In Ukraine Dry Weather Could Lower Wheat Yields June 26, 2017

Highlights

Ukraine has completed planting grains for the 2017 spring campaign. Weather conditions featuring low levels of soil moisture and frost in some regions have created conditions for lower-than-expected yields in general. Post estimates that total grain production for Marketing Year (MY) 2017/18 will fall below the record levels achieved over the last few MYs. Ukraine remains an active grain exporter, with wheat and barley exports already reaching record levels for MY2016/17. Exporters continue to diversify their market destinations. This is particularly notable for exports of corn and wheat flour, where there is a decreasing reliance on a small number of large buyers.

Ukrainian farmers have planted: 177 thousand hectares (ha) of spring wheat, 1.5 million ha of spring barley, and 4.5 million ha of corn as of June 13, 2017. These areas combined with winter grains planted areas, as reported by the State Statistics Service of Ukraine (SSSU) at the end of 2016 as well as available information about planting areas on the Crimean Peninsula (217 thousand ha of barley, 294 thousand ha of wheat and 2.5 thousand ha of corn), form the basis for estimated production areas for individual grain crops reflected in USDA’s Production, Supply and Distribution (PSD) data.

Trade

Bumper production volumes in 2016 for all major grains (except for rye) translated into increased export volumes. Ukraine exported 17.3 million metric tons (MMT) of wheat; 20.1 MMT of corn; 5, 3 MMT of barley; 7.6 thousand metric tons (MT) of rye and 368 thousand MT of wheat flour for local MY2016/17 (July 2016-June 2017 for all mentioned crops) as of 21 June, 2017. It is notable that exports of wheat, barley, and wheat flour hit record marks.

For July 2016-March 2017, wheat exports grew by 13 percent compared to the same period of the previous MY. Wheat exports have been diversified by shipping over one third of total exportable volume to South Asia (predominantly India and Bangladesh) while reducing volumes shipped to the EU by nearly one half.

Wheat flour exports grew by 15 percent for July 2016-March 2017, compared to the same period of the previous MY.A major change among export destinations occurred as a result of the 5.5-fold increase of exports to Africa at the expense of a 40-percent decrease of exports to traditional buyers in East and Southeast Asia -- predominantly China, North Korea and South Korea. An interesting feature of Ukrainian exports to Africa is that they have shipped to a half a dozen countries across the continent with volumes varying widely -- from 23 thousand MT to Somalia, down to only 48 MT to Chad. This is likely a sign that Ukrainian flour producers are targeting the African market to increase future market share.

For July 2016-March 2017, barley exports grew by almost 21 percent compared to the same period of the previous MY. The major driver behind this growth was a 2.7-fold increase in exports to Africa -- mainly the countries of Libya, Algeria and Tunisia.

Corn exports grew by almost 13 percent between October 2016-March 2017, compared to the same period of the previous MY. Ukrainian exporters lost their positions in East and Southeast Asia after a decrease in demand from the Chinese market -- down to 286 thousand MT from 1.7 MMT the same period of the previous MY. This amount was practically redirected to South Korea, Vietnam, and Japan. Another factor supporting corn exports was a boost of shipments to the Middle East -- mainly to Iran, which bought almost 2 MMT, compared to 113 thousand MT for the same period of the previous MY.

Consumption

Post has further decreased wheat and rye food consumption for MY2016/17 against the previous estimate, based on ever-decreasing volumes of bread production in the country . Despite decreasing bread volumes, wheat flour production for MY2016/17 remains stable supported by growing exports of this commodity.

The decrease of bread production for MY2016/17 resulted in cuts to FSI consumption for wheat and rye. These two crops are mainly intended for food consumption, particularly milling and baking.

Rye feed consumption levels have been kept at a minimum for MY2016/17 on the grounds that only a small fraction of this crop is used for feed purposes. Post maintains the same level for MY2017/18 as estimated production volumes would not likely sustain increased feed consumption of this crop. Growth of rye feed consumption could only happen under an unlikely scenario involving a drop in its FSI consumption due to drastic changes in consumption patterns of the local population.

General animal numbers in the country: a 9.3-percent decrease in pig numbers and a 1.4-percent increase for poultry for December-May 2017. The economic situation in the country does not suggest increased consumption of products of animal origin in 2017. Moreover, reports of the local Veterinary Service on outbreaks of African Swine Fever suggest a further decrease of pig herd sizes in 2017. Based in these assumptions, Post decreased the country’s total feed consumption by around 5 percent for MY2016/17 compared to MY2015/16, and another 3 percent for MY2017/18 compared to MY2016/17.

Stocks

Ending stocks for all grains at the end of MY2016/17 showed traditional depletion to minimal levels due to active exports of corn, wheat and barley. Rye stocks hit new lows caused by decreasing production of this crop for two consecutive MYs in a row. Wheat stocks were lower than usual due to active exports of both wheat and flour for MY2016/17

Production, Supply and Distribution Data

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 include Crimean Peninsula production numbers.

Barley:

Post’s production estimate is 24 percent higher than USDA’s official data for MY2017/18, based on higher yield estimates. This revision leads to increased Post numbers compared to USDA’s official data for: exports by 17 percent; feed and residual consumption by 26 percent; and FSI consumption by 7 percent.

Post’s export estimate is 3 percent lower than USDA’s official data for MY2016/17, based on available import data.

Post’s Feed and Residual estimates are 7 percent higher than USDA’s official data for MY2016/17, due to low volumes of wheat available for this purpose resulting from active exports. Post’s FSI estimates are also 7 percent higher than USDA’s official data for MY2016/17, based on stable demand from domestic processors.

Corn:

Post’s production estimate is 11 percent lower than USDA’s official data for MY2017/18, based on lower yield estimates. This revision leads to decreased Post numbers compared to USDA’s official data for exports by 12 percent, and Feed and Residual consumption by 14 percent, for MY2017/18. Post’s import estimate is revised 30 percent lower and Post’s export estimate is revised 6 percent higher than USDA’s official data for MY2016/17, based on available trade data.

Rye:

Post’s production estimate is 6 percent lower than USDA’s official data for MY2017/18, based on lower yield estimates. Post’s export estimate is 20 percent lower than USDA’s official data for MY2016/17, based on available export data. Post’s Feed and Residual estimates are 80 percent lower than USDA’s official data both for MY2016/17 and MY2017/18.

Corn

Barley

Rey