Plans for Ukraine to introduce minimum export prices for grain were already in the air. Yesterday the country announced that it is now complete and the new system can be introduced. Ukrainian exporters are very concerned about the consequences that the introduction may have on the country's export position. In the EU, wheat exports are lagging behind last season, while in the US exports are improving.
The September wheat contract on the Matif closed €1,50 higher yesterday at €204 per tonne. In Chicago, wheat rose 0,9% to $5.33 a bushel. Soybeans were essentially unchanged, closing 1 cent higher at $9.57¼ a bushel. Corn took a step back to close 0,9% lower at $3.75 per bushel.
Ukraine has approved the minimum price system for grains and a number of other agricultural products. The government announced this yesterday (Tuesday, August 20). The price mechanism that Ukraine wants to introduce will apply to wheat, corn, soy and rapeseed, among others. Under the new rules, a minimum price will be calculated using the average price calculated from the previous month's customs data with a 10% discount. By introducing a minimum price, the Ukrainian government wants exporters to keep the grain price artificially low to avoid taxes. Agricultural raw materials are the most important export product for Ukraine.
Farmers in trouble
The Ukrainian Association of Grain Traders is critical of the government's plans. By introducing minimum prices, up to half of Ukrainian grain exports are at risk, according to the association. An important part is traded via futures contracts. Minimum prices conflict with that system and create additional uncertainty on the market. These futures contracts are used, among other things, as collateral for loans, according to the Association of Grain Traders. The loss of these contracts could mean that farmers can no longer obtain loans.
It is not yet known when the minimum prices will be introduced. According to some sources, the system could come into effect this month, but the government has not yet announced a date.
European exports are faltering
The EU has exported 18 million tons of wheat through August 3,55. Last year, the export counter stood at 20 million tons on August 4,53. While exports in the EU are faltering, grain exports in the US are doing better. According to the USDA, 15 tonnes of wheat and 348.000 tonnes of maize were exported in the week to August 1.166.000, compared to 311.000 and 511.000 tonnes respectively in the same week last year. A favorable dollar exchange rate has given American exporters the wind in their sails, according to experts.
Jordan has withdrawn a tender for 120.000 tonnes of wheat. Some sources expect the country to open a new tender later today. Egypt's supplies minister announced that Egypt's wheat stock will cover six months of consumption. The country wants to increase the stock to nine months' consumption.
China is in the market for soy from the US. Compared to July last year, Chinese soy exports have tripled, according to Chinese customs figures. This amounts to a total of 475.392 tons. By far the largest part of the soy demand in China is met by Brazil. In July, this concerns 9,12 million tons of soy that China imported from Brazil. Still, analysts see the increased demand from China for US soy as a boost. Thanks to a favorable growing season, America is heading for a good harvest and any additional demand to use up that extra soy is welcome.