Ukraine clawing up ag ladder

THE State Statistics Service of Ukraine reports that the volume of agricultural production in the country enjoyed an estimated growth of 17.5 percent of the period of 2011. The highest growth was documented in the north eastern Ukraine (Kharkiv, Poltava, and Symy regions).
Interestingly, both agricultural firms and households experienced production growth – 23.8 and 12.3 percent, respectively. In 2011 each region of Ukraine boosted agricultural production while in 2010 overall agricultural production in the country dropped by 1.5 percent.

On December 31, 2011, the Minister of Agrarian Policy and Food of Ukraine Mykola Prysyazhnyuk stated that over the year Ukraine increased its agricultural products export potential by 35 percent.

“This year showed growth of export figures for agricultural products shipped to the EU,” noted the Minister in his interview with Channel 5. He explained this development by the improved quality of the produced goods.

Ukraine has been gaining a stronger position on world’s agricultural market over the recent years. In 2011 Ukraine cropped the record amount of grain in twenty years (since declaring independence).

The unprecedented harvest – over 55 million tons of grain – as well as the removal of the export taxes and quotas contributed to export boost in 2011. This resulted in Ukraine becoming one of the world’s top three grain exporters. The country is also ranks number one in barley exports globally. Moreover, this year Ukraine became the third corn supplier in the world, surpassing Brazil and being the second runner-up to the USA and Argentina.

Given Ukraine’s rich grain production in 2011, in August that year the country initiated the creation of the world’s grain reserve under the auspices of the United Nations. Ukraine aimed to form a grain reserve of 10 to 12 million tons, preserve it and make grain interventions on the market. This would allow for more efficient price regulation on the world grain market.

Traditionally, Ukraine claims its position as one of the leading agricultural countries in the world. The country possesses 30 percent of world’s black soil – the most favorable soil for agriculture. This allows for a certain commercial advantage. Accordingly, agricultural exports brought ten billion dollars to the Ukrainian budget in 2011.

Ukraine threshes 35.3 million tons of grain by September 9

Ukraine threshed 35.3 million tonnes of grain by September 9, 2011, from 11.6 million hectares, which was 75% of the target, according to the Agrarian Policy and Food Ministry.

The average yield of grain crops across the country was 30.5 centners (one metric centner equals 100 kilograms, or 220.46 pounds) per hectare against 25 centners per hectare as of the same date in 2010.

Farmers threshed 272,000 tonnes of maize from 57,000 hectares (2% of the target). Its average yield is 47.6 centners per hectare (38.1 centners per hectare in 2010).

Buckwheat was harvested from 188,000 hectares (63% of the target). Its harvest was 215,000 with the average yield being 11.4 centners per hectare against 8.4 centners per hectare. Millet was gathered from 128,000 hectares (78% of the target), the harvest was 252,000 tonnes of millet with the average yield being 19.6 centners per hectare (15.4 centners per hectare in 2010).

Farmers are still harvesting technical crops. In particular, as of September 9, 2011, they threshed 1.3 million tonnes of sunflower seeds from 723,000 hectares (16% of the target). Their average yield is 17.5 centners per hectare, against 15.2 centners per hectare.

Soybeans were gathered from 113,000 hectares (10% of the target), 222,000 tonnes of soybeans were harvested with a yield being 19.6 centners per hectare (13.9 centners per hectare in 2010).

As of September 9, 2011, farmers also gathered 893,000 tonnes of sugar beets from 25,000 hectares. Its average yield was 354 centners per hectare against 309 centners per hectare in 2010.

As was reported, the agriculture ministry predicts that the yield of grain in Ukraine in 2011 will exceed 50 million tonnes. Last year Ukraine harvested 39.3 million tonnes of grain.

Record sugar harvest could see cheap sweets for Russia

Those with a sweet tooth could be in for a treat after record sugar beet harvests were reported in Russia.

This year farmers expect to bring in up to 4.3 million tons, which could more than halve the amount of imported sugar Russia requires to meet an annual demand for about 5.5 million tons.

And that is expected to have a knock-on effect on prices – with wholesale and retail costs falling as a result.

Trade prices for raw sugar have plummeted, Vedomosti reported, with a daily drop of 20-30 kopeks per kilo.

According to analysts from IKAR, the market prices in Krasnodar, where much of Russia’s sugar crop is processed, are down to 28.2 rubles / kilo, compared with 30.9 rubles two weeks earlier.

Andrei Bodin, chairman of the Russian Union of Sugar Producers, doubts that prices will drop below 20 rubles / kilo, but still sees plenty of scope for costs to drop.

Trade prices for raw sugar have plummeted, Vedomosti reported, with a daily drop of 20-30 kopeks per kilo.

According to analysts from IKAR, the market prices in Krasnodar, where much of Russia’s sugar crop is processed, are down to 28.2 rubles / kilo, compared with 30.9 rubles two weeks earlier.

Andrei Bodin, chairman of the Russian Union of Sugar Producers, doubts that prices will drop below 20 rubles / kilo, but still sees plenty of scope for costs to drop.

The market value is expected to reach its lowest levels in October and November at the end of the harvest season.

This is partly because, even with a record harvest, Russia remains one of the world’s biggest sugar importers.

But experts remain confident that prices will be lower, and expect to see some of those savings passed on to shoppers after farmers overtook production records established across the whole of the USSR.

Russia And Ukraine To Regain Share Of Wheat Trade

KIEV, Ukraine -- Russia and Ukraine may, thanks to Europe's weak harvest prospects, reclaim their historic share of wheat shipments to the big importers, despite a tepid reaction so far to their relaxation of export curbs.

The two biggest Black Sea wheat exporters have failed to score any premier wheat sales since Ukraine replaced quotas with levies on grain shipments, and Russia announced the ditching of export levels this month.

Signally, Egypt, in its first wheat tender since February, this week barred Russian wheat from the tender.

Egypt, the world's biggest wheat importer, was left with unfulfilled orders after Russia in August imposed its grain export ban following a drought devastated harvest.

