DJ UPDATE: End To Ukraine Wheat, Corn Duties Boosts Export Hopes

Ukraine's parliament voted Friday to end duties on grain exports as of next year, in a move industry sources say will boost shipments from this year's expected bumper harvest.

The new bill plans to abolish duties on wheat and corn put in place last year, while keeping the barley export duty at 14% but not less than EUR23 per metric ton, according to the parliamentary press service.

The bill now needs to be signed by president Victor Yanukovich but is expected to come into force on July 1, 2012--a year after the current taxes were put in place.

Industry groups welcomed the move to reduce the duties, which they blame for Ukraine's modest grain exports so far this year. Ukraine's agriculture ministry forecasts grain production could reach 50 million to 53 million tons in 2011, up from the less than 40 million tons harvested from last year's drought-hit crop.

"The tariffs had a very negative influence on the market as a result of which traders suffered very large losses," Leonid Kozachenko, president of the Ukrainian Agrarian Confederation, told Dow Jones Newswires. "And the state also didn't receive the desired revenues into the budget."

He estimates that Ukraine has the potential to export 23 million to 24 million tons of grain in the 2011-12 marketing year. In the first three months, traders have exported a little over 3 million tons in the first three months of the current marketing year, compared to around 3.5 million tons last season.

The move also comes at a time when higher grain prices in Russia--a key supplier to the world market since the Kremlin lifted a ban on shipments this year--have made Ukrainian grain more attractive.

This week, the state grain buyer for Egypt, the world's largest wheat importer, signalled it intends to add Ukraine to its approved suppliers for the first time since 2008; Ukrainian wheat was also offered as the cheapest origin in its latest tender.

"Russian wheat is still the cheapest offer into Egypt, but the fact that Ukrainian wheat was offered cheaper (but not accepted) may point the way to the future, especially if current export duties are relaxed," said U.K.-based merchant, Gleadell.

Still, local traders in Ukraine said they don't expect a sudden flood of exports any time soon. Poor weather earlier in the season could also limit demand as much of the wheat harvest will be of feed wheat, Gleadell added.

Ukraine's government imposed export duties on grain July 1 as a result of last year's drought. Wheat export duty was 9% of the contract price but not less than EUR17 per metric ton. The corn export duty was EUR12 but not less than EUR20 per ton.

-By Grigori Gerenstein and James Marson; contributing to Dow Jones Newswires; gerenstein@hotmail.com (Caroline Henshaw in London contributed to this article)

(END) Dow Jones Newswires