Highlights

In 2016, wheat production remained close to the level of the previous year despite decreased production area under winter crop. Barley production slightly exceeded the previous year's mark. Corn production is expected to be at least 10 percent higher compared to the previous year based on expanded production areas. All grains demonstrate higher yields as the result of favorable weather conditions. Wheat food consumption as well as feed consumption for all grains has been downscaled based on shrinking animal numbers, the difficult economic situation, and change in consumer preferences. Decreased domestic consumption and lower ending stocks for grains allowed for higher exports. Decreasing rye production opened the opportunity for imports of this crop for MY2015/16.

Executive Summary

Production

The local marketing year (MY) has been concluded for wheat, barley and rye. According to industry sources, 60 percent of wheat is of milling quality and 40 percent is feed quality.

In 2016 farmers harvested: almost 26.6 million metric tons (MMT) of wheat, 2.5 percent below the 2015 level; 9.7 MMT of barley, 13 percent above; and almost 402 thousand metric tons (MT) of rye, comparable to 2015 level. These numbers are estimated by FAS Kyiv as production volumes for MY2016/17.

Corn harvesting is still in progress and according to a report provided by the Ministry of Agricultural Policy and Food of Ukraine (MAPF), Ukrainian farmers have already harvested 1.2 million hectares (ha) translated into 6.2 MMT of grain as of October 4, 2016. Given the generally favorable weather conditions during the season, FAS Kyiv estimates the corn production volume for MY2016/17 at 26MMT.

Currently, Ukrainian farmers are planting winter grains and according to MAPF's report they have sown 3.6 million ha of wheat, 119 thousand ha of rye and 181 thousand ha of barley as of October 4, 2016. These numbers are 3 to8 percent lower compared to the previous year.

Planting decisions made by farmers in regard to winter grains are being impacted by both economic factors and weather conditions.

Economic factors include low international grain prices as well as depreciated farm-gate prices caused by inefficiency of inland logistics (please refer to Trade section for more details).

Weather factors suggest insufficient levels of topsoil moisture as of the end of September 2016, which is confirmed by local weather reports as well as satellite imagery data (please refer to comparative images of Derived Surface Wetness Anomalies for 2016 and 2015).

Decreased prices and potential for low yields could lead to decreased areas under winter grains as farmers will likely opt for planting more profitable spring crops (predominantly oilseeds).

Trade

Ukraine exported 17 MMT of wheat; 4.4 MMT of barley and 19.7 thousand MT of rye for MY2015/16. Please refer to the Author Defined section at the end of the report for more information.

For MY2015/16, 6.3 MMT of Ukrainian wheat was exported to a number of countries in East and Southeast Asia including traditional buyers Thailand, Indonesia, Bangladesh and South Korea. Sales to these destinations have surged twofold, stemming from the need to sell off the 2015 bumper harvest.

Another growing market was the EU, which bought 2 MMT of wheat in MY2015/16, a 40-percent increase compared to the previous MY. Exports to this destination are primarily supported by a Tariff Rate Quota (TRQ) offered to Ukraine under the Deep and Comprehensive Free Trade Area. Recently, the EU announced a further increase of TRQ ceilings for a number of agricultural products from Ukraine, including grains that might further boost exports to this market. For more information please refer European Commission's proposal.

A fall in domestic bread consumption is forcing Ukrainian millers to increasingly sell to international markets (please refer to Consumption section for more details). For MY2015/16, Ukraine exported 365 thousand MT of wheat flour and products, an increase of almost 30 percent compared to the previous MY. The major growth destinations are East and Southeast Asian countries. According to industry sources, the major consumer of Ukrainian flour for this region remains North Korea, which is importing both directly as well as transshipping the commodity through China.

Barley exports reached 4.4MMT for MY2015/16. Trade has been redistributed from the Middle East, which bought 2.6 MMT, a 30 percent decrease compared to the previous MY. Instead, 872 thousand MT were shipped to East and Southeast Asia, a two-fold increase; 653 thousand MT to Africa, a 76-percent increase; and 231thousand MT to the EU, a three-fold increase.

Ukraine's MY2015/16 corn exports reached 16.4 MMT from October 2015 to July 2016. FAS Kyiv estimates corn exports to reach 16.9 MMT for MY2015/16.

During October 2015 to July 2016, due to the lack of demand, trade flows have been transferred from the Chinese market (which bought only 2.4 MMT, a 44-percent decrease compared to October 2014 to July 2015) to the EU market (which imported 8.4 MMT, a 44-percent increase.

