August 7 2003, 17:43 APK-Inform

Grain association worried with administrative regulation of grain market

A joint sitting of the Council of Representatives of Ukrainian Grain Association (UGA) with representatives of grain companies was held on Tuesday, August 5. The participants of the meeting have expressed concern about some of the recent developments in Ukrainian grains market. In particular, this regards the attempts of administrative intervention into the process of price formation in the country's grain market, including those which occur in accordance with the order of the Cabinet of Ministers of July 24 this year.

As far as agrarian sector of Ukraine has already been working under the laws of market economy, the prices for grain crops in domestic market are formed in accordance with the supply/demand balances, the meeting participants said. Thus, in order to prevent significant hikes of prices, the measures to encourage saturation of domestic market ought to be taken, which includes import purchases. Such work is currently being done both by the government and by private companies, which are providing import supplies of grain and seeding material to Ukrainian market.

It is impossible, though, to set prices in the market by administrative measures, which was proved by the experience of 1999/2000 marketing year and of the fist half of 2003. Such measures of government cause fears of the grain owners, who cut the supplies to a still larger extent (afraid to be accused of selling at "wrong prices") and hold on the grain in their own granaries, which are quite often not properly fitted for long-term storage. This results in damage of grain, which becomes unsuitable for both food and feed purpose usage. Thus, there is a real threat of additional losses from the crop, which has already been quite poor, the UGA representatives are warning.

The regulative restriction of baking industry and grain farming and trade profitability, down to the level which prevents from stepping up (or even restoring) the production, entails a drop in economic motivation and is pregnant with decrease in grains farming and baking industry performances in the next year. This will also involve extension of the shadow part in the sector of farming economy.

The meeting participants believe that while in large cities the supplies of staples with limited profitability will nevertheless be provided by some wholesaling and retail trading companies, there will be not any supplies of agricultural products to small townships and rural areas. The threat of shortage of grain products outside the large cities is thus completely real.