Ukraine considers grain export quota of 2.5 mln mt

The Cabinet of Ministers is planning to impose a 2.5 mln mt grain export quota from September 1 to December 31, 2010, Nikolai Prisyazhnyuk, Ukraine’s Minister of Agriculture said yesterday, according to local media reports. In the meantime, 1 mln mt of grain currently stored in ports will not be subject to the export limit and will be allowed to ship, while corn sales will not be subject to quota restrictions, the minister said. Ruslan Patlavskyy: We estimate Ukraine’s gross grain harvest in 2010 at 39 mln mt (down 15% y-o-y), out of which 11 mln mt ( down 48% y-o-y) will be available for export. As domestic traders have already sold off 3.7 mln mt (including the 1 mln mt held at ports) of grain this season, the forecast of a 7.3 mln mt export balance is 2.9x larger than the suggested quota. Thus, we see a high likelihood that the quota will be increased in October-November, once the grain harvest is completed and better crop loss estimates are available. This, however, is likely to have a negative impact on Ukrainian traders, and in particular Kernel Group (WSE: KER PW) as according to our estimates the 76% y-o-y increase in export wheat prices (grade 5, ex-works) to USD 185/mt is not sufficient to balance the 48% y-o-y decline in forecasted grain export volume to 11 mln mt.