Lately there appeared many unfounded rumours and speculations about “NIBULON”. We asked the General Director of “NIBULON” to confirm, deny or comment on existing assumptions and assertions, and Oleksiy Vadaturskyy replied to our questions.   – Is it true that someone is trying to take away business from the owner of “NIBULON” and a part of it is already taken? Who is the attacker, from which side is the threat? “NIBULON” is a well known company, successfully operating in the domestic and foreign markets, with an impeccable reputation in the world, among international financial institutions, such as the World Bank, the European Bank for Reconstruction and Development, and other largest first-class western banks. The company also receives financial support from the Kingdom of Denmark, Kingdom of the Netherlands, and the Kingdom of Sweden. The company actively develops, invests in agricultural production and development of infrastructure for storage and transportation of agricultural products that is why it constantly arrest sights, and it’s normally. In addition, we successfully work even during the financial crisis that attracts even more attention. Therefore, we always receive a lot of different offers. There were civilized offers from international financial institutions and transnational corporations in terms of investments in authorized capital of our company and Eurobonds issue. We consider that uncivilized attempts are forcible and hostile takeovers, but we have faced with similar intentions before, since 1991. At various times it was called differently – an non-amicable merger, a suggestion “to share”, intentions to make us assign a part of our business or to go against our own interests, creating adverse or intolerable conditions. But since 2004 we have clearly realized that these are attempts of  hostile takeovers of the company. Mykolayiv citizens certainly remember those periods of “NIBULON’s” history when we were not allowed to work, they demounted  our access ways, tried “to override” us by the courts and did not let the ships go to our berth, in every way trying to convince our company to do business in a different way. Attempts to control the grain market of Ukraine and the activities of our company through the change of its ownership structure were present both now and always. I always say that the country has enough levers, mechanisms and monitoring bodies in order to control grain business and grain market by civilized market methods, to create a system of food safety in Ukraine. You do not need to enter into our business or take away a part of it. Our company is a leader of Ukrainian agricultural market and its price formation also depends upon us. “NIBULON” is also a face of Ukrainian agriculture complex; not only Ukrainian but also international communities are keeping a close eye on us. We are both an example, and a litmus test by which investors determine whether to invest in the country or not, and many farmers are looking how to behave in a particular situation, and make sure that despite all the existing difficulties and constant pressure, one can work honestly in such conditions. We were pioneers in the direction of the construction of grain terminals, we have shown how and what one can do, and the rest followed us.  “NIBULON” is a family business, there aren’t, there weren’t and there won’t be any changes in the company’s ownership structure and we do not intend to change owners of the company in the near future. We have civilized relations with international financial institutions that have their own practice: before trusting large financial resources to the borrower, to foresee all possible scenarios and to protect themselves from unpleasant surprises. Therefore, changes in the ownership structure of the company are not allowed in the period of the loan agreements. Relevant documents have been shown to those who took a particular interest in our company. When our foreign partners ask me similar questions, I have nothing to hide, I say everything as it is, including those offers that reached us. I can say that the heads of major foreign banks are informed very well on what is happening with our company and what is happening in the grain market and in Ukraine’s agribusiness on the whole. In relation to “NIBULON” they show full confidence, and we highly appreciate this trust and we try hard not to disturb it in any way.   – What threatens “NIBULON” if the State decides to become a full player in the grain market? How does the State implement its decision? The state has always been a competent player. To be more precise, it has always tried to be an important player. We support and encourage it: do faster, more active, more interesting, but we emphasize – do it in market, civilized ways, as a full member of the grain market! What do we see when the state starts to be active in some directions, in particular in food sphere? There appears a deficit of buckwheat, a deficit of butter, sugar, flour … When high-ranking officials say that the state today will “intervene” in the grain market in order to “influence” it, I know that nothing good will come of it. There will be other accusations of all market participants. According to officials, traders are always guilty of everything, bread becomes more expensive or grain becomes cheaper. It is enough. Stop blaming market participants in collusion. That’s not true, this is another attempt of the state absolve itself of the responsibility for the inept, absurd actions. In summer, during grain price increase on the world market, which caused the rise in prices in the domestic market, the Agrarian Fund had to intervene in the trading network, and in the flour mills to ensure the issue of social kinds of bread and to prevent the growth of bread prices on the whole. But it did nothing. In August, September and October 2010 “NIBULON” sold the grain to bakeries at a reasonable price, to relieve possible tensions in the region and to stabilize grain prices at the request of the Governor of Mykolayiv region Mykola Petrovych Kruglov. In March 2011, when there was the threat of bread price rise again, we have provided a thousand tons of wheat in order to prevent disappearance of bread and flour in Mykolayiv. But it must be done by the government, which through the Agrarian Fund, by means of intervention can regulate prices in the domestic market. But the Agrarian Fund made regional authority a prisoner of the situation by its clumsy policy and inaction. Instead of blaming us that we underpay with the purchase of grain during harvest time, the state had to come to the market of grain purchase itself and offer a better price, to pay more, then we would try to catch up to it or could not compete, according