However, with a dry weather taking a toll on Europe's wheat harvest, depressing the region's export potential, Russia and Ukraine appear to have a strong hand in regaining custom, consultancy Agritel said.

"Ukrainian and Russian wheat quality is similar to European wheat, especially in terms of protein content," said Agritel which, while based in Paris, has a Kiev-based affiliate company.

"It is hence reasonable to consider that Ukraine and Russia will compensate easily the production losses expected in Europe, and might reclaim their market shares on the traditional markets of North Africa and the Middle East."

Rival consultancy Strategie Grains on Thursday cut its estimate for European Union soft wheat exports in 2011-12 by 4m tonnes to 12.9m tonnes thanks to weak harvest prospects, and implying a slide of 6m tonnes in shipments year on year.

The US Department of Agriculture, whose data set global benchmarks, last week forecast the EU's total exports of wheat, including the durum variety used to make pasta, falling 7m tonnes to 15m tonnes.

Agritel's comments came as it forecast better crops for both Russia and Ukraine this year, with prospects improved by rains in the last week, which had eased concerns stoked by a dry May.

Russia's wheat harvest will rebound 29% from last year's drought-affected levels to 53.4m tonnes, although these estimates assume further rainfall is needed in the Volga valley and in Lipetsk and Voronezh, Agritel said.

Ukraine's harvest will increase by 1.3% to 18.7m tonnes, although again "additional rainfall is still needed to confirm such an improvement".

According to weather service WxRisk.com, while southern Ukraine is set for hot weather in the six-to-10 day outlook, eastern areas and central and northern Russian, besides northern Europe, look set for "above-normal" rainfall,However, Agritel flagged caution over expectations that Ukraine might plug the gap in EU rapeseed supplies left by a weak harvest, with 20% of Black Sea country's own crop hit by high levels of winterkill.

"Ukraine will probably lose market share on the international rapeseed market, mostly due to winterkill damage," Agritel said, pegging the country's harvest falling 10.2% to 1.3m tonnes and exports falling some 14% to 1.2m tonnes.

Ukraine Should Not Sell Farmland To Foreigners, Minister Says

KIEV, Ukraine -- Ukraine should not sell farmland to foreigners so local producers can improve agricultural output, Agriculture Minister Mykola Prysyazhnyuk said.

“People who cultivate land and feed the country must become full-fledged participants in the farmland market,” Prysyazhnyuk said in a statement on the ministry’s website today. Farmers will be able to use land “efficiently” and “make production attractive for investments,” he said.

A moratorium on farmland sales is a “correct and strategically important decision,” according to the minister.

The sale of agricultural land is now banned in Ukraine. Companies lease plots from individual owners and there are around 6.5 million plots in the country.

Ukraine has 41.6 million hectares (103 million acres) of agricultural land covering 69 percent of its territory.

Arable land accounts for 32.5 million hectares. President Viktor Yanukovych, who came into power after 2010 elections, wants to start a farmland market as of Jan. 1.

Foreigners should be temporarily banned from buying farmland, he said yesterday.

Parliament probably will vote on legislation on a farmland market in September, Yanukovych also said yesterday. His office is putting together a bill.

Prime Minister Mykola Azarov’s Cabinet seeks to about double the price farmers get for leasing land, agriculture consultancy APK-Inform said on its website yesterday, citing Mykola Kalyuzhnyi, head of the state agency for land resources.

The state sets a nominal price for land plots and also leasing prices.

“Companies that lease land for production will be very much affected by the increase,” said Nikolay Vernitsky, director of Kiev-based researcher ProAgro.

“Small family farms may not be able to pay higher lease and will be taken over by larger companies.”

Ukraine Tightens Control Over Vegetable Imports From EU

KIEV, Ukraine -- Ukraine has tightened controls over vegetables imported from the European Union as the region struggles with a deadly E. coli outbreak, Prime Minister Mykola Azarov said Thursday.

"Ukraine from the beginning of this phenomenon has taken action to protect its people, but we did not advertise it," Azarov told reporters. "The team of border guards was ordered to tighten control over European vegetables, and at the moment they continue to do it."

The prime minister said all vegetables imported from the EU are being checked by the Ukrainian phytosanitary office.

Azarov spoke as Germany, where the outbreak started more than a week ago,struggles to find the exact source of contamination.

The outbreak has killed 18 people and sickened more than 1,500 others across Europe, including 470 who have developed a rare kidney failure complication, according to the latest reports.

Researchers have been unable to pinpoint the cause of the illness, which has hit at least nine European countries, and prompted Russia on Thursday to extend a ban on vegetables to the entire European Union.

The World Health Organization said that the E. coli bacteria responsible for the outbreak is a new strain that has never been seen before.

The outbreak is already considered the third-largest involving E. coli in recent world history, and it may be the deadliest.

Twelve people died in a 1996 Japanese outbreak that reportedly sickened more than 9,000, and seven died in a 2000 Canadian outbreak.

Ukraine May Export 4 Million Tons Of Grain By March, UkrAgroConsult Says

KIEV, Ukraine -- Ukraine may export about 4 million metric tons of grain by the end of next March even if the government lengthens caps on outbound shipments, according to UkrAgroConsult.
An extension of the limits until March 31 would still allow traders to ship 1 million tons of grain a month, Liza Malyshko, an analyst at the Kiev-based researcher, said today by phone.

Exporters have made shipments equating to about 11 percent of the current quotas, she said.

The Economy Ministry yesterday proposed extending the caps, scheduled to expire Dec. 31, through 2011’s first quarter. It also suggested adding an extra 1 million tons of corn and 500,000 tons of wheat to the current 2.7 million-ton export quota.

The government imposed the curbs in October after dry weather damaged crops.

Ukraine has exported 5.3 million tons of grain since the current marketing year started on July 1, of which 250,000 to 300,000 tons fell under the quota, according to Malyshko. That leaves about 2.4 million tons to be used, she said.

The current quota comprises 2 million tons of corn, 500,000 tons of wheat and 200,000 tons of barley.

Ukraine’s grain-export potential for the current marketing year is between 14 million and 15 million tons, depending on final stockpile calculations by the national statistics office later this month, Malyshko said.

