Ukraine is considering capping milling wheat exports in the first half of 2022. Officials are expected to make a decision in mid-January, two sources familiar with the discussions told Reuters.
Government officials fear that strong exports will raise domestic prices for high-quality bread wheat, making staple foods more expensive at a time when inflation in Ukraine is near its 2018 high.
Demand for Ukrainian wheat is being boosted by an export tax from competing supplier Russia, which is also trying to control domestic price pressures.
"At a recent meeting at the Department of Agriculture, officials indicated that restrictions are possible because exports are too fast," one of the sources told Reuters.
Any further measures are likely to drive up milling wheat and bread prices around the world.Food affordability is a major issue, in part due to the economic damage caused by the COVID-19 pandemic, with the most recent measurement of food price inflation from the United Nations at a 10-year high.
Ukraine has exported 15.6 million tons of wheat so far in the 2021/22 season (July-June), 27% more than in the previous year.
The country can only export around 10 million tons - up to 4 million tons of milling wheat and 6 million tons of feed wheat - without affecting its own consumption, analysts and traders said.
Russia has been trying to curb exports since the beginning of this year, with deliveries having declined 37.5% since the start of the current 2021/22 season, causing large importers to look for alternative offers.
Government officials fear that strong exports will raise domestic prices for high-quality bread wheat, making staple foods more expensive at a time when inflation in Ukraine is near its 2018 high.
Demand for Ukrainian wheat is being boosted by an export tax from competing supplier Russia, which is also trying to control domestic price pressures.
"At a recent meeting at the Department of Agriculture, officials indicated that restrictions are possible because exports are too fast," one of the sources told Reuters.
Any further measures are likely to drive up milling wheat and bread prices around the world.Food affordability is a major issue, in part due to the economic damage caused by the COVID-19 pandemic, with the most recent measurement of food price inflation from the United Nations at a 10-year high.
Ukraine has exported 15.6 million tons of wheat so far in the 2021/22 season (July-June), 27% more than in the previous year.
The country can only export around 10 million tons - up to 4 million tons of milling wheat and 6 million tons of feed wheat - without affecting its own consumption, analysts and traders said.
Russia has been trying to curb exports since the beginning of this year, with deliveries having declined 37.5% since the start of the current 2021/22 season, causing large importers to look for alternative offers.
The Milling Wheat Futures on Parisian Euronext BL2c1 rose to a record high last month and are currently 35% above the level of the previous year.
"The introduction of restrictions by Russia only complicates the situation - their quantities will most likely be replaced by Ukrainian grain," said one of the sources.
"This will lead to an increase in demand and prices, which of course will lead to an increase in domestic wheat prices and, consequently, an increase in bread prices (in Ukraine)."
Ukraine harvested a record grain crop in 2021, but its inflation, fueled by higher global food and gas prices, hit 11% in September and will still be around 10% by the end of the year.
The Ministry of Agriculture and the dealers sign an export memorandum every season. The export is currently set at 25.3 million tons without specifying the amount of feed or milling wheat deliveries.
According to the two sources, the government could update the memorandum and add a 4 million ton export limit on milling wheat for the remainder of the season.
“A plan to restrict exports sounds sensible, as there are around 4 million tons of milling wheat in stock. This will take until April-May, then food security could be at risk, "said a market source.
Ukraine's Agriculture and Economy Ministers told Reuters that there are currently no market factors that would require restrictions, but the sources said officials plan to look into the issue in mid-January.
The Ukrainian Flour Manufacturers Association said in a letter to the government last month that any shortage of milling wheat could significantly affect prices of flour and flour products in the country.
"Some restrictions are likely - there are more and more voices saying that there will be no grain and no bread in Ukraine," said another trader. "But that limitation will most likely only affect food grains as we have a lot of them." Feed the grain. "
Russia, where inflation remains near a 6-year high, announced the level of its wheat export quota from February 15 to June 30 last week and announced that it would change the formula of its wheat export tax to world prices as a guarantee of safety in the event of strong growth.
"The introduction of restrictions by Russia only complicates the situation - their quantities will most likely be replaced by Ukrainian grain," said one of the sources.
"This will lead to an increase in demand and prices, which of course will lead to an increase in domestic wheat prices and, consequently, an increase in bread prices (in Ukraine)."
Ukraine harvested a record grain crop in 2021, but its inflation, fueled by higher global food and gas prices, hit 11% in September and will still be around 10% by the end of the year.
The Ministry of Agriculture and the dealers sign an export memorandum every season. The export is currently set at 25.3 million tons without specifying the amount of feed or milling wheat deliveries.
According to the two sources, the government could update the memorandum and add a 4 million ton export limit on milling wheat for the remainder of the season.
“A plan to restrict exports sounds sensible, as there are around 4 million tons of milling wheat in stock. This will take until April-May, then food security could be at risk, "said a market source.
Ukraine's Agriculture and Economy Ministers told Reuters that there are currently no market factors that would require restrictions, but the sources said officials plan to look into the issue in mid-January.
The Ukrainian Flour Manufacturers Association said in a letter to the government last month that any shortage of milling wheat could significantly affect prices of flour and flour products in the country.
"Some restrictions are likely - there are more and more voices saying that there will be no grain and no bread in Ukraine," said another trader. "But that limitation will most likely only affect food grains as we have a lot of them." Feed the grain. "
Russia, where inflation remains near a 6-year high, announced the level of its wheat export quota from February 15 to June 30 last week and announced that it would change the formula of its wheat export tax to world prices as a guarantee of safety in the event of strong growth.
Source
Hansa Terminhandel GmbH
