Agricultural commodity prices are going through the roof.
Soybeans have jumped nearly 26% in the past 12-months … Barley and Wheat have surged more than 40% since last year … and Corn prices doubled in the just the past six months …
With spot prices for such a wide variety of foodstuffs surging right now, why are the Ukrainians dumping their own Wheat harvest in the Black Sea?
Ukraine, in the heart of the former Soviet Union and known as the “breadbasket of Europe”, is a key grain supplier to the entire continent. But today, the agricultural industry in this emerging semi-capitalist state seems to be stuck in its socialist ways.
In a move taken straight out of the old Soviet-style, command economy playbook, the Ukrainian government is pursuing a policy of export restrictions on most grains, and a total ban on wheat exports.
This populist move is designed to keep domestic food prices low, earning kudos for local politicians. But budding agri-capitalists in the Ukraine are suffering big-time – as grain consumers around the world are forced to pay higher prices.
Due to these heavy-handed export restrictions, huge stockpiles of grain have built up in storage facilities at Ukraine’s ports along the Black Sea. But due to the poor condition of these aging storage silos -- many of the crops are left to rot -- and end up being dumped into the sea. Ukraine’s agricultural sector has lost “hundreds of millions of dollars”, according to one industry source. Commodity traders claim that global grain prices have been inflated by as much as $20 per ton as a result.
The World Bank has declared Ukraine’s export restrictions "unjustified", and warned of potential corruption in the government’s handling of the affair. It seems that certain small domestic grain merchants have been awarded big export quotas, while large multi-national companies with big stockpiles are able to export only small amounts of grain. According to a recent article in the Financial Times, who is wonderfully covering this story; “Suspicions are mounting that inside deals could be at play in the quota-granting process.”
Corruption? … in the former Soviet Union? … Imagine that!
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