to the laws of civilized competition. But those purchases are a serious risk. What risks will the state take as a player of the grain market? Will it risk the budget money? Unfortunately it takes risks very often and does not take responsibilities before the taxpayers. Accounts Chamber, after analyzing the work of the Agrarian Fund with the grain harvest in 2010, came to the conclusion about the inefficiency of the government. It stated that at the stage of purchasing of grain harvest of 2010 the Agrarian Fund has completely lost function on the implementation of financial interventions connected with price regulation, promotion of agricultural production and development of agricultural market because of the non-compliance with the requirements of the law “On State Support of Agriculture of Ukraine”. That means that the Agrarian Fund did not actually perform functions of a “price control” in the agricultural market. What measures were taken after the conclusions of the Accounts Chamber? If our officials reported, then they would be responsible for their actions. It is necessary that the Agrarian Fund reports publicly, as it is done in civilized countries, and our officials want to control, intervene and influence on the grain market, but there is no reports. Who is responsible for the sale of wheat at a price significantly below than market price at the beginning of the marketing year? How efficiently did the state operator “Khlib Investbud” work during the first quarter of this year? Today the state does not use market methods at the grain market. With all responsibility I can say: today the state shows foot dragging, the Agrarian Fund is managed by people who have no idea about the market mechanisms of grain market regulation, because of this agrarian sector of Ukraine is deprived of the opportunity to sell grain at fair market prices that are imposed by the global market. As state structures are not able to use the mechanism of intervention, they used the simplest way: forbade export to keep prices in the domestic market. What happened? Farmers and other grain producers can no longer dispose production and sell it at a fair price that would meet world market. Today, we see: there are quotas on grain export, these quotas are allocated in manual mode unjustly and non-transparently. Priority is given to close to the authority little-known companies who have no work experience and credibility in the international grain market. Thus, not only grain traders are damaged, but also the image of Ukraine in the international market of food is damaged. I have been working in this sphere since 1971, I had to deal with removing the excessive demand for flour, husband resources, provide regions with high-quality bread, so as an expert in this sphere I can remind that earlier there was a system of studying and meeting the needs of the regions in grain and flour as well as distribution and redistribution of these resources depending on demand. Today, this system does not exist any longer, but they still want to manage manually, not even knowing who, what and how much does it need. Therefore, nothing comes or will come of it. This policy is doomed, manual control and bans lead to the deficit and price rise for a particular product. In order to ensure stable prices for social kinds of bread in Ukraine, it is necessary to have about 700 thousand tons of wheat a year. More than 20 million tons of wheat are grown in the country. Who interferes the state during the harvest season to apply to grain producers with a suggestion to cell a certain amount of grain at a fixed price, for example, UAH 1350 per ton, but with a guarantee that the rest of the grain they can dispose at their own discretion? I think that all market participants would agree to such conditions. Because the country’s need for socio guaranteed price for grain compiles 5% of the total volume of grown in Ukraine grain. That’s the price of the issue. Some of the bills prepared by the Ministry of Agricultural Policy and Food, are directed to monopolize foreign and domestic grain markets of Ukraine in favor of some companies, by identification of the state-owned operator of the market and to provide it with the exclusive right to conduct external trade operations from Ukraine and within Ukraine. In fact, it has nothing to do with protecting the public interests, it is a banal corruption, government relations of particular companies. Government officials make decisions in favor of particular companies under the guise of state interests. The state does not benefit from that, but the officials and those structures do whose interests they are lobbying. Such actions have caused discontent of all participants of the grain market, international financial institutions and the general public. The administrative, anti-market methods can only destroy everything that has been laboriously created during the past 20 years. Everything is used as a smear of talking about food security of the country. Ukraine is not facing a food crisis. The only threat of food security in Ukraine is the threat of incompetent management of resources, which inevitably and always will provoke a deficit on particular products. All the talks about food security are just a smoke screen for interference in the grain market, which today is a very competitive market. It is the only market where the state tries to regulate the pricing by administrative methods. Prices for metal, building materials are not regulated, prices for fertilizers, petroleum products are rising, fixed prices for products are imposed upon farmers only.  I have a counteroffer: let’s create national traders on export of metal, cement, coal, gas, chicken – in all areas of Ukrainian export. Why are national traders not created in these spheres? Why is an increased attention paid on agriculture? They started to discuss food security when prices had risen in the world market. But a year ago they were very low, and no one remembered about food security. When prices went up, there appeared talks about the fact that exporters are earning a powerful lot of money, they are enemies, so we must give the entire export to one own company. I am sad and at the same time it is funny to hear that, our business is not as simple and not as lucrative as someone thinks. We, exporters have to take risks and anticipate. Delivery contracts are concluded 3-4 months earlier harvest, when it is very difficult to calculate or predict all the factors that affect the crop. If we conclude a contract at the prices prevailing in the world market at the moment of conclusion of the contract, but then the price for various reasons inflates, we may incur huge losses, because we must fulfill all contract conditions. Sometimes