At least a quarter of Ukraine's grain market kept in the shadow
Depending on the region and crop, from 10 to 25 per cent of the Ukrainian grain market is in the shadow, says the Director of Agrain Trading, a subsidiary of Agrain, Andrei Bartkiv.
“The thing is that any farmer working either legally or illegally can sell grain for cash. After all, shareholders are given grain, they join together and sell it — one, two, three truck, etc. Thus, shadow prices have a negative effect on large players, on companies like ours,” commented Andrei Bartkiv.
As stated by the director of Agrain Trading, to avoid short-lived grain trading companies, the company's experts study the registration documents, analyze whether it is possible to do business with them.
“Truly, selling crops directly to multinational companies is not always cost-effective. In fact, one can earn more by selling comodities to small companies. But our strategy is to work stably with reliable partners,” he added.
According to Andrei Bartkiv, over ten years there was only once on the market when the company could not fulfil its contractual obligations. But then the parties agreed to extend the contract for another year.
If the company is unable to fulfil the contract terms, then the business is done on general terms. According to the director of Agrain Trading, it is necessary either to replace (that is, to buy and deliver) the missing volume, or to pay compensation, as traders say, to wash out. This implies compensation for the difference in the contract value of the grain and the current market price of the required volume. In addition, due to the quality of wheat, this year, “washouts” is a rather frequent situation.
Previously reported that since the start of 2018/19 grain exports from Ukraine as of May 10th reached 43.5 million tons.