Ukraine Seeks More Flexibility Under $1.5 Billion Grain Contract

Concerned that China’s economic difficulties could have an effect upon the two country’s 2012, $1.5 billion loan-for-grain deal, Ukraine is seeking increased flexibility under the terms of the trade agreement.

Under the terms of the deal, Ukraine’s state owned grain company, GPZKU, agreed to supply 5 million tons of grain to China’s CCEC trading company per year- however, the 15-year contract does not stipulate that Beijing is obligated to accept this volume.

Ukraine, which has exported 800,000 tons of grain to China this year, is seeking a revision to the contract indicating that the country would have the right to sell grain to third parties if China refuses delivery. Ukraine would also like to revise the system through which China can receive a broker’s commission for selling Ukrainian grain to a third country. GPZKU has proposed a change in commission from the current fixed rate of $5 per ton to 1% of the contract value.

“If it (CCEC) does not accept our (trade) offer, we believe that GPZKU has the right to sell the products to another company. We also believe that no penalties should stem from this,” the ministry quoted GPZKU Chief Executive Borys Pryhodko as saying.

Last year Ukraine ran afoul of the trade agreement when it was in danger of defaulting on grain shipments to China as a result of its domestic market being disrupted by the country’s ongoing financial and political upheaval. GPZKU exported 2 million tons of corn to China in 2014, and aims to exports an equal volume this year.

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