UPDATE 4-Ukraine confirms wheat export ban

Wed Oct 24, 2012 5:17pm EDT

* Traders welcome official ban instead of informal barriers

* Recent deals with Egypt's GASC in doubt

* GASC warns Ukraine on international credibility

* Ukraine focuses on maize exports (Adds EU farm chief reaction)

By Pavel Polityuk and Maha El Dahan

KIEV/ABU DHABI, Oct 24 (Reuters) - Ukraine's agriculture minister on Wednesday said the country would ban wheat exports from Nov. 15 after a weather-damaged harvest, a move that underpinned international prices.

Egypt, the leading global wheat importer, warned that Ukraine risked damaging its credibility on international grain markets. Ukraine later said existing contracts can be fulfilled.

"There will be a full ban from Nov. 15. There will be a government order about this. We are not playing games here. We do not have any other option," Farm Minister Mykola Prysyazhnyuk told Reuters, confirming widespread speculation in markets in past weeks.

The European Union's top farm official warned Ukraine to avoid any measures that would increase global grain prices and disturb traditional trade flows.

"I am deeply disappointed to see this announcement ," EU A g riculture C o mmissioner Dacian Ciolos said in a statement. " I t will add unnecessary tension to international agricultural markets, and those that will suffer most will be the world's poorest."

Ukraine, one of the top 10 global wheat-exporting countries, saw its harvest slashed by a third this year due to poor weather, as the United States suffered its worst drought in more than half a century. Global prices of wheat, corn and soybeans raced up sharply over the summer period.

U.S. wheat rose on Wednesday after the confirmation on expectations that there would be more U.S. export business. Chicago December wheat rose 0.2 percent to $8.70-3/4 a bushel. It had been down 0.2 percent just before the announcement.

Prysyazhnyuk had said that Ukraine would consider imposing limits if the high level of exports threatened to push up the price of bread at home.

Last week the government said the high pace of wheat exports would exhaust stocks of Ukrainian wheat available for shipping abroad by Nov. 15-20, and it urged traders to be cautious in concluding new contracts.

Market players, who had feared the government would resort to unofficial restrictions, were relieved.

"A full ban with a clear date is probably the best option for traders," said a trader for a large foreign grain house. "Everything is clear and we can claim force majeure."

In 2010, the government, under a threat of a possible jump in local grain prices, raised artificial barriers for exports and halted the shipments in the first months of the crop season.

EGYPT DEALS AT RISK

The ban could hit wheat purchases by Egypt's GASC, the country's main state wheat buyer. The group bought 55,000 tonnes of Ukrainian origin wheat in mid-September as part of a larger tender purchase for shipment Nov. 21-30.

Another 55,000 tonne consignment was also purchased on Sept. 11 by GASC as part of a 235,000 tonne deal for Nov. 11-20 shipment.

Nomani Nomani, vice chairman of GASC, said Ukraine should carefully consider any wheat export ban before it is implemented in order to maintain confidence in Ukraine as a global supplier of wheat.

"I hope that Ukraine studies this decision very well before passing it as it takes away from the credibility of the origin," he told Reuters.

GASC also said it was waiting for the government order to be issued for more clarity.

"We will wait to see the order that is issued and the details that are in it," Nomani said. "Will it, for example, include all contracts or will the contracts that have already been signed before the ban be honoured?"

Ukraine's Farm Ministry said in a statement on Wednesday that it had agreed with traders to increase the allowed wheat export volume in the 2012/13 season from the previous 4.0 million.

"At present, 3.8 million tonnes of wheat have been exported. Overall contracted volume is 5.4 million tonnes (of wheat), and these contracts can be fulfilled," it said.

Nomani said last week that rumours of the ban were being spread by traders seeking to increase prices.

Some European traders said efforts were being made to ship the Egyptian cargo out earlier.

"There will be a rush to move everything out in the next three weeks," one German trader said. "People had been expecting a ban and had been cautious about heavy sales from the second half of November."

"This will keep the markets firm in Ukraine for the next three weeks. Force majeure will no doubt be a theme for the shipments that cannot be covered," the trader added.

Others were slightly more sanguine.

"So far everything is calm here and there is no panic due to the ban," a Ukraine-based trade source said. "Venus used to work on a cost and freight basis, and I have not seen any big orders in the market today."

According to official data, Ukraine had exported 7.1 million tonnes of grain as of Oct.18, including 3.57 million tonnes of wheat as traders doubled monthly wheat exports against the previous season.

Latest export figures, provided by the agriculture consultancy UkrAgroConsult, showed that traders are accelerating exports this month. They already sold abroad 1.06 million tonnes of wheat on Oct. 1-21 and plan to sell an extra 646,000 tonnes in the near future.

Ukraine, which consumes 12 million tonnes of wheat, harvested 15.5 million tonnes of the commodity in clean weight this year.

FOCUS ON MAIZE

In the last few years, Ukraine has turned to maize planting. It boosted maize production to 22.7 million tonnes in 2011 and plans to harvest at least 20 million tonnes in 2012.

The ministry has said about 12 million tonnes of maize were likely to be exported in 2012/13 season.

It said 2.2 million tonnes of maize had been exported so far in 2012/13. The ministry said an additional 1.7 million tonnes of maize were due to be sent abroad in the near future.

"Local wheat prices are likely to decrease slightly," said Mykola Vernytsky from ProAgro consultancy.

"Traders will focus on maize and there is no ground to expect that Ukraine will limit maize sales - the country does not need such high stocks of this commodity," he said.

Ukraine exported 14.7 million tonnes of maize in 2011/12. (Additional reporting by Michael Hogan in Hamburg, Jonathan Saul in London, Maha El Dahan in Abu Dhabi and Charlie Dunmore in Brussels; editing by Keiron Henderson, Veronica Brown and Leslie Adler)

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