The potential “soft" factor limiting actual export volumes might be the Memorandum of Understanding (MoU) for MY2016/17 signed between MAPF and a number of NGOs representing the interests of traders, farmers and millers. The MoU suggests the following exportable amounts: Wheat – 16.5 MMT (including 10.1 MMT of milling wheat and 6.4 MMT of feed wheat), Barley – 5.6 MMT, and Rye – 1 thousand MT.

Inland grain logistics to port gate is structured as follows: 63 percent transported by railcars, 32 percent by trucks, and 5 percent by river.

In summer 2016 the Government of Ukraine introduced a ban on movement of trucks with gross weight exceeding 40 tons (previously 50-60 tons was allowed) on highways to prevent excessive damage of the roads. This limitation has increased transportation costs to port gate.

Railway transportation continues to remain inefficient due to inability of the national railway operator to invest into the renewal of an aging fleet of grain hoppers circulated in country. This also results in additional costs due to downtime and grain loss/theft.

Ukraine is a net exporter of grains and does not import significant volumes of these commodities.

However, should be noted that due to the continued slide in rye production, in MY2015/16 Ukraine imported 15 thousand MT from the EU to cover demand on the local market.

Ukraine also imported 16.3 thousand metric tons of milling industry products (predominantly wheat flour and pasta) for MY2015/16. They are mainly sourced from the EU, but this trend is reversing as consumers are switching to more affordable domestic brands due to the unfavorable economic situation in country.

For October 2015 to July 2016, Ukraine imported 27.8 thousand MT of corn, including 23.6 thousand MT from the EU. These are predominantly planting seeds and this number is assumed as final volume of exports in the PSD table for MY2015/16.

Consumption

Domestic wheat consumption is sliding down due to a decreasing population as well as loss of governmental control over the Crimean Peninsula and parts of the territories in Eastern Ukraine. According to industry contacts, flour mills in Ukraine are running at approximately 30 percent of their capacity, and millers are trying to balance shrinking domestic consumption with exports.

Thus is confirmed by SSSU's data indicating shrinking volumes of wheat flour as well as bakery products in Ukraine.

The annual demand for rye flour on the domestic market is estimated at 320 thousand MT. This is the basis for keeping rye food consumption on the level of 420 thousand MT for MY2015/16 and MY2016/17.

Total feed consumption for all grains has been decreased for MY2015/16 compared to MY2014/15. This reduction is based on a 6.7 percent decrease of poultry flock and a 3.4 percent decrease of the swine herd for January-September 2016, compared to the same period of 2015 in accordance with SSSU data.

Feed rye consumption has been decreased for MY2015/16 and MY2016/17 compared to MY2014/15 because Ukraine began importing this commodity due to the decrease of domestic production.

The decrease consumption of rye and corn for feed purposes has been partially substituted by increased domestic consumption of wheat and barley for feed purposes for MY2015/16. Domestic corn prices were higher compared to feed wheat and barley (please refer to the price graph below), so feed rations for animals have likely been rebalanced to include cheaper components.

FAS Kyiv retained the projected MY2016/17 food and total feed consumption for all grains at the same level of the MY2015/16 estimate. It was done based on the 2017 forecast of 2.5 percent growth in

Real GDP for Ukraine, presented by the International Monitory Found. At the same time, composition of individual grains in feed rations and their subsequent level of domestic consumption would depend on the level of domestic prices as individual grains are, to some extent, substitutable while balancing feed ratios.

Active exports of corn, wheat and barley resulted in a decrease of ending stocks for these crops for MY2015/16.

Production, Supply and Demand Data Statistics

Post's FSI Consumption estimates for wheat are lower than USDA's official data by 6.2 percent for MY2014/15, and 11.2 percent both for MY2015/16 and MY2016/17. The rationale behind this reduction is decreased volumes of production for the flour and bakery industry in Ukraine (please refer to Consumption section for more details).

Post's FSI Consumption estimates for rye are higher than USDA's official data by 20 percent for MY2015/16, and 40 percent for MY2016/17. This is based on stable demand for this crop for baking purposes (please refer to Consumption section for more details).

Post's Feed and Residual estimates for wheat, barley and corn are as follows:

  • wheat, 15.6 percent higher for both MY2015/16 and MY2016/17;
  • corn, 13.4 percent lower for MY2015/16 and 7.8 percent lower for MY2016/17;
  • barley, 6.3 percent higher for MY2015/16 and 5.9 percent lower for MY2016/17;
  • rye, 40 percent lower for MY2014/15 and 20 percent lower for both MY2015/16 and MY2016/17.

