Creation of international rules and principles of trade that will help to protect the interests of all participants of trade transactions is the basic principle of civilized market relations in the world. These rules must be understandable and acceptable in order that there is no need to discuss them again and again for each new trade agreement. “Free trade and export barriers: engaging the market and government policy” was the subject of the IV International Grain Conference that was held on the 26-27 of May, 2011 in Kiev. The International Association of Grain and Feed Trade (GAFTA) and the Ukrainian Grain Association (UGA) were traditionally its organizers. These joint conferences are held every two years and collect leaders and experts of world-class grain trading companies, investors and politicians. This year at the conference the most important topics that generated active discussion of participants of international and regional grain markets were considered, they were a ban on grain export in Russia, the introduction of quotas in Ukraine and the ability to implement its export duty for basic grains. According to the international community, a serious issue for the Ukrainian government is an increased food price that is why the participants of the conference were interested in learning about new strategies that will be used by Ukraine as to export. Although the day before the conference – on the 25th of May – the Minister of Agricultural Policy and Food Mykola Prysyazhnyuk told to the whole world about suspension of export quotas for wheat and barley by Ukraine, this topic has not lost its relevance: there is still no official decision of the Cabinet of Ministers of Ukraine about it and the law on the introduction of the export duty on wheat, corn and barley in 2011 passed by the Verkhovna Rada was addressed for signature to the President of Ukraine. Thus, over one hundred and fifty participants of the conference listened with interest the statement of Ukrainian specialized minister to try to build further tactic of behavior and cooperation with Ukraine for their companies. During the conference two documents were signed: a memorandum on cooperation between the Cabinet of Ministers of Ukraine and the Chicago Board of Trade (CHBT) and a memorandum on cooperation between Ukrainian futures exchange and CHBT. The president of CHBT Leo Melamed came to Kyiv to sign the memorandum and participate in the conference. On the part of Ukraine on behalf of the government the first document was signed by the Minister of Agricultural Policy and Food Mykola Prysyazhnyuk. According to the memorandum the parties expressed the intention, using the large positive experience of the Chicago Board of Trade and an interest of Ukrainian government, to learn opportunities and to promote the development of financial market of our country and to improve the functioning of the exchange market, including the introduction of commodities derivatives trade, in particular futures and option contracts, base asset of which is agricultural products. The President of “Ukrainian Agrarian Confederation” Leonid Kozachenko affixed the second memorandum a signature. Turning back to the problems of a civilized grain market performance it should be reminded that only countries with underdeveloped economy can afford to constantly change game rules in the domestic market. This, unfortunately, refers to Ukraine. But all the same we have to consider the global game rules, so much that they exist more than 130 years – since the creation of the International Association of Grain and Feed Trade in 1878. Its president – founder was John Ross. Currently, the first time in history of the Association, GAFTA is headed by the representative of Ukraine – Oleksiy Gavrylov, the head of the supervisory board of “Ramburs”. He addressed the participants of the conference with a short welcoming speech. Speech of the President of Ukrainian Grain Association Volodymyr Klymenko was also laconic. Thus developed over one hundred thirty years ago by GAFTA international trade standards system successfully operates throughout all these years and is the base for traders and for the superintendent, logistics, brokers, laboratories and other market participants. Today the Association has over 1000 members from 80 countries. Although the scope of its activities expanded considerably over time, primary and basic purpose of the Association is to provide standard forms of commercial contracts. The system of contracts standard forms of GAFTA is a proven and reliable, but that does not mean that contractual conditions remain completely unchanged. The Committee of International Experts on Trade holds regular meetings, is active in following the new trends in international trade sector. Based on its findings, standard forms of contracts are amended. It is important that all members of the Association conduct their activities under the unified rules and principles of professional practice and ethics to maintain a decent level of international trade in grain and feed. It is indispensable condition, because approximately 80% of grain and feed trade in the world is performed with a use of standard contracts forms of GAFTA. “My word is my obligation” is the motto of the Association, because not only legal documents play a role in commercial relations: a high level of trust in a partner is an important condition for the conclusion of each transaction. Department for trade policy of the Association represents interest of its members in government and executive bodies worldwide. GAFTA, with non-governmental status in the international arena, has significant opportunities of lobbying of its members in the World trade organization (WTO), and in the Food and Agriculture Organization of the United Nations (FAO) and World Health Organization (WHO). Domestic speakers, including Minister of Agrarian Policy Mykola Prysyazhnyuk and President of “UAC” Leonid Kozachenko, as well as available printed informational support tried to present possibilities of Ukraine in a favorable light. We really have a lot to be proud of. Ukraine