Farmers say grain export tariffs are hurting agricultural industry
More than 1,000 farmers rallied on Oct. 4 outside the government and parliament buildings in Kyiv, protesting against protectionist state policies that they say are impoverishing them and crippling the country’s promising agriculture sector.
Activists held imitation scythes and pitchforks and brandished placards reading "No to destroying the village" and "Authorities! Grow at least a bag of grain and find out its price."
The protest came after the Ministry of Economic Development and Trade posted a draft law on its website proposing to extend duties on grain exports. Ukrainian officials have routinely used such curbs to curtail inflation and protect the domestic food supply, ignoring the harsh consequences for the nation’s farmers.
Despite boasting a record grain harvest that could exceed 50 million metric tons, the government has kept restrictions in place to limit exports of wheat, barley and corn. They could now extend and expand mem to soybeans, sunflower oil and rapeseed.
While grain traders pay the export duties, they lower purchase prices in order to avoid losses. This places the burden on the farmers, who are among Ukraine’s poorest citizens.
"The export duties are in fact taxes on farmers," said Kostiantyn Fastovets, an analyst at investment bank Renaissance Capital. "More than half of the sum the farmers could earn and use for development of the sector would [instead] go to support the state budget," he added.
Wearing a l9th-century peasant costume and holding an old-fashioned threshing tool, Volodymyr Yurko, a farmer from Chernihiv Oblast, said that agrarians would now have to use the implements like this as they have no money for modern farming machines.
"The price for grain and sunflower seeds has already halved," said Viktor Bezukhov, a farmer from Vinnytsia Oblast, waving a sign that read: "Export duties are a genocide of producers."
"The government wants to make bread cheap at the expense of the farmers," he added.
Exporters currently pay a tax of 9 percent on wheat exports, 12 percent on corn and 14 percent on barley. The draft law, published on Sept. 29, would extend those duties until Jan. 1, 2013, a move that experts say is aimed at filling the state budget, but could impoverish farmers.
"It is a low blow," said Volodymyr Lapa, director of the Ukrainian Agribusiness Club.
He said that even the appearance of this draft law on extending the duties would lead to a decrease in domestic grain prices and result in huge losses for producers.
"Each day that this draft law is on the ministry’s site means minus Hr 100 for a ton of grain," he said, adding the situation is aggravated by the decrease of the world grain export prices by $40-50 per ton in the last month.
"The prices for grain in some cases dropped lower than the cost [of producing it]," said Gennady Novikov, head of the Ukrainian Agrarian Union,
the farmers’ association that organized the protests. "It means a person worked for a year and then was left with nothing."
In addition to prolonging existing duties, the draft law proposes tariffs of 12 percent on soybeans, 9 percent on rapeseed and 10 percent on sunflower oil.
Fastovets from Renaissance Capital said he doubted this draft law be passed as the powerful sunflower exporters like Kernel or Bunge would lobby hard against the proposals.
"After passing of this bill Ukraine will reduce its production of sunflower oil, and we supply almost 25 percent of world export of this product," he said.
Lapa said this draft law threatened Ukraine’s promising agriculture sector. If it is passed, he said, "we will kill the goose that lays the golden eggs."
A competing draft law was registered in parliament on Oct. 4, which proposes to reduce export duties for wheat, corn and barley to 3 percent and impose the same tariff on rapeseed and sunflower oil. Analysts at investment bank Dragon Capital said this could be "highly positive" for producers and lead to an increase in exports.
Prime Minister Mykola Azarov said on the same day the government is ready to discuss with the agrarians the disputable issue of export duties, considering budget revenues, the profitability of agribusiness and state food security.
"Government is ready to seek a compromise," Azarov said. "But ultimatums will not do."