Ukraine union urges suspension of planned minimum food prices

Illustration shows Ukrainian flag and grain

By Pavel Polityuk

KYIV (Reuters) -Ukrainian government plans to set minimum export prices for some agricultural commodities would disrupt trading, cut grain exports and lead to losses for farmers, the UGA traders' union said on Thursday, calling for the scheme to be suspended.

Ukraine is seeking to increase its revenues and at the same time deal with the impact of protests in Europe last year by farmers who said cheap imports from Ukraine had crippled their business.

In response the European Union, which had granted trade-free access to Ukraine to help it following Russia's invasion in 2022, imposed limits on some imports.

Ukraine's government has drawn up calculations to set minimum export prices for some agricultural commodities, although Deputy Agriculture Minister Mykhailo Sokolov on Wednesday said the new rules would not start until August at the earliest.

"It will have a very negative impact on the ability of exporters to fulfil their obligations, undermine the trust of international partners in Ukrainian counterparties, complicate the planning and financing of export activities, and at the same time reduce the competitiveness of Ukrainian goods on world markets," the union said in a statement.

Disruption due to the war with Russia has led to cash domestic purchases of some of Ukraine's agricultural products and exports at artificially low prices to avoid taxes.

The minimum prices would apply to shipments of wheat, corn, sunflower oil, soybeans, rapeseed and some other major agricultural commodities.

Speaking to analysts on Wednesday, Sokolov said government documents needed to be adopted to launch the minimum price mechanism and that the new scheme did not take into account the specifics of forward contracts.

UGA said the minimum export prices would put half of Ukraine's exports at risk, could destroy the forward contract system and lead to uncertainty in the market regarding the fulfilment of exporters' obligations and grain purchases.

The union said many enterprises used bank loans that are secured by forward contracts. The absence of such contracts would prevent farmers from obtaining loans.

"This turns Ukraine into a spot market with all the consequences, including a lack of predictability and the ability of farmers to manage their risks in a civilised way by entering into forward contracts linked to prices on world exchanges," it said.

(Reporting by Pavel Polityuk; Editing by Michael Perry and Barbara Lewis)