Agreement paves way for imports of Ukrainian corn

The Ukrainian farming giant UkrLandFarming Public Ltd said it recently signed an agreement on corn supply and transport with China National Cereals, Oils and Foodstuffs Corp, a leading State-owned food conglomerate, paving the way for Ukrainian corn to enter the Chinese market.

The agreement showed both companies' willingness to deepen cooperation but did not lead to an order from COFCO for Ukrainian corn, ULF Board Chairman Oleg Bakhmatyuk said in an interview on Wednesday.

The Ukrainian company also signed an agreement with Rongsheng Heavy Industry Co, China's largest private shipbuilder, to purchase two grain carriers while retaining the option for more bulk cargo vessels, as it intends to build its own fleet to transport corn to China, the Middle East and North Africa.

Bakhmatyuk said ULF is in talks with five large Chinese companies about possible purchases of Ukrainian corn, with COFCO being one of the largest.

"In principle, Ukrainian corn is allowed to enter China's market," he said.

"But it remains undecided which Chinese company will have the quota to import Ukrainian corn."

"Agreement with COFCO will definitely facilitate this process," Bakhmatyuk added.

China and Ukraine signed a protocol last month to allow Ukrainian corn to enter the Chinese market by the end of the year, said Mykola Prysiazhniuk, Ukraine's agricultural policy and food minister.

"The protocol allows us to export corn to China," he said.

The export potential of Ukrainian corn in the 2012-13 marketing year is estimated at 12.5 million metric tons, of which 3 million tons have already been exported, according to Ukrainian government statistics.

Meanwhile, China released a total import tariff quota of 6 million tons of corn for this year. Next year's quota is likely to reach 8 million tons, according to estimates by industry analysts.

Bakhmatyuk said he hopes the company could send its first shipment of corn to China by the end of this month and estimated that Ukrainian corn exports to China may reach 1 million to 2 million tons in 2013.

"China's demand for corn is growing rapidly," he said. "Our exports to China are expected to stand at 5 million tons within the next five years."

China's corn imports have registered strong growth in recent years, thanks to its increasing population, ongoing urbanization and a dietary shift toward more meat - as corn is used as animal feed.

China imported 4.6 million tons of corn in the first 10 months of 2012, a more than threefold increase from the same period in 2011, according to the General Administration of Customs. Most of the imports came from the United States.