Export potential in the year may be about 6 million tons for both corn and wheat and about 3.6 million tons for barley, according to UkrAgroConsult. Ukraine has shipped 2.22 million tons of wheat, 2.3 million tons of barley and 440,000 tons of corn so far in the period, Malyshko said.

Tomato farmers eke out hard lives in Kherson region

Tarasivka, Kherson Oblast– The word “farmer” is too posh to describe them. They’re peasants, really.

Yet thousands of these people make the backbone of the food growing industry in Ukraine, a nation where agricultural corporations are only just emerging and commercial land cultivation is in its infancy.

Oleksandr Koryagin is one of them.

Like his peers in the sunny steps of Kherson Oblast, Koryagin grows tomatoes on his one-hectare allotment. He keeps livestock, grows early cucumbers in the spring and late cabbages in autumn, raises cows for milk and meat, and does dozens of other things to stay afloat. He and his wife, Halyna, do most of the work manually.

Theirs is a life typical of Ukrainian farmers, most of whom received small land parcels when the Soviet collective farm system broke down at the start of the 1990s.

Slaving away on land for long hours with no financing available for modern equipment and fertilizers, they produce just enough to eat and sell at a local market. But the rich soil, strong sunlight and their hard work combine to create a delicious product.

By the time my city alarm clock rings at 6:30 a.m., their beds have been cold for a long time – sometimes for up to two hours, depending on the day’s agenda. By breakfast time, Halyna has milked her two cows and churned the milk into cream.

The cows have been taken to the field, dozens of geese, chickens, ducks and ducklings have been fed, as well as two dogs, two pigs, two puppies and six calves. All the animals have been given water to last them through the heat of the day.

Everything takes much longer here than a town dweller would imagine. The lack of modern infrastructure and equipment is compensated for by manual labor. But once the morning routine is over, it’s time for the humans to have breakfast and get ready to go into the field.

August is one of the hottest times in this village, Tarasivka, both in terms of temperature and work. Apart from tomatoes, there are plenty of melon and watermelon fields around. But unlike tough-skinned melons, tomatoes cannot be left on the vine for too long before picking.

They will simply rot and the crop will be lost. Timing is everything here in late summer.

The Koryagins collect about a metric ton of tomatoes per day, give or take three hundred kilos. They usually hire four other locals for help at Hr 50 each.

After picking, the tomatoes are sorted into old but sturdy banana boxes.

Then they need to be driven about 60 kilometers to the nearest wholesale market as soon as possible. Modern storage facilities and other agribusiness conveniences are yet to arrive to this area, and it does not look like it will happen very soon.

Most of the farmers drive ancient, Soviet-made Ladas or Moskvich cars. Usually coupled with trailers, they are kings of the dusty roads – hard to drive, but simple in design and easy to fix.

“In good crop years, prices drop by the day. Today its Hr 1.50 per kilogram, tomorrow it’s Hr 1.20, and two days later it’s down to 50 kopecks.”
- Oleksandr Koryagin.

When a little Lada pulls a ton of tomatoes in a trailer, the car is so strained that the drivers often have to switch on the heating in the salon to kick-start the engine cooling system.

In the 40-degree heat, the temperature in the car soars to the point that would make hell seem quite mild by comparison. But the choice is none if you want to sell what you have labored for since the early days of spring.

Once at the marketplace, the farmers seek out wholesale buyers, usually arriving by trucks from other parts of Ukraine. The current asking price is Hr 2 per kilogram. To me, the price seems quite shocking. “Isn’t there a crop you can grow that would sell for more?” I ask.

“That would probably be cannabis,” Oleksandr jokes back.

The local farmers think that the wholesale price this year is actually pretty good.

“In good crop years, prices drop by the day. Today its Hr 1.50 per kilogram, tomorrow it’s Hr 1.20, and two days later it’s down to 50 kopecks,” explains Oleksandr.

But this year the crop is relatively poor. Early in the summer, the tomato plants got too much rain, and then got scorched by the sun. Many of the vines wilted or its fruits baked in the sun. The simple underground irrigation systems every farmer has installed have not helped much.

Tomatoes are the local pride and joy for villagers and the main source of summer income. Whoever manages to keep his plants bearing fruit the longest is rewarded with respectful looks.

The ability to grow and fix things, and manage on a shoestring budget is the local glamour in this forgotten land of absent agricultural machinery, no specialized literature or help from the local government.

The farmers here have had to survive on their own ever since the collapse of the local collective farm in the 1990s.

The land was then divided up, and one-hectare allotments were issued to each local resident, like in most of rural Ukraine. Some end up leasing their land plots; others cultivate them.

Somehow, the former collective farm head ended up keeping most of the farm’s not-so-numerous machinery. He is very well-off now, offering plenty of heavy-duty services with his tractors and combines.

As a result, he drives the coolest car in the village, a vast Japanese pickup truck that looks terribly out of place here where a second-hand Volkswagen minibus is every farmer’s dream.

Loans – for anything from machines to fertilizer – is an even more distant dream. And that distance is even longer than the 30-kilometer drive the villagers would need to take to get to the nearest bank – or ATM, for that matter.

But on the upside, boy does their homemade cream taste good! And their tomatoes could have tempted Adam in the Garden of Eden.

Stalin's Harvest

Poor wheat harvests in Russia and Ukraine, along with devastating wildfires in Russia, have resurrected fears of a global food crisis. Some have blamed global warming for inducing a severe drought. But the real blame rests with poor agricultural performance over the long term in a region still hampered by communist experimentation.
To react by banning exports, as Moscow has done and Kiev is considering, would be counterproductive. Combined with restrictions on the use of modern agricultural technologies imposed in the European Union and being proposed in the U.S., such bans really could lead to a global food crisis.

After the Russian revolution in 1917, the Bolsheviks socialized all agricultural markets. Although they directed their rhetoric against "middlemen," their real aim was to squeeze farmers by paying them below-market prices and use the proceeds to finance state-owned industry.

This "New Economic Policy" backfired spectacularly as farmers fed grains to livestock, or converted them into liquor and then sold both on the black market, thereby evading the Bolsheviks' price controls.

