Archive for June 6th, 2011

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Ukraine wins Lebanese tender for grain

June 6, 2011

Well dear readers, Ukraine is often mentioned in the media in relation to tenders. Mostly in a bad light regarding transparency or or the origins of the companies that actually win.

Anyway, the Lebanese government decided to hold a tender for 25,000 tonnes of wheat grain on an FOB basis. Tenders duly arrived from the EU, US, Russia and Ukraine.

Ukraine won at a price of just less than $300 per tonne. Russia was just over $313 per tonne. This you would think is good news, and it is, depending upon what happens next.

The next tender is from the government of Egypt and Russia is now obviously aware that the Ukrainian price will sit at no more than $300 per tonne. They will have to match it or better it. All good news for global food pricing as it is a downward trend. Continued competition like this, particularly between Russia and Ukraine, would direct the price of food down and not up with a noticeable impact in global pricing.

However, last year there was talk of a Grain OPEC, consisting of major exporting nations from this region. Russia, Ukraine and Kazakhstan were three amongst the Black Sea Region nations. Very much like Arabia, it would of course set the price per tonne from the region and of course allow for more influence on the global grain markets.

Whilst the world may wean itself of oil eventually, it is hardly likely to wean itself of grain foods. Would an OPEC style grain agreement by the Black Sea regional nations be acceptable under the WTO as far as Ukraine is concerned? What of the DCFTA with the EU?

How low will the grain price go before there is sufficient political and industry wide support to form a Grain OPEC of the Black Sea region nations run in a very similar manner to that of the Arabian oil system? By default Arabian oil has an influence over the US$ as that is currently the denomination for many global sales (although that is reducing steadily). Would a grain consortium gather enough sway to influence it?

Just something to keep an eye on.

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