Ukraine Grain Merchants Owed Huge Amounts Of VAT Refunds

The Ukraine government owes grain merchants in the country enormous sums of money in VAT refunds, according to a report on

They say that 3.5 billion (GBP270 million) in the local hryvnia is outstanding, and that Louis Dreyfus Commodities Ukraine have got so fed up with the situation that they've stopped buying grain at local elevators.

Under Ukraine law VAT paid on grain exported from the country is refundable, and as we know they exported a record 25.2 MMT of grain in the 2008/09 marketing year, and a further 12.2 MMT has already left it's shores in 2009/10.

There's just one teeny weeny problem, the government have run out of cash. They've recently had to beg USD2 billion from the IMF just to keep the wolf from the door, after reneging on promises to get their internal house in order. They've already had already had USD11 billion from the IMF this year, who then wisely suspended the release of any more cash in October. They've subsequently relented, throwing the country another USD2 billion to pay the gas bill.

When things are this desperate, the matter of VAT refunds to grain merchants becomes small beer.

It seems that domestic cereal prices are now being driven lower as the only price most trading houses are prepared to now pay for grain discounts the VAT that they know they probably aren't going to get.

The flip side of that is that prices are now so low that many farmers can't afford to pay for fertiliser and pesticide inputs this coming season. It's going to be a long hard winter.