Ukrainian grain trader HlibInvestbud (HIB) said on Thursday it planned to boost exports by 300 percent to 5 million tonnes in 2011/12, despite competition from Russia after the expiration of an export ban there. HIB emerged as one Ukraine's major grain traders last summer when it secured the lion's share of exports quotas introduced after a drought. The government has a 49 percent stake in the company and 51 percent is owned by private investors.
The company won more than 20 percent of last season's total grain export quotas of 4.2 million tonnes and sold abroad 1.2 million tonnes of grain. "We plan to export about 5 million tonnes... taking into account an increase in the grain harvest and a large number of consumers," HIB director Robert Brovdi told Reuters in an interview.
According to the latest official forecast Ukraine is likely to boost its harvest to up to 51 million tonnes from 39.2 million in 2010 and Brovdi said a high crop would allow for exports of up to 20 million tonnes in 2011/12. Ukraine cut exports to 12.7 million tonnes in 2010/11 from 21.5 million in 2009/10 after the government imposed export quotas in a bid to prevent a rise in domestic bread prices due to a fall in the harvest after heavy rains followed by drought and a jump in global prices.
Brovdi said that feed grain would dominate Ukrainian exports this season due to poor weather across the former Soviet republic. Milling wheat, he said, would be mostly consumed in Ukraine. "The share of milling wheat is falling in favour of feed wheat. Feed wheat, feed barley and feed maize would form three main parts of the exports," he said, adding that feed wheat would make up 60-65 percent of the total wheat harvest in 2011.
In 2010 the share of feed wheat did not exceed 45 percent. "Feed grain will be the major trade trend this year. Excess supply of feed grain would cause a fall in prices abroad and in Ukraine," he said. Brovdi said current domestic prices for Ukrainian feed grains were too high and exporters faced difficulties in selling the grain to foreign consumers.
"At least four serious multinational traders, which signed export contracts for barley with other multinationals, are working with losses of $20-$25 per tonne," he said. According to his calculations, the current barley price of $252-$258 FOB means that traders should buy grain in port silos at no more than $201 per tonne, although they paid $226.
RUSSIAN COMPETITION Brovdi said Ukraine would face tough competition from Russia which had large grain stocks from the previous season and expected a bumper harvest of 90 million tonnes in 2011, a strong rebound from last year when the drought slashed yields.
Ukraine has already felt the pressure from Russian grain sales and in July Ukrainian grain exports dropped 81 percent to 334,000 tonnes from 1.786 million in June. Brovdi said Russia, which was a key factor on the market this season, would continue its bumper sales and had no reasons to increase its export prices which were helping it clean up in major international tenders this year.
Egypt on July 29 said it bought 240,000 tonnes of Russian wheat with prices around $255 a tonne, with freight costs of up to $16.25, around $40 a tonne below EU and US competition. He said Russian feed grain now traded at $201-$205 FOB Novorossiysk while 11.5 percent protein milling wheat was offered at $215-$220 FOB. Ukrainian milling wheat cost $242 FOB Black Sea, feed wheat - $230-$240 FOB.
"Russia will export non-stop by the end of this season. They will use their export facilities to 100 percent," he said. Russia exported 2 million tonnes of grain in July and its grain lobby forecast the shipment of 3.5 million in August. "It's not dumping. Russia works with a good profit. Even if it cuts prices Russia stays in the black. Grain production cost is the same in Ukraine and in Russia but Ukrainian export price includes export duties and VAT or $60-$75," Broad said.
In July, Ukraine replaced grain export quotas with export duties. Export duty on wheat is 9 percent but no less than 17 euros ($24.30) per tonne. Export duty on barley is 14 percent and no less than 23 euros per tonne. Export duty on maize is 12 percent and no less than 20 euros.
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