Stalin dealt with such evasions first by denigrating independent farmers as greedy kulaks (the Russian word for fist) and then by starving them to death. As Soviet agriculture was collectivized and crops and livestock were confiscated, millions of peasants died. Russia and Ukraine have yet to recover fully from this assault on the countryside.

The contrast with China is stark. In the late 1970s, millions of peasants who had survived agricultural collectivization and Mao Zedong's "Great Leap Forward" two decades earlier responded to his death by becoming entrepreneurs.

In village after village, property was informally privatized. Output exploded, ensuring that attempts at sanctioning this illegal activity were carried out half-heartedly. Deng Xiaoping subsequently legitimized these bottom-up reforms in what became known as the "Household Responsibility System," which provided a major catalyst for China's modern economic take-off.

During the 1980s, Mikhail Gorbachev attempted similar reforms in Russia, but from the top down. These were not successful. After more than half a century during which entrepreneurship had been repressed, who would dare take the risks associated with farming and agricultural marketing?

In spite of the collapse of communism, it has been difficult to convert Stalin's collectives into private farms. Although most of the farming industry is privately managed, rural property rights are poorly defined and access to commercial credit is limited.

Also, bankruptcy law is ill-developed, which impedes the liquidation of inefficient operations and the transfer of real estate and other assets to efficient managers. All these factors undermine incentives to invest in productivity-enhancing technologies and good management. Former collectives are also subsidized, warping incentives further.

Fertilizer applications on Russian farms currently average 11 kilograms per hectare, which is below the amount needed to compensate for crops' uptake of nutrients and is similar to levels in sub-Saharan Africa. As a result, soil fertility is declining with each passing year.

Predictably, cereal yields in Russia (1,865 kilograms per hectare) are barely a quarter those of the United States (typically 7,000 kilograms per hectare or more), and similar to U.S. yields before the 1930s, when farmers began using hybrid seeds and synthetic fertilizer.

Russia and Ukraine have the potential to be far more productive, but to do so their governments must provide the right incentives to farmers to invest in land improvements and to use modern seed, fertilizer and pesticides. That means removing barriers to ownership and exchange.

Banning exports has the opposite effect, curtailing farmers' existing markets, then their incomes, then their incentives to invest, all of which would further reduce their low output.

World supplies of grains are also adversely affected by the EU's restrictions on the use of biotechnology and pesticides. In addition to limiting production in the EU, these restrictions also spill over into exporting countries.

Russian and Ukrainian producers, for instance, worry about falling foul of EU rules and so have additional reasons not to adopt beneficial yield-enhancing technologies.

To make matters worse, the U.S. Environmental Protection Agency seems to be following the EU's example and is seeking to restrict a number of widely used agricultural chemicals.

One of these is atrazine, a weed-killer that has been applied for more than four decades with no observable ill effects, and which the EPA itself reapproved four years ago. Such restrictions would further undermine global crop output.

Americans are accustomed to availing themselves of plentiful food at affordable prices, which most take for granted. But there is no such thing as a free lunch in the food economy.

Removing the inputs that make bountiful harvests possible will inevitably drive up prices and, as the experience of Russia and neighboring countries demonstrate, place the world at risk of shortages.

Moscow orders grain from Kazakhstan

Moscow’s food resources bosses have ordered up to 300,000 tons of grain from Kazakhstan – but added that if cheaper supplies become available the capital will take its business elsewhere.

The order was confirmed by the Kazakh agriculture ministry, the commission came directly from Yury Luzhkov, Moscow’s mayor.

Kazakhstan expects to export 8 million tons of grain this year.

Officials Mull Grain Export Curbs To Keep Bread Cheap

KIEV, Ukraine -- With global wheat prices skyrocketing, and fears of a backlash from voters already high after natural gas prices for households were increased by 50 percent on Aug. 1, Ukraine’s government is mulling grain export quotas to prevent prices on bread and other foods from spiking ahead of the Oct. 31 election to local government bodies.
But to the surprise of most observers, officials failed to reach a decision on the issue by Aug. 19, despite earlier statements indicating it was a done deal.

World grain prices have leapt by more than 50 percent since June, mostly due to drought in Russia, which prompted Kremlin leaders to completely ban grain exports for the rest of the year. Since Ukrainian domestic prices traditionally track world prices at a discount of around 30 percent, the global price spike has Ukraine’s leadership worried about soaring prices for the nation’s staple food – bread.

President Viktor Yanukovych told reporters on Aug. 18 that the government would take all measures to stop the bread price increasing significantly, but said no one could rule out a minor increase.

Comments from top government officials the previous day had pointed to the swift introduction of quotas on grain exports, in an effort to stop bread prices increasing. Agriculture Minister Mykola Prysyazhnyuk said on Aug. 17 that the government would restrict exports to 2.5 million metric tons until the end of the year: milling wheat exports were to be restricted to 500,000 metric tons, livestock feed wheat to 1 million metric tons, and barley also to 1 million metric tons.
Ukraine's grain harvest this season is expected to be 40-42 million metric tons, down from the 46 million metric tons produced last season, or about a 10 percent drop. Severe winter frosts and a scorching summer are to blame.

Following a government meeting on Aug. 18, at which an export quota decision was expected to be taken, officials postponed action until next week. The Economy Ministry later posted a draft of the government directive under discussion.

While concern over food prices and inflation provide powerful motivation for introducing export quotas, the hesitation may result from financial considerations and commitments to international organizations, experts say.

Although curbing exports is undesireable, so is a surge in the price of bread. High consumer prices could hurt Yanukovych's Party of Regions in the Oct. 31 local eletions. Food expenses constitute about 40 percent of an average household’s budget, but for the poor, it is far higher.

The other side to the argument is that grain exports account for 20 percent of Ukraine’s total exports.

The government has set very ambitious revenue targets for 2010. Fulfillment of these targets is crucial to keeping the budget deficit within 5.5 percent of gross domestic product, the limit agreed with the International Monetary Fund as a condition for renewed lending.
“The quotas discussed could reduce Ukrainian grain export by 29 percent this year, to 11.3 million metric tons of grain, and this will strongly affect profit figures for traders,” said Ivan Panin of Sokrat brokerage.

