Ukraine. Grain and Feed Update. July 2015 July 20, 2015
The summer grain harvest is progressing in Ukraine despite of some delay caused by weather conditions. About 42 percent of the total barley area is harvested and just about 22 percent of wheat. Production volumes for major grains are expected to be lower compared to the previous year as the result of cut in production areas. Average crop yields are showing good results even though adverse weather in Central and Eastern Ukraine had some negative effects. Grain exports in the new marketing year are starting off well. The Government and the industry are currently negotiating the terms of trade for the new season.
The harvest of grains was underway in Ukraine at the beginning of July 2015. By the time of this report writing, all agricultural production regions in Ukraine have engaged in harvesting winter and early spring crops. Due to heavy rains in late June – early July there has been a delay in the harvest for all crops. Harvest conditions in eastern Ukraine are somewhat difficult due to violent clashes between combined Russian separatist forces and Ukrainian forces in parts of the eastern regions of Donetsk and Luhansk. Also, harvest and planting data presented in this report does not include statistics for the territory of Crimea because this data was not available.
As of July 14, 2015 of the main agricultural crops grown in Ukraine, about 5 million metric tons (MMT) of wheat was harvested, around 3.4 MMT of barley and just 4 thousand tons of rye. Corn and spring wheat are in the growth phase.
Favorable weather conditions during spring and early summer months mitigated the extreme weather conditions in effect when winter crops were planted. High precipitation rates during this period replenished soil moisture levels. Late June and early July featured patchy rains that failed to deliver sufficient amounts of moisture for the Central and Eastern regions. At the same time certain parts of Kyiv, Vinnitsa, Zhytomyr and Khmelnitsky oblasts had no efficient rains at all and this could impact the growth rate of crops.
At the time of the report writing, certain parts of the Southern regions featured abundant rains that delayed crop harvests, resulted in layering of plants and triggering development of diseases and pests. All these factors might negatively impact the quality of winter crops.
In general, winter wheat, barley and wheat are in good condition. Steppe regions have already started harvesting these crops, while they were still ripening in Forest-Steppe and Polissya regions. Corn plantings are generally in good condition, however in some of the Western regions a certain degree of crop wilting exists and Southern regions crops have suffered some pest damage. So far production of corn is projected to be above average. However, weather conditions in late July and in August are an important factor for the end result. Excessive heat and dryness during that period of time usually results in reduced yields for these crops in Ukraine.
National currency destabilization in 2014, following its sharp devaluation in late 2014 and early 2015, has negatively impacted the financial situation of agricultural producers, forcing them to reduce expenditres on inputs including seed, fertilizer and fuel. Sharply reduced domestic prices for major grain crops in MY2014/15 also prompted producers reduce production area. This resulted in a area reduction for major grain crops (excluding wheat) of 10-20 percent.
The new crop Marketing Year (MY) 2015/16 for wheat, barley, and rye has begun in Ukraine on July 1st, 2015. During 1-15 July, 2015, exports were reported for wheat at 131,000 MT and about 166,000 MT for barley. Also, almost 390,000 MT of corn was exported from Ukraine during the same period.
The previous season has ended with good trade results. According to the preliminary crop year-end data reported by the Ministry of Agrarian Policy and Food of Ukraine (MAPF), Ukraine exported 10.8 MMT of wheat and 4.5 MMT of barley in MY 2014/15 (July 2014 – June 2015). In addition to that, it has exported about 18.8 MMT of corn for the same period.
Domestic wheat, corn and barley prices in June 2015 remained relatively unchanged and followed the usual downward tendency as harvest approached and commenced while coming through significant price fluctuations induced by foreign currency exchange rate surges in late-2014/early-2015.
Crop stocks for wheat and corn at the end of MY 2014/15 were respectively 57 and 62 percent higher compared to the previous MY driven by the general trend for decreasing domestic prices for these crops as well as larger volumes of production in 2014. At the same time barley stocks followed the same trend that has been observed during the previous years.
The leadership of MAPF is committed to sign a new Memorandum of Understanding for MY 2014/15 with the industry at the time of this report writing. It is anticipated that the new season trade terms would be similar to the agreements reached in the preceding year, however the actual exportable amounts have not been fixed yet.
Projections of strong grain production and larger ending stocks support calls to dispense with trade restrictions in MY 2015/16. However, domestic bakers may press for ensuring ample availability of milling wheat in the domestic market.
The Government of Ukraine (GoU) is continuing in its efforts to develop of the State Food Safety and Consumer Protection Service by combining the Veterinary and Phytosanitary Services with some elements of the liquidated State Agricultural Inspection corps. The organizational, procedural and staff challenges inherent in this process have potential to inject uncertainty into performance of the overall state control system until this process is concluded.
The State Grain and Food Corporation (a government-run agricultural commodity procurement and trading enterprise) has been making some forward purchases of grains from producers. The enterprise is expected to continue corn trade with China and announced its plans to ship 1.5-5 MMT of corn from Ukraine to China in MY 2015/16. It has also revealed plans to buy 2.5 MMT of corn in total from the domestic market before the end of 2015.
GoU has already announced plans to expand the capacity of existing sea ports and is currently working with foreign investors to increase transshipment capacity of the Ilyichivsk and Yuzhny ports.