17:04 12.10.2021

Millers, bakers withdraw signatures under memo with ministry due to impossibility of ensuring quality of products under memo conditions

4 min read

KYIV. Oct 12 (Interfax-Ukraine) – Representatives of three associations related to grain processing have withdrawn their signatures under the Memorandum of Understanding agreed on July 5 on the maximum grain export volumes in the 2021/2022 marketing year (July-June), since their proposal to separately limit the volumes of exported bread and fodder wheat was not taken into account, without which it is impossible to produce bread of proper quality.

Director of the Millers of Ukraine union Rodion Rybchynsky, President of the Ukrainian Association of Bakers Yuriy Duchenko and Head of the Ukrkhlibprom association Oleksandr Vasylchenko told about the withdrawal of their signatures under the Memorandum of Understanding and the reasons for this action at a press conference held at Interfax-Ukraine on Tuesday.

According to the director of Millers of Ukraine, the wheat harvest in 2021/2022 grew by 29.3% compared to 2020/21, to 32.2 million tonnes, while the amount of milling wheat required for the manufacture of bakery products decreased in the total volume to 42% from 58% in the last year.

"We proposed in the memorandum to separate 45% of milling wheat and 55% of fodder wheat from the total volume [the value of the maximum export volume established in the memorandum], in order to establish the maximum export volume of this or that wheat," Rybchynsky said, having specified earlier the agreement reached by the signatories of this document on the introduction of proportions for the export of wheat, depending on its quality.

He said that last week, most of the signatories to the memorandum refused to the representatives of the grain processing industry in introducing the separation of the volumes of exported bread and fodder wheat.

According to the director of Millers of Ukraine, the export of wheat since the beginning of the current year in July and as of October 8 amounted to 10.05 million tonnes, of which bread wheat amounted to 92% - 9.2 million tonnes. At the same time, 3.5 million tonnes of milling wheat are required annually for the domestic market of Ukraine and the needs of the processing industry.

Rybchynsky said that market participants had previously agreed to limit the export of wheat from Ukraine this season at the level of 25.3 million tonnes, without dividing it into bread and fodder wheat.

Accordingly, since 92% of wheat exported from the country is bread wheat, in Ukraine its supply over the past months has significantly decreased, and the difference in price between bread and fodder wheat has grown to at least $15 per tonnes. This leads to a shortage of bread grade 2 wheat used for processing into flour.

The head of the association said that starting from January 2022, the supply of milling wheat will decrease even more significantly, which will either lead to the need for millers to add low-quality bread wheat to the grinding batch, which will significantly reduce the quality of bread, or the industry will have to import it.

"Based on the above, we have withdrawn the signatures of the three associations from the memorandum that we signed on July 5, that is, we denounced our signatures, and we put everyone in front of this fact so that later there would be no remarks against our flour and bread producers. The today's situation will lead to at least two situations: a deterioration in the quality of bread and a significant increase in the price of it," Rybchynsky said.

As reported, on July 5, participants in the grain market and the Ministry of Agrarian Policy signed a memorandum of understanding for 2021/2022 agri-year. At the same time, the annex to the memorandum, which indicates the maximum export volumes of agricultural products, the parties were going to sign after the volumes of the harvested crop become known.

They sign this document annually since 2011 to maintain a balance between domestic grain consumption and export opportunities in Ukraine.

In January 2021, market participants agreed on a maximum corn export volume for 2020/2021 agri-year in the amount of 24 million tonnes and made the appropriate amendments to the annex to the memorandum. Prior to that, the grain memorandum for the past year, signed in August last year, contained an agreed position on the export of wheat and rye at the level of 17.5 million tonnes and 16,000 tonnes, respectively.