To the surprise of the government, even after they spent billions of hryvnia to create a commodity reserve to stabilize prices, stopped agricultural commodity exports for the same reason, and implemented price controls on food products prices stubbornly continue to grow.

For example:

The problem with this picture is that domestic Ukrainian prices for agricultural commodities are still well below world prices. For example the domestic price for 3^rd class wheat is approximately $200 per ton, while world price is approximately $250 per ton or at least 25% higher. Other grain commodities are also well below world prices. This means producers and traders have lost significant income. Will Ukrainian farmers use as much fertilizer this year given this situation? Will they put in more oilseeds rather than spring grains as oilseeds are not subject to export control?

Also given that the least price increases were for flour and bread, these commodities are now subject to speculative buying by people with limited purchasing power. As government has forced bakers to bake but not millers to mill, bread is still available but flour has disappeared.

One of our colleagues suggested a 5% tax on grain exports and transfer of the money to those below the poverty line would have been a better solution than price controls and state purchasing. Given that the policy has not worked, we agree.

UkrAgroConsult (UAIndex Issue 8)