Traders have naturally expressed fierce opposition to the quotas: “The stated quotas are too low and will have negative effects for the market and Ukraine as a whole,” the Ukrainian Grain Association said in an open letter to Prime Minister Mykola Azarov, published hours before the Aug. 18 government meeting.

The letter called for no measures to be taken before Sept. 15.
It is also unclear how effective quotas might be in keeping down the price of bread.

Analysts point out that Ukraine had high bread prices from 2006 to 2007, at a time when there was a complete prohibition of grain exports. And if Ukrainian restrictions cause global grain prices to spike again, this could have a delayed impact pushing up domestic prices, rather than reducing them.

While export restrictions could keep more grain on home turf and available at lower prices, it would, as in the past, hit Ukraine’s farmers hardest, preventing them from getting top dollar for their grain. In turn, this could trigger a downward spiral, hitting next year’s crop by denting farmers’ resources available for sowing next season’s harvest.

Export quotas could also conflict with Ukraine’s commitments to the World Trade Organization, which it joined in 2008.

“This is why government ministers are stressing that the issue is not the price of bread, but the possibility of a real deficit of grain in the country, i.e. food security,” said Serhiy Feofilov, head of UkrAgroConsult. A threat to food security would justify waiving WTO terms, Agriculture Minister Prysyazhnyuk claimed Aug. 17.

But Feofilov pointed out that, although the overall harvest forecast was down for this year from 2009, the summer heat wave could boost the proportion of the wheat crop attaining high enough quality to be used for baking bread.

Feofilov said its share of the harvest was higher than usual, at 35-40 percent of wheat. “Ukraine will produce 6 million metric tons of milling wheat this year, while consumption is only 5 million metric tons,” said Feofilov.

These figures could undermine the government's claim that food security, and not just price, is under threat.
According to Volodymyr Klymenko, president of the Ukrainian Grain Association, the baking of “social bread” – the cheapest, most basic sorts such as “batons,” “bricks” and “Ukrainian” – uses only 900,000 metric tons of milling grain per year.

“To keep the price of ‘social bread’ stable, these 900,000 metric tons will suffice,” he said, adding that the state food reserve was by law obliged to stockpile at least 1.2 million metric tons of grain at all times.

Nevertheless, the government claims it is currently restocking depleted grain reserves. “We have set a task to buy 1 million metric tons of bread wheat for the state reserve. We have currently bought about 800,000 metric tons. And 1.5 million metric tons will be purchased for the regional funds,” Yanukovych announced Aug. 18, according to Interfax.

“The government should have bought more grain for its reserves while the price was cheap,” said Mykola Vernitsky of ProAgro consultancy. “Instead, in July, it released 300,000 tons of grain from the grain reserve to traders to pay back VAT rebate arrears, as demanded by the International Monetary Fund. And it did the same in August. Now it has to replenish the reserve at a far higher price.”

Ukraine May Slash Grain Exports As Drought Worsens

KIEV, Ukraine -- Ukraine may cut grain exports for the remainder of 2010, following the impact on crops of a severe drought.
The move would follow Russia's ban on grain exports on Sunday because of drought and a spate of wildfires.

Ukraine's cabinet will discuss whether to cut exports at a meeting on Wednesday, the state news agency reported on Tuesday.

The news sent wholesale wheat prices higher, fuelling concerns that the cost of some High Street foods will rise.

Over the last decade, the Black Sea region has emerged as a key exporter of grain to global markets.

Ukraine is the world's largest exporter of barley and the sixth-biggest of wheat. The country exported 21 million tonnes of grain in the year to June.

But Mykola Prysyazhnyuk, Ukraine's agricultural policy minister, said: "We are proposing to allow the export of 2.5 million tonnes from now until the end of the year."

One million tonnes currently held in ports would also be exported, he said.

Russia, the world's third-largest wheat exporter last year, imposed a ban in order to keep the domestic market supplied and prices down.

Russia's ban sent wheat prices to a two-year high. The country's Prime Minister, Vladimir Putin, warned: "There is no need to count on a quick removal of the export ban."

A European Union spokesman said on Tuesday that the EU has plenty on grain stocks and export bans will not hurt supplies.

But some countries are rushing to find alternative suppliers. Egypt, which had previously sourced about 63% of imports from the Black Sea, is searching as far afield as France and Argentina for new supplies.

Egypt's minister of trade and industry, Rachid Mohamed Rachid, said: "We have already replaced most of the quantities that were contracted with Russia... Egypt is continuously in the market."

Wilting Harvest

KIEV, Ukraine -- Not only people are suffering under the hot sun and drought that affect parts of Europe. Crops are also drying up, prompting Russia to ban grain exports, while Ukraine is considering its own restrictions. What will happen to the price of bread?
Ukraine’s grain harvest is forecast to be at least 10 percent lower this year, due to the heat wave and drought in some areas. For politicians, the shortfall is focusing their minds on how to prevent sharp hikes in the price of bread.

Bread, which has practically a sacred status in Ukraine as a symbol of prosperity, has long been kept artificially cheap through subsidies by a succession of Soviet and post-Soviet governments.

Preventing bread prices from skyrocketing, despite an increase in grain prices, could be one of President Viktor Yanukovych’s toughest challenges ahead.

The daily staple – which figures prominently in meals, wedding rituals and in welcoming guests – needs to be kept affordable for average citizens, who on Aug. 1 had their natural gas utility bills hiked 50 percent. Now, the most commonly purchased white bread – a loaf of “baton” – costs as little as Hr 3, less than 40 cents.

A backlash from voters over price hikes – however justified or market-driven – could be felt in the Oct. 31 local elections.

After drought-stricken Russia banned grain exports last week, the Ukrainian government announced that it may introduce export quotas.

Analysts and traders’ organizations accuse the authorities of already imposing a de facto export ban through additional inspections at ports, as the government builds up its emergency stockpile of milling wheat.