The estimated wheat flour, pasta and bakery exports/imports have been added to export volumes for wheat in wheat grain equivalent calculated by multiplying the product weight by 1.368.

Grain production numbers reported by SSSU in bunker weight have been converted to estimated commodity (final) weight by subtracting 3 percent, and adding Crimean Peninsula's production numbers. Please refer to the Production section of this report for more information.

Wheat

Market Begin Year

Ukraine

2014/2015

2015/2016

2015/2016

Jul 2014

Jul 2015

Jul 2016

USDA

Official

New Post

USDA

Official

New Post

USDA

Official

New Post

Area Harvested

6300

6283

7115

7110

6500

6372

Beginning Stocks

3670

3670

5178

5674

2548

3299

Production

24750

24745

27274

27332

27000

26579

MY Imports

27

28

27

24

50

25

TY Imports

27

28

27

24

50

25

TY Imp. from U.S.

0

0

0

0

0

0

Total Supply

28447

28443

32479

33030

29598

29903

MY Exports

11269

11269

17431

17431

15000

14200

TY Exports

11269

11269

17431

17431

15000

14200

Feed and Residual

4000

4000

4500

5200

4500

5200

FSI Consumption

8000

7500

8000

7100

8000

7100

Total Consumption

12000

11500

12500

12300

12500

12300

Ending Stocks

5178

5674

2548

3299

2098

3403

Total Distribution

28447

28443

32479

33030

29598

29903


Corn Begin Year

Ukraine

2014/2015

2015/2016

2015/2016

Jul 2014

Jul 2015

Jul 2016

USDA

Official

New Post

USDA

Official

New Post

USDA

Official

New Post

Area Harvested

4625

4630

4085

4048

4250

4250

Beginning Stocks

2402

2402

1819

1876

802

1134

Production

28450

28504

23333

23330

26000

25968

MY Imports

28

30

50

28

50

30

TY Imports

28

30

50

28

50

30

TY Imp. from U.S.

0

1

0

1

0

0

Total Supply

30880

30936

25202

25234

26852

27132

MY Exports

19661

19660

16400

16900

17000

18000

TY Exports

19661

19660

16400

16900

17000

18000

Feed and Residual

8000

8000

6700

5800

7300

6000

FSI Consumption

1400

1400

1300

1400

1400

1400

Total Consumption

9400

9400

8000

7200

8700

7400

Ending Stocks

1819

1876

802

1134

1152

1732

Total Distribution

30880

30936

25202

25234

26852

27132

Rye Begin Year

Ukraine

2014/2015

2015/2016

2015/2016

Jul 2014

Jul 2015

Jul 2016

USDA

Official

New Post

USDA

Official

New Post

USDA

Official

New Post

Area Harvested

185

185

152

151

143

151

Beginning Stocks

128

128

106

144

80

100

Production

475

478

394

391

375

390

My Import

0

0

0

15

0

20

TY Imports

0

0

0

15

0

20

TY Imp. from U.S.

0

0

0

0

0

0

Total Supply

603

606

500

550

455

510

MY Exports

22

22

20

20

10

10

TY Exports

13

12

20

20

10

10

Feed and Residual

50

20

50

10

50

10

FSI Consumption

425

420

350

420

300

420

Total Consumption

475

440

400

430

350

430

Ending Stocks

106

144

80

100

95

70

Total Distribution

603

606

500

550

455

510

Barley

Market Begin Year

Ukraine

2014/2015

2015/2016

2015/2016

Jul 2014

Jul 2015

Jul 2016

USDA

Official

New Post

USDA

Official

New Post

USDA

Official

New Post

Area Harvested

3200

3200

3000

2997

3050

3001

Beginning Stocks

971

971

1265

1282

909

764

Production

9450

9465

8751

8788

9700

9911

MY Imports

0

1

5

6

5

3

TY Imports

0

1

5

6

5

2

TY Imp. from U.S.

0

0

0

0

0

0

Total Supply

10421

10437

10021

10076

10614

10678

MY Exports

4456

4455

4412

4412

5000

5300

TY Exports

4332

4332

4700

4500

5000

5300

Feed and Residual

3200

3200

3200

3400

3400

3200

FSI Consumption

1500

1500

1500

1500

1500

1500

Total Consumption

4700

4700

4700

4900

4900

4700

Ending Stocks

1265

1282

909

764

714

678

Total Distribution

10421

10437

10021

10076

10614

10678