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Ukraine bans wheat exports

By Emiko Terazono and Jack Farchy in London and Roman Olearchyk in Kiev

Ukraine is to ban wheat exports from mid-November, the first move by a leading producer to restrict trade since a sharp rise in food commodity prices this summer.

The move will raise fears of a repeat of the wave of export restrictions that exacerbated the food crisis of 2007-08, which triggered riots in countries from Egypt to Senegal. In 2010 Russia and Ukraine imposed export restrictions, triggering a sharp rally in cereal prices that helped to cause the so-called Arab Spring.

Kiev told traders of the ban on Friday morning, according to several people with knowledge of the decision. Although the Ukrainian government portrayed the decision as a mutual agreement with the industry, traders said it was a de facto ban.

“There will be a halt on wheat exports starting November 15,” said Jorge Zukoski, president of the American Chamber of Commerce in Ukraine.

The agriculture ministry in Kiev said: “There has been no official government decision to ban exports?.?.?.?But if exports increased uncontrollably, threatening national food security, measures have to be taken.”

Ukraine is a top ten wheat exporter and along with Russia and Kazakhstan is part of the Black Sea region, which accounts for about a quarter of global exports of the commodity used to make bread. The area, an important supplier to north Africa and the Middle East, has suffered a severe drought this year. Traders will now be closely watching for any similar moves from Moscow.

Wheat prices rallied on the move, although they remained below the peaks of mid-July when the effects of the drought ravaging the US were still unclear. Chicago wheat futures rose 1.9 per cent to $8.85½ a bushel.

The decision comes on the eve of Ukraine’s October 28 parliamentary election, in which opposition parties hope to break President Viktor Yanukovich’s monopoly grip on power by mustering a legislative majority. Prices for wheat and bread, the staple food for millions of impoverished Ukrainians, is a politically sensitive issue.

The move flies in the face of recent calls from international policy makers asking agricultural producers to refrain from export restrictions.

Abdolreza Abbassian, senior economist at the UN Food and Agriculture Organization in Rome, said: “We are hoping that if countries are considering export restrictions because of difficult domestic situations that they also think seriously about the repercussions it would have on the world market and on their own grain sector the following year.”

It is unclear whether the restrictions would apply only to new sales or if they would include existing commitments.

There would be another meeting in early November where the government would clarify the rules, according to grain traders.

“The government does not want to be accused of market interference by unilaterally banning exports, as they have done in the past. So they are seeking mutual agreement with traders through memorandums,” another trader said.