“If quotas are introduced, then first of all [it will be] on wheat, to guarantee the security of the food supply in the country,” Agriculture Minister Mykola Prysyazhnyuk said on Aug. 11. “They will be adjusted with grain traders, and they will be moderate and reasonable.”

Severe frosts last winter and a scorching summer have hit Ukraine’s grain harvest hard, causing analysts to slash forecasts to 42 million tons, compared with 46 million tons in 2009, and a record 53.3 million tons in 2008.

Analysts expect Ukraine to export only about 15 million tons of different types of grain, in contrast to 21.5 million in the 2009-10 season.

Grain exports, which are vital to Ukraine's economy, were expected to bring in more than $3 billion this year, before talk of restrictions. The sales are the second-largest export revenue source, after steel.

The crucial wheat harvest is forecast to drop to 17.5 million tons, compared with 20.9 million tons last year. Ukraine’s annual domestic consumption of wheat is about 12 million tons, cutting export potential for the grain to 5.5 million tons.

“If the export [of wheat] is uncontrolled and too high, then Ukraine may face a shortage of milling grain,” UkrAgroConsult analyst Elisabeth Malyshko said. “I think the government will work out some legal methods in order to somehow control the export process.”

Since Ukraine, unlike Russia, is a member of the World Trade Organization, experts say it cannot ban grain exports without risking sanctions. Introducing export quotas on some types of grain could be a solution.

World Bank officials came out this week urging nations not to restrict exports, warning that such protectionist measures could trigger a repeat of the 2007-8 global food crisis.

Traders complain that informal export limitations are already in place, leaving them potentially facing hefty penalties for failing to fulfill export contracts. They are calling on Ukraine to introduce a formal export ban that would allow them to avoid penalties.

Volodymyr Klymenko, president of the Ukrainian Grain Association, an umbrella union of Ukraine’s biggest exporters, said on Aug. 10 that the transportation of grain from Ukraine’s ports was practically impossible due to additional checks by customs authorities over the last three weeks.

The State Customs Service said the checks had been ordered “to defend the economic interests of the state.”

According to Klymenko, up to 15 cargo ships carrying grain are waiting for permission to leave ports. The customs service blocked two ships from leaving on Aug. 12, ostensibly because of incorrect documentation.

At a government meeting on Aug. 11, First Deputy Prime Minister Andriy Klyuyev accused traders of using “shady schemes.”

“Some [traders] are exporting good quality wheat under the guise of feed grain; others overvalue grain type in order to receive reimbursement of value-added tax,” he said. “State control of the grain market should be increased.”

Some experts join Ukraine’s government in blaming traders for fueling the crisis to spike prices and generate higher profits.

“It is the task of the traders to exaggerate the crisis,” said Jean-Jacques Herve, an agriculture expert.

Andriy Yarmak, an agribusiness consultant, said the government is interferign with exports to keep the bread price down. "Our customs service is acting this way because the government is trying to keep its populist promises that bread prices will not rise. They are basically trying to gain some electoral points at the expense of Ukrainian grain growers,” Yarmak said.

But analysts said attempts to prevent bread price hikes by controlling exports are doomed.

“As the price of bread is a social and political question, it will be decided not so much by the price of grain, but by agreements between the authorities and bread makers,” said Mykola Vernitsky, an analyst at ProAgro consultancy. “In 2006-7, the export of grain was banned, but prices were still quite high despite the high supply of grain on the market.”

Russia ban on grain export begins

Russia has imposed a ban on grain exports until the end of the year, after a severe drought and a spate of wildfires devastated crops.

Russia is one of the world's biggest producers of wheat, barley and rye, and the ban is likely to see bread prices rise in places like the Middle East.

The measures are designed to keep domestic food prices under control.

But agriculture ministry data has revealed that this year's crop is unlikely to meet even domestic demand.

Hundreds of wildfires have been burning across central Russia in the last three weeks. But officials say the area being affected by the fires is now almost a quarter less than a week ago, reports say.

The grain harvest is down by at least a third compared with last year,it comes as no surprise that Russia is temporarily banning exports as it seeks to stop prices sky-rocketing at home.

Russians eat bread with practically everything and rising bread prices is an issue which has traditionally had the power to stoke popular unrest.

The country's leadership has so far been unable to say when the ban might end.

President Dmitry Medvedev predicted that the measures could be lifted before the end of the year.

But Prime Minister Vladimir Putin suggested the ban could remain in place until well into 2011'

Mr Putin said that this year's crop could be as low as 60 million tonnes, well below last year's 97 million, and Russia needs almost 80 million tonnes to cover domestic consumption, so even with this ban, there might be a shortfall of nearly 20 million tonnes for the Russian consumer.

The Kremlin says talks on the issue will be held in October.

Last year, Russia exported a quarter of its 2009 grain output.

Russia produces a soft type of wheat that is suited to making unleavened bread, so much of its wheat is exported to the Middle East.

Egypt is its largest market, followed by Turkey, Syria, Iran and Libya.

Analysts say there is likely to be a small increase in bread prices in the short term.

But they say wheat prices should soon fall back down again because the US - the world's biggest exporter - is predicting a bumper harvest of its current crop.

This week economists predicted that the heatwave and wildfires would cut $15bn (£9bn) from Russian economic output.

The figure, which does not include the cost of rebuilding hundreds of destroyed homes, is predicted to slow down the country's recovery from the recent global crisis.

More than 50 people have died in the fires and many more are thought to have been adversely affected by smog which has enveloped Moscow and other areas.

Moscow's daily death rate is twice what it would be normally for the current time of year. While officials have been careful not to link this to the heat and smog, doctors have been doing so off the record.

On Saturday, heavy rain cooled the capital, providing respite from the record-breaking temperatures and the smog for the first time in weeks.

However, dozens of wildfires are still burning around Moscow, and according to the Emergency Situations Ministry more than 500 wildfires are continuing to burn across the country.

These include a new blaze to the east of the major nuclear research facility in Sarov, about 400km (250 miles) east of Moscow.

Earlier this month, as fires raged near the site, all nuclear and explosive materials were removed as a precaution.