it happens that we sign a profitable delivery contract at a good price, but delivery can not be implemented, because the recipient, seeing that it is possible to buy grain at a lower price in the world market at the time of execution of the contract, will do everything to avoid performance of the contract. In other words, grain is purchased in the domestic market at a high price and it can not be sold in the world market at a bargain price. Every day we face many such situations, it is a difficult business. Natural disasters in any country influence grain price. Who could predict a drought in Russia last year, and that in July Russia would stop export? There was a price hike in July, and the Agrarian Fund continued to sell grain to particular companies at prices that were lower than market ones. Who could predict the recent events in Japan and predict that because of the event the price would drop by USD 30-40 per ton in the world market? What about typhoons, flooding of the fields, and other natural disasters in various parts of the world?   A chart of fluctuations of corn prices on the Chicago Stock Exchange in 2009-2011.   Look at the fluctuations of prices during 3 years! The current prices in the world market allow “Khlib Investbud” to pay agricultural producers not UAH 1900-2050 per ton, but much more. Summary statements of the Director of “Khlib Investbud” Robert Broudi that in the world market price for wheat is USD 475-480 per ton (Ukrainian business resource UBR dd 22.03.2011 – author), disorient agricultural producers. Mr. Broudi does not refer to the class or quality of wheat, or delivery basis, causing a lot of questions. One can not be irresponsible to mention such figures in the press. After all, every person, if desired, can make simple calculations. For example, let us use the price, mentioned by Broudi, USD 475 per ton of the 1st – 2nd class wheat (according to Ukrainian standards). To have fair price one should deduct USD 30 for services of cargo delivery to the destination port and USD 10 for the port services and other organizations for the loading of the vessel. Thus, a fair price for 1 ton of wheat on terms of CPT as of 22.03.2011 is USD 435 or UAH 3458.25 (at the rate of NBU dd 22.03.2011). It means that “Khlib Investbud” takes UAH 1558.25 to itself. In the same article, R. Broudi takes the liberty to make a confident prediction, and estimate implications, in case if nothing is done as he wants instead of the Ministry of Economic Development and Trade, the Ministry of Agricultural Policy and Food, the Cabinet of Ministers of Ukraine. Hence, he uses insider information, and controls the grain market. The conclusion is forced upon you: either they do not know how to trade and enter into loss-making contracts for the country, or the profit remains in offshore, or the company’s policy is to build relationship in the society on deception. This price is mentioned to denigrate the exporters, i.e. “Khlib Investbud” considers that it is permissible to pay at below-market prices to agricultural producers and to mislead the agrarian sector of Ukraine. Now imagine: traditional exporters were not given quotas, but they have grain. In such situation, these companies leave the market. Quotas were allocated to “Khlib Investbud”, but they do not have necessary volumes of grain to use these quotas. They came into the market and are forced to raise prices on purchased grain every day, thus they are still not able to perform the contracts. As a result: “Khlib Investbud” is responsible for price rises for bakery products in the domestic market. Consequently, in conditions of inaction of the Agrarian Fund they destabilize the prices of bakery products in the domestic market. As head of the company, I do not oppose “Khlib Investbud” as well as any other entities of Ukrainian grain market. I am sure that the rules of the game should be equal for all business entities. I am sure that every company needs to gain prestige in a fair fight, not starting its activities with the scandals. Do not deceive the agrarian sector of Ukraine. – How is a grain price set? Let’s see. For example, during harvest time, we bought corn at a price of UAH 1800 per ton. Then it must be stored in elevators for 9 months, it is necessary to work with grain in order not to make its quality deteriorate, to pay for elevator services, to pay for handling of credit resources and many other expenses, including penalties for non-delivery of goods etc. You can count yourself, correlate costs, costs of production and think whether it is fair to blame companies that during harvest time bought grain, while at the same time the government bought nothing. Conversely the Agrarian Fund sold grain to confidant companies at below-market prices and below those prices we paid agricultural producers. Who will evaluate risks of things we do not know, or at what price and when we will sell it? Whose money will use the state to pay for the inevitable mistakes, for unsuccessful contracts? Whose assets will risk the state company in the international market? They are assets of the state. I can say: if we achieve profit of USD 7-10 per ton at year-end, we consider it as great success. Moreover, I think that government officials have no idea about the fact that in the world grain is purchased only on terms of tender. There, in importing countries, tenders are as real as the fight against corruption. We participate in state tenders of importing grain countries, and we know how difficult is to guess, predict, calculate the price to the penny, to win the tender. What is the grain trade today? We must pay more to buy grain, store and sell it to earn, in other words to win the tender by offering favorable terms so that they buy your grain. For example, in 2008 the Ministry of Industry and Trade of Jordan conducted a tender for the supply of barley in the amount of 100.000 MT. In order to win a tender, they counted every cent, the difference in the price of the winner and the company that took the second place was USD 0.10 (!).     Tender is an example of transparency in any country: we see who wins and who loses. What do we have in Ukraine? Nobody knows where and how quotas were distributed. When there was a drought in Russia, government declared about force majeure and declared a kind of default. Thus, companies operating in the Russian market, did not perform supply contracts, but were protected by their state. Ukraine declared to the whole world that our market is free, but limited export by customs, arrests of ships, criminal cases. As a result, our export companies suffered double losses under contracts and for demurrage of vessels.   – Does “the latest nationalization” threaten Ukrainian grain market