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Ukrainian Traders Warn Against Minimum Export Prices for Agricultural Commodities

Ukraine 25.06.2024
Source: The DairyNews
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Plans by the Ukrainian government to set minimum export prices for key agricultural commodities could severely disrupt trade, decrease grain exports, and lead to significant losses for farmers, according to warnings from the UGA traders' union reported by Reuters on Thursday. The union has urged the government to suspend the proposed scheme.
Ukrainian Traders Warn Against Minimum Export Prices for Agricultural Commodities
The move comes as Ukraine aims to boost its revenues while addressing fallout fr om protests last year in Europe, wh ere farmers complained that cheap Ukrainian imports were undercutting their businesses. Following Russia's invasion in 2022, the European Union had provided Ukraine with trade-free access but later imposed limits on some imports in response to these protests.

Ukraine's Deputy Agriculture Minister Mykhailo Sokolov indicated that the new pricing rules would not be implemented until August at the earliest. The proposed minimum prices would cover exports such as wheat, corn, sunflower oil, soybeans, and rapeseed, among other commodities.

However, the UGA traders' union criticized the plan, arguing that it would negatively impact exporters' ability to fulfill obligations, damage the trust of international partners, and lessen the competitiveness of Ukrainian goods globally. The union also highlighted that the government's new scheme does not consider the specifics of forward contracts, which are crucial for planning and financing export activities.

The traders' union warned that the minimum export prices could jeopardize half of Ukraine's exports, disrupt the forward contract system, and introduce significant market uncertainty. This uncertainty could prevent farmers from obtaining necessary bank loans, as many depend on forward contracts as collateral.

The union concluded that this policy shift would effectively turn Ukraine into a spot market, stripping farmers of the ability to manage risks through predictable forward contracts linked to global exchange prices, and undermining the structured trading system that has supported Ukraine’s agricultural sector thus far.
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