When those fires were brought under control, the materials were returned to Sarov.

However, Sergei Novikov, a spokesman for the Rosatom state atomic corporation, told the Associated Press that there was no immediate need to move them out again.

Drought Threat Now Hits Black Sea 2011 Winter Crop

KIEV, Ukraine -- Drought and heat across the European part of Russia and Ukraine are now expected to delay the sowing of winter grain crops, raising concerns that losses will extend to next year's harvests.
The sowing of winter wheat traditionally starts in August. The winter crop accounts for 90 percent of Ukraine's total wheat harvest, and in Russia winter grains account roughly for 40 percent of the grain total.

Ukraine and Russia also sow winter rye and winter barley but their acreages are not as significant.

A severe drought with temperatures reaching 40 degrees Celsius (104 degrees Fahrenheit) has hit grain-growing regions and slashed production in the crop year that started July 1.

Russia, previously the world's third-largest wheat exporter has banned grain exports until at least end-December. Ukraine, the largest exporter of barley and sixth-largest of wheat, is considering imposing export quotas, and its customs service has already blocked some shipments.

Now the threat to crops is extending into next year's harvest.

Russia's chief weather forecaster said on Thursday that the weather would further delay sowing of winter crops in the European part of Russia.

"(Winter) sowing is unlikely at least until September," Roman Vilfand, director of the Hydrometcentre government weather forecasting service, told a news briefing.

"There will be insufficient rains for the sowing till the last 10 days of August. There will be rains in the last 10 days but not very intensive," he added.

Ukraine's weather forecasters also said there was no reason to start winter sowing until the end of August because the upper level of the soil had no moisture.

"The situation with winter sowing will not be favourable by the end of August," Anatoly Prokopenko, deputy director of the Ukrainian Hydrometcentre government weather forecasting service, told Reuters.

"Ukrainian southern and eastern regions will stay without rains, while insignificant rains could fall on other parts of the country," he said.

Prokopenko said the pace and structure of Ukraine's 2011 winter sowing would depend on the weather in late August.

While Ukrainian analysts noted that local farmers would sow even in dry soil, Russian officials have said some winter grain areas will not be sown this year.

Russian Agriculture Minister Yelena Skrynnik told Prime Minister Vladimir Putin on Wednesday that farmers planned to increase the sowing area for spring grains to compensate for losses of areas they will be unable to sow for the winter crop.

"Our regions confirm that they are ready to sow 18 million hectares with winter grains, but if the weather changes then it may be 15 million hectares," Skrynnik said, according to a transcript of the meeting published on Putin's web site premier.gov.ru

"In this case we will have to increase the area to be sown with spring crops by 30 percent."

The winter grain area for the Russian 2010 crop is estimated at around 16 million hectares out of a total of 43.6 million.

Russian analysts, however, said that an increase in the spring sowing would only partially compensate for losses.

"It will not be easy to find sufficient seeds for larger spring sowing," Andrei Sizov Sr., chief executive of the SovEcon agricultural analysis firm, told Reuters on Thursday.

"Seeds from Siberia are unsuitable for sowing in the centre and along the Volga," he added.

Farmers face less of an immediate problem in Ukraine, where winter sowing extends from late August to the end of September.

"Dry autumn is not an extraordinary event for Ukraine, and farmers are sowing into a dry soil waiting for rains," said Serhiy Feofilov from UkrAgroConsult agriculture consultancy.

"We have seen no critical problems as of August 12 but can say that the start of sowing will be delayed until the first days of September. This situation just raises concerns, but everything could change in few days."

Ukraine sowed about 7 million hectares in 2010 winter grain crops, and officials have said that this year's winter sowing area could be similar.

Ukrainian traders, whose trade activity helps farmers to accumulate funds for sowing, also said that hot weather and drought would not affect sowing plans.

"I haven't met a farmer who has chosen not to sow (this season). All areas will be sown," said Volodymyr Klymenko, head of Ukrainian grain traders' union UZA.

One Man’s Rise From Villager To Farm Giant

NIBULON, Ukraine -- Not many people know as much about Ukraine’s agricultural industry than Oleksiy Vadatursky. Even as soaring temperatures threaten this year’s grain harvest, Ukrainian agriculture continues to offer the country’s best hope for robust future growth and badly needed foreign investment.
And few Ukrainian agriculture industry professionals know the sector as well as Oleksiy Vadatursky, a former Soviet collective farm worker who is now the owner and CEO of Ukraine’s biggest agriculture exporter, Nibulon Ltd.

Vadatursky, 62, has spent nearly his entire life extracting food from Ukraine’s famous chornozem, or black soil.

Most recently, he has also been busy trying to get the grain and seed oil he produces to hungry foreign markets – despite what he and international exporters in Ukraine describe as significant government interference.

Nibulon, based in the southern Ukrainian region of Mykolayiv, boasts 80,000 hectares of land under cultivation and $1.1 billion in assets. It is fully owned and run by Vadatursky, himself a product of Ukrainian agriculture.

“I was raised in a village, where work was hard. In the eighth grade, when I was 15 years old, I produced the annual equivalent of a full-time agriculture worker,” he told the Kyiv Post in a recent interview.

After getting an education in food processing, he began working his way up the career chain at a large Soviet bakery.

But he also managed to broaden his mind through tours abroad – a rare luxury at the time.

“I saw how people lived in different countries, and how they were treated compared to here, and decided to make something of myself,” he remembered. The foreign experience would come in handy after Ukraine gained independence in 1991, the same year that Nibulon was founded.

“When I was given the opportunity to organize my own business, when they told me that I wasn’t needed by the state system, a great desire arose to do everything that I wasn’t able to do before,” he said.

Vadatursky said that both during Soviet times and now, the biggest obstacle to realizing his potential as an agro-producer is Ukraine’s entrenched bureaucracy. In addition to competition from transnational producers and protectionist governments, one of the biggest problems faced by Ukrainian agro-producers like Nibulon is getting their goods out of the country.

