Ukrainian agrarian policy minister offers analysis of situation on grain market

MOSCOW. July 26 (Interfax) - Key factors contributing to grain price hikes around the world are this year's drought in Europe and some countries' desire to build large food stockpiles, while factors driving these prices down include the unblocking of Ukrainian seaports, this season's solid harvest in Brazil and a reduction of bioethanol manufacturing in the United States.

"Global grain prices will probably decline," the Ukrainian media quoted Ukraine's Minister of Agrarian Policy and food Mykola Solskiy said at a press briefing in Kyiv on Monday.

However, the price of these commodities also may grow because of this year's severe drought in European countries, including in Ukraine's neighbors Romania and Hungary, Solskiy said.

"Another factor driving the price up is that countries which traditionally build their food stockpiles to last for quite a lengthy period of time will try to do so even for a longer period this year. Apparently, they are at least psychologically ready for this decision which will be made soon," the Ukrainian minister said.

Meanwhile, there are three factors that will drive the world's grain prices down: the imminent start of Ukrainian grain exports by sea, expectations of a good harvest in Brazil, and possible U.S. steps to lower bioethanol levels in gasoline, a measure that will make it possible to redirect certain amounts of wheat and corn in this country from industry to the agricultural sector.

"The Ukrainian factor is one of the most important. The first thing we saw was how the exchange reacted with a $3-$4/tonne decline for wheat and corn on Friday," Solsky said when commenting on the July 22 signing of the treaty on agricultural exports from Ukraine's seaports.

"It is quite difficult to forecast how all this will happen on all markets. My personal opinion is that globally the price may decrease somewhat. Obviously, this process will meet Ukraine's interests, as the price for farmers will grow due to lower logistics costs, but the price may then decline at the port," Solskiy said.

The price at which agricultural products are bought from Ukrainian farmers has increased by 10%-30% in the past few days after the National Bank of Ukraine raised the hryvnia's official exchange rate to the U.S. dollar by 25%, as well as thanks to the treaty signed by Ukraine with Turkey and the United Nations on restarting agricultural exports from Ukrainian seaports, he said.

Over the past few days alone, these factors have produced a positive effect on Ukrainian agricultural producers and have led to a growth of grain traders' interest in cooperation with Ukrainian farmers.