Ukraine Seen as a Fierce Competitor

KIEV -- Russia and Ukraine are set to become fierce competitors on the world grain market if they are squeezed out of European Union markets next year, analysts said Wednesday.

They said both countries would try to export as much grain to Europe before Brussels introduces a wheat import quota from next year, but would have millions of metric tons of wheat left over.

With Ukraine keen to maximize exports after another big crop and with Russia ready to slash prices, the neighbors were set to fight for their share in traditional markets.

"Ukraine and Russia are trading on the same markets -- North Africa, the Middle East, Korea," said Mykola Vernytsky from the Kiev-based ProAgro consultancy.

"These markets have already consumed significant volumes of Black Sea grain and additional offers could prompt tough competition."

Ukraine and Russia had expected EU countries to take up about 6 million tons of grain this season, which runs from July to June, but the quota means a cut of 2.5 million tons.

The European Union said earlier this month that the quota would be introduced from next year, ruling that Ukraine, Russian and other non-EU states beside the United States and Canada could export no more than 2.4 million tons to the region. If the countries export more than 2.4 million tons, they would incur a 95-euro-per-ton tariff.

Analysts said increased competition in traditional markets would force both producers to lower prices, as they are sitting on big surpluses and need the revenue from foreign sales.

Ukraine harvested 38.5 million tons of grain this year and has at least 12 million tons available for export this season, while Russia plans to sell up to 10 million tons from its crop of 86 million tons.

"Local prices could fall by $5 to $10 per ton," one Ukrainian trader said.

Ukrainian feed wheat is trading between $70 and $79 per ton, with milling wheat at $87 to $96 and barley at $75 to $85.

Analysts said Ukraine could gain over Russia by advertising its developed export infrastructure and reduced transport costs.