Head of newly created agency for managing state reserves prepared to turn organization into leading player on the local grain market - but Ag Ministry might have other ideas
, the reserve”s head, Yevhen Chervonenko, said on Friday.
Chervonenko told Reuters that his newly created State Agency for Management of State Material Reserves would do its best to create real market conditions in Ukraine and make local agricultural business honest and transparent.
“Our task is to become the leading grain operator in Ukraine because the state has every right to be in the market with other big commercial companies. The state must earn money, but we will do it by market means alone,” he said.
“The reserve used to be a shady and destructive player, while today we are fully transparent,” he said. “The reserve used to ruin the market by dumping, while now we stimulate the market by our transparent grain tenders.”
The reserve has already sold about 200,000 tons of feed and milling wheat this year, including 100,000 tons on July 6 at Hr 849-Hr 855 ($156-157) per ton, and analysts say these sales will cause local grain prices to fall soon.
But this policy of selling grain to bring prices down is at odds with the agriculture ministry”s policy, which is to keep prices high on the domestic market so as to discourage exports.
Under a recently adopted presidential decree, the reserve has been ordered to buy grain directly from farmers this year and Chervonenko said the reserve had already started doing so, although current prices were unwarrantedly high.
We are sure that (this season”s) prices will fluctuate around the world price – $100 to $120 per ton, more or less,” Chervonenko said.
“Our forecast is between Hr 500 and Hr 650 per ton for third class milling wheat,” he said, noting that the reserve wanted to buy as much grain as possible this season to avoid farmers exporting massive volumes of milling wheat instead. Chervonenko said earlier this week he planned to buy up to 2 million tons of bread-making grain from the 1999/2000 season. He said on Friday the reserve had already attracted commercial loans to buy grain from producers, but gave no details.
There are two opposing viewpoints among senior officials on grain policy in Ukraine in the 2000/2001 season. The agriculture ministry”s position is that domestic prices should stay as high as possible to prevent farmers turning to the export market.
The ministry, which has been blamed by President Leonid Kuchma for the country”s serious shortage of milling wheat, says high prices will also help producers overcome initial problems caused by market transformations now under way.
The other viewpoint, represented by Chervonenko, is to allow prices to slip to the average world price, but not below it.
Chervonenko says if prices are too high it will lead to grain imports into Ukraine and a significant volume of currency could leave the country.
“To buy grain now means to encourage panic,” he said.