“Our bureaucrats don’t interfere in production because that’s not easy work. It’s very hard work in fact. It’s easier to seize the dividends once the hard work’s been done,” he said. Instead, a company’s products are most vulnerable during transportation by rail, road and ship to port.

“They [Ukrainian authorities] once blocked ships from collecting our grain for 140 days,” Vadatursky said. International grain and seed oil exporters operating in Ukraine have experienced similar problems.

Ukrainian Deputy Prime Minister Sergiy Tigipko told a meeting of private grain exporters, industry trade associations and government officials in Kyiv on Aug. 2 that recent attempts by various Ukrainian agencies to slow down or block the export of grain from Ukraine were not acceptable and must cease immediately, according to Morgan Williams, president of the U.S.-Ukraine Business Council, who attended the meetings with Tigipko.

Private grain traders also pointed out that Ukrzaliznytsya, the state railroad monopoly, had put unofficial bans on loading grain hoppers, resulting in huge losses and slowing down or stopping the loading of export vessels. In response to such obstacles, Vadatursky has set out on a costly and ambitious plan to make his company’s logistics more secure by expanding river transport of grain to port.

The EBRD endorsed the plan by recently approving a $50 million loan for Nibulon to build elevators and terminals.

“The company has always sought administrative, financial and logistical independence. We try to be independent in all respects,” Vadatursky said. And making oneself attractive to Western lenders is one way of doing so.

“We have developed on credit and our own resources, developed a perfect credit history so that a first-class Western bank trusts us … Even those banks that were on the verge of bankruptcy gave us credit. One has to earn that,” he said.

Unlike the owners of other Ukrainian agro majors, which have sought to finance growth through placements on Western stock exchanges, Vadatursky has doubts about relinquishing equity. “Why did we develop independence if only to sell it and become more dependent? In business, one can never say ‘No’ …

We have had people trying to get us to do an IPO [initial public offering] for the last five years, but we held out and think we did right. To do an IPO is to undress in public,” he said.

Since 2002, Vadatursky has had full control of Nibulon, which used to be owned by almost a dozen shareholders.

Agro analysts familiar with the company say that the company got its start in 1991 when Vadatursky used local connections in Mykolayiv and the promise of Ukraine’s export potential to attract financing from Western investors, whom he later bought out.

His vision for his company and Ukrainian agriculture in general is centered on export. Nibulon, which produces grain and seed oil, currently boasts almost 25 percent of Ukrainian agro exports, selling 90 percent of its own products abroad. “Ukraine is destined to be an exporter, just like America,” Vadatursky said.

This means the export of raw grain and seed oil, not finished products, he said, as it makes no sense to try to sell flour to countries such as Bangladesh rather than wheat, as processing is cheaper there because of low labor costs.

Sergey Feofilov, director of Kyiv-based agribusiness consultancy UkrAgroConsult, called Ukraine’s chances of becoming a major food exporter “rather good.” Grain production – notwithstanding the drought – is on an upward curve, and could be boosted by further investment. “Grain yields could be increased by 300-400 percent with comparatively small investments in better agro-technology,” Feofilov said.

Heat wave results in farming feud

As the heat wave continues to ravage Russia’s harvest, farmers have attacked insurers for conning them out of their premiums.

Russia’s Grain Union leader Arkady Zlochevsky criticised insurance companies at a press conference on Monday, saying they use “intricate contracts [that] allow [them] to find loopholes” to avoid paying compensation.

Farmers in 11 regions of Russia where the worst drought since 1972 has destroyed half the crops are on the brink of bankruptcy, while 13 regions have declared a state of emergency.

Due to the difficulty of claiming compensation only 20 per cent of farmers have insurance, and the rest are relying on government handouts.

The grain union favours making insurance compulsory, and although the authorities have been pushing policies many farmers have resisted.

“Insurance in agriculture is still not complete,” said Natalya Agapova, chairman of the Agriculture Industry Centre. “Many farmers still try to avoid this despite various government and Ministry of Agriculture resolutions.”

Prime Minister Vladimir Putin promised loans and subsidies to those affected by the drought, and those who got insurance are first in line for handouts to tide them over until they receive their compensation.

“Though everyone will get aid, it’s a good thing that state and regional authorities are stimulating those who chose to insure their crops,” said Anton Shaparin, a spokesman for the grain union.

The premier also issued a warning to insurers not to try to make money by exploiting the situation.

Insurers hit back, saying there were no loopholes but that there was an absence of quality standards, particularly in some firms that specialise in agriculture.

“It is a bad state of affairs [but] the policy holder should receive something in any case,” said Nikolai Galushin, the deputy general director of Ingosstrakh. “A habit has been
developed – whether or not there is a crop – that the unprofitability (in volume of payments) from such insurers does not exceed 50-60 per cent of the collected insurance premium.”
Galushin added that information given by policy holders was often inaccurate and that a special law was needed for to make insurers pay up in full and on time.

The grain union is requesting 40 billion roubles ($1.3 billion) in aid for stricken farmers, according to Zlochevsky. Agriculture minister Elena Skrynnik said the request had been turned over to the finance ministry and the funds would be distributed through regional authorities.

“The government gives strong state support to the agriculture industry, prolonging their credit to banks and leases and giving new loans under low interests,” said Agapova.
Insurers, however, have criticised the handouts to farmers who weren’t insured, saying that they removed the incentives for anyone to get a policy.

“[The state support] should work only concerning those policy holders who voluntarily carry out insurance of crops, otherwise there will be no stimulus for insurance,” said Galushin of Ingosstrakh. “[It is] easier to wait with an outstretched hand for help from the state.”

The government has been criticised in some sectors for being too slow to act, while President Medvedev only chimed in on Tuesday, saying everyone should concentrate on preserving what’s left of the harvest.

Some reports say authorities only intervened when local newspapers started stirring fears that the price of bread would shoot up.

Experts, however, have played down these fears, saying that Russia has more than enough bread and that the cost of a loaf isn’t strongly linked to the price of grain.

Skrynnik, the agriculture minister, said that the harvest projection had to be cut from 97 billion tons to 85 billion tons. Russia consumes around 77 billion tons of grain every year.