is a powerful agrarian state with old traditions of agriculture. Possessing one third of the world’s black soil, it has strong potential for development of agriculture and necessarily unlocks it. There are all conditions for that: fertile soils, favorable mild and humid climate, human resources, favorable geographic location and proximity to key markets of the Middle East, North Africa, former USSR. This makes Ukraine highly attractive for investment in the agricultural sector. Only by raising the yield to the average European one, the agricultural sector of Ukraine is able to more than double the gross grain production, bringing it to 100 million tons. In these circumstances real export can be more than 50 million tons. To successfully solve this task, players of the grain market have created a powerful logistics and export infrastructure, including elevators, roads, transshipment facilities in the ports etc. The Dnipro River runs through the whole country, it does not only irrigate the fields by its waters, but also serves as a convenient highway for cheap water transportation of crops from the depths of the country to the seaports. Capacity of grain terminals is 35 million tons. In addition, having advantageous geographical location, infrastructure of ports and grain elevators, Ukraine can not only export but also carry out re-grain from other countries. Ukraine is considered the richest country in the world according to the qualitative composition of soil and land productivity. Therefore, separate promising direction that can not be realized elsewhere, is the production of organic products, demand in it is constantly growing. Given sufficient investment in the agriculture sector, Ukraine can play a key role in solving the problem of food shortages in the world. According to the UN and the Organization for Economic Cooperation and Development till a year 2019 Ukraine will yield to Brazil only in growth rate in agricultural production and will outstrip China and India. Even now Ukraine is among the leaders in the world grain market. As a result of the marketing year 2009/2010 we confidently moved into the third place in the world on export of grain and have about 9% of the market. Only the United States and the European Union are ahead of us. Our state is the undisputed leader in the export of barley and sunflower oil: in these spheres, we actually dictate pricing. Ukraine is fourth in corn export and fifth – in the export of wheat. Recent entrance to the market of the Far Eastern countries gives significant prospects in buildup of grain trade. Agricultural products trade is an important part of the national economy. Currently one in four dollars comes to Ukraine from the export of agricultural goods. In general, the state receives up to USD 10 billion from the sale of agricultural products to foreign markets. Under favorable conditions, our state can become the leading supplier of food to world markets. However, let’s give the floor to participants of the conference. Oleksiy Vadaturskyy, Director General of “NIBULON”, Hero of Ukraine told about life of Ukrainian traders in the domestic and world grain markets: Back in 1991 when “NIBULON” was a small agricultural enterprise, we understood that Ukraine, no matter how much production will be processed in the domestic market, is destined for export. We saw how the first-class companies that came to the market with their own funds, the name in world trade, with own understanding and vision of business, work. At that time we understood: either we build our infrastructure and become independent, or we have to depend on whether multinationals buy our corn or not. Given that even now our loan interest rates for the agricultural sector are 15-17% per annum in hyperinflationary economy of early 90’s, unstable political situation, it was almost impossible to conduct business in Ukraine. We set a goal to win the trust of first-class Western banks in order not to yield to multinational companies on financial support. Of course, we knew what multinational company in Ukraine is confronted with: the old elevators, the lack of proper logistics, normal roads, vehicles for transportation of grain, normal ports, monopoly of Ukrainian Railway. It is impossible to establish logistics without serious investment activity in Ukraine. However, conducting an investment activity in Ukraine is not an easy task, moreover, it is designed for people with strong nerves. Now, first of all, in order to invest in agricultural sector, one should solve a range of issues, starting from assignment of lands, approval of projects etc. Often their decision is delayed for one to three years because decisions of various levels of government are necessary – from local authority, district and regional and to the central one. Paper chase takes years, investor must pay money immediately to solve the social needs of the territory, where construction is provided. It is required to finance various funds, kindergartens, hospitals, to satisfy one or the other official and get one or the other authorization. A positive decision of local authorities depends on whether a certain amount is paid or not. Such payments, they can be called an additional tax, compile up to 10% of the cost of the facility. But even if the facility is put into operation, the investor – who can be both Ukrainian and foreign one, is impervious to the fact that conditions on which the facility was built, will not be reviewed. After a three year path of obtaining a permit for construction is covered, officials can come and tell, for example, that land is obtained illegally, so you should review the terms of construction – and it means you need to pay extra money to one or the other authority. This factor should be considered, not to mention the well-developed mechanisms of corruption at various levels. Despite all the disadvantages, our company – “NIBULON” – during its activity, and this year we celebrate 20 years anniversary, has invested USD 1.2 billion into Ukraine’s economy. During the last 2.5 years, even in times of financial crisis, we have invested in the