Global grain exchanges may come to Ukraine

Ukraine expects branches of the Chicago or European grain exchanges to open offices here next year, says Agricultural Policy Minister Mykola Prysiazhniuk. “I believe that by the next harvest, we will have a proper grain exchange here, whether it is the Chicago or the European one.” The Minister added that representatives of the two exchanges had already been delegated to Ukraine.

According to the Minister, Ukraine’s existing exchange legislation is good enough to establish those kinds of organizations. At the same time, he added, Ukraine needs to approve a law on farm insurance. “A bill has already been drafted and has passed first reading,” says Mr. Prysiazhniuk.

According to the Minister, setting up farm exchanges will reduce tensions between grain traders and the Government.

One of the largest exchanges in the world, NYSE Euronext, is also negotiating to open a base for trading grain futures in Ukraine. The trading platform is looking for partners in Ukraine to open an exchange to trade in grain futures. Plans are to open a full-fledged independent exchange, rather than a branch of an international exchange. It will operate on the basis of electronic trading.

Trading in grain futures is a very promising area, as it makes it possible to hedge against risks, as the pricing situation on grain markets is generally unpredictable especially when harvesting starts. This will make it easier for growers to get loans.

Once futures become widely used, it will be possible to guarantee stable supply and demand for both growers and traders, to establish prices more than half a year in advance, to hedge against price fluctuation risks, to provide additional reinforcement of commitments on both parties to exchange contracts, and to improve lending conditions.

Tags: grain