Financial Times: Ukraine Ag Minister Confirms to Sign Corn Deal With China in Oct.

September 20, 2012 02:31 AM

via a special arrangement with Informa Economics, Inc.

Report confirms deal that has been in works for months, but more corn than initial report

NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.

Sometimes confirmation of a report surfacing months before is news for what additional information it includes. And for some signals of what may come later. Such is the case with news regarding Ukraine and China.

Corn-for-credit deal. The Ukraine and China will sign a deal in October that will result in Ukraine receiving $3 billion in loans from China’s Export-Import Bank and will supply China with 3 million tonnes of corn, Ukraine Ag Minister Mykola Prysyazhnyuk told the Financial Times in an interview.

"China is asking for about 3m tonnes of corn each year ... to be supplied at market prices that are set at the time of export," Prysyazhnyuk told the newspaper. "This market is important and attractive for us. We have not yet exported crop there."

The corn tonnage increased from initial reports. Initial reports of the plan involved $3 billion in loans to Ukraine from China and 2 million to 2.5 million tonnes of corn from Ukraine to China. A memorandum of understanding for the deal was signed June 28.

Of note, Ukraine said it will use the loans to finance the purchase of Chinese agriculture technology, herbicides and pesticides. "We will use these investments to boost our harvest and, in turn, fulfill export obligations to China," Prysyazhnyuk said.

The deal with China has been in the works for several months and there is the matter of a quarantine agreement between China and Ukraine on corn as well. But so far, there’s no indication that such a deal has been finalized. Reuters reported in July that grain industry officials in the Ukraine were hopeful that a quarantine agreement between the two countries on corn could be signed by the end of 2012. Those comments emerged while a group of businessmen and others from Ukraine were in China.

This would not be the first agreement between the two nations as they signed a currency swap agreement in June worth 15 billion yuan ($2.38 billion). And work is said to continue on another series of loans from China to help Ukraine modernize its energy industry.

Comments: The process of working out a quarantine deal remains a key in this situation. Also, it’s interesting to note that the level of corn involved has grown from an initial indication of 2 million to 2.5 million tonnes annually to now 3 million tonnes, according to Ukraine officials. Clearly, China is seeking to broaden its sources for imports of corn, in particular in the wake of the U.S. drought which has reduced U.S. corn output and bolstered global corn and grain prices. It will also be interesting to see how some G20 officials react to this development because France has called the first ever emergency meeting next month of a new G20-backed group to discuss shortages in global agricultural markets. The FT article says the Ukraine-China loan-for-crop deal is likely to raise concerns among other big importers of agricultural commodities in Asia, including Japan and South Korea. So, old news is new news, with potential impacts.


NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.






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