development of the state more than USD 350 million. Despite all the difficulties we achieved such operation mode that we can build from 5 to 10 elevators per year. What was the strategy of our investment activity? We decided to build a series of vessels of “river-sea” type. The project is entitled “Revival of the Dnipro River as a transport water way of Ukraine”. With the support of Western banks, especially the EBRD, we have built 24 vessels of “river-sea” type with gross displacement of 108 thousand tons. Our investment program gave a possibility to load a single active Shipyard of Ukraine – Mykolayiv shipbuilding yard “Okean”, gave the work to 2.5 thousand of our fellow citizens. In the past marketing year our vessels transported 800 thousand tons of grain, while, the whole Ukraine, all entities, transported 700 thousand tons. For several years of this investment program, we have become one of the largest transporter of grain particularly and cargo in general in Ukraine. But last year, after introduction of quotas, our entire full of grain fleet-elevator was standing at the berth, and the whole year we had tremendous problem connected with preservation of grain in these vessels. Unfortunately, because of the unpredictability of the grain market, we also suspended the investment project on construction of 12 tugs and barges of “river-sea” type as well as the project on the revival of passenger shipping along the Dnipro and the Southern Bug Rivers. Free market should operate to have confidence in investment. Because free market is an opportunity to gain profit from one or the other project. Earlier we used to take investment projects worth USD 170-200 million every year, and now, through the non-transparency of the market, introduction of the quotas and elimination of individual companies, including our own, obtaining of quotas, we had to suspend construction of a number of elevators and fleet . Of course, on condition of stabilization of situation, our investment activity will be restored. We received funds from the governments of Denmark, the Netherlands, Sweden, the EBRD, the World Bank, even in times of financial crisis. We appreciate the confidence of these financial institutions and hope for their support in the future. Now we are constructing 17 enterprises. Altogether we have constructed silos with a total capacity of 1.7 million tons in Ukraine. Overall we plan to build capacities of  2.5 million tons, in order to let our company easily export up to 8 million tons of grain per year and provide storage both of own grain grown in the area of ​​80 thousand hectares, and purchased for export. It is not a secret: today, if a company does not posses elevator, then owner of grain, if necessary, may not be able to take the grain of the same quality back. In our company also there are many cases when we had to prosecute with the elevators for a long time, when there was not enough grain and we had to reserve it, exclude from circulation. One of the last branches that was constructed during export ban is elevator in Nova Odesa for 76 thousand tons. We built it during this year’s winter, raising the soil 3 meters above the water, save it harmless from flooding. We had to consider educative experience of the U.S.A. – the dam breach on the Mississippi River and elevators were flooded. Today there are a lot of talks about the opportunity to grow 80 million tons of grain in future in Ukraine. I can say: if productivity in the country is the same as in our company – it will be real today, because we have twice higher grain yields than the average ones of Ukraine. I am convinced that Ukraine is able to grow specified amounts. Therefore I encourage international participants of the conference to actively invest in our economy. We need to form this market together and not to wait until by trial-and-error method and experiments on the agrarian sector of Ukraine will become a civilized country with a genuine grain market. The agricultural sector of Ukraine will suffer firstly from the lack of investments, and hence the global food market as well. Therefore, your active position, the position of your government and their dialogue with the leadership of our country will not allow to lose Ukraine – a state with a giant export potential of the agricultural sector. In the world high hopes are put on Ukraine, so we need to work together to make these hopes come true. Russian Grain Union President Arkadiy Zlochevskyy made an interesting report. He said that Russia can sow about 11% of world corn field. Now it sows about 9% and in the area produces 6.5% of world grain. The figures for 2008 year, when there was a maximum yield in 108 million tons. Correspondingly, the share of Russian grain export is an average of 14% of the world one. Of course, the correlation between areas and production does not speak in favor of Russia, possessing such reserves of acreage, it can not make worthy contribution to world production yet. But Russia is engaged in grain export only the last 10 years. Before that Russia and the Soviet Union were the largest importer of grain. According to Mr. Zlochevskyy, potential of Russia is huge and firstly it resides in unused reserves of yield crops. (Unfortunately, it is impossible to publish all the information from the conference in one issue, so you can read the talking points of Mr. Zlochevskyy in the next issue of “Agroprofi”) President of Ukrainian Grain Association Volodymyr Klymenko, at the request of journalists of “Agroprofi”, summarized the conclusions of the work of IV International Grain Conference: – The conference has fully met the challenges set. About 150 people from around the world attended the conference, it enriched with new knowledge and experience many market participants. All leading grain market players: “Cargill”, “Toepfer”, “NIBULON”, “Rise”, “Kernel” were present. UGA members carry out 90% of country’s grain export. Grain trade in the world is constructed in the way that about 20 of major international trading houses control the entire market. All of them were working here. It is very important. <span&gt