Focus on Ukraine

by Chris Lyddon
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Ukraine
 
The International Grains Council (IGC) now puts Ukraine’s total grains production in 2017-18 at 62 million tonnes, down from its previous estimate of 62.1 million and below the 2016-17 crop of 66.2 million.

Ukraine’s 2017-18 wheat crop is forecast at 26.5 million tonnes, the same level as in the previous report, and down on the previous year’s 26.8 million tonnes.

“Area in Ukraine is projected to increase by about 2%, to 6.7 million hectares, with growers encouraged by favorable returns and good planting conditions,” the IGC said. “Most regions lacked snow cover by mid-January, but temperatures have not been low enough to cause damage.”

The IGC’s forecast for maize is also unchanged at 25.5 million tonnes, down from 28 million the year before.

Barley production is forecast at 8.5 million tonnes, another unrevised estimate, with the 2016-17 crop put at 9.9 million tonnes. Production of oats is put at an unchanged 500,000 tonnes.

The IGC forecasts total Ukrainian grain exports at 41 million tonnes in 2017-18, down from a forecast of 42.5 million made in December and also down on the 44.3-million-tonne export figure for 2016-17. Its prediction for Ukraine’s 2017-18 wheat exports is unchanged at 17 million tonnes, down from 18 million the previous year.

Maize exports are forecast at 19.1 million tonnes, down from the previous estimate of 20.6 million tonnes, which was the same level as the 20.6 million tonnes exported in the previous year. The IGC described the downward revision as “amid very strong competition into the E.U. market and with Iran also buying less.”

Ukraine wheat situation
Source: U.S. Department of Agriculture
 
Ukraine’s barley exports are put at 4.7 million tonnes in 2017-18, up from a previous forecast of 4.6 million tonnes, but down on the 2016-17 level of 5.3 million tonnes. Ukraine is also set to export 125,000 tonnes of sorghum, an unchanged estimate that compares with 165,000 tonnes in 2016-17, as well as 22,000 tonnes of rye, up from the previous estimate of 10,000 tonnes and also up on the 11,000 tonnes exported the year before. Exports of oats in 2017-18 are put at 38,000 tonnes, an unchanged estimate that compares with 44,000 tonnes exported the year before.

Among the oilseeds, Ukraine’s 2017-18 soybean crop is forecast at 3.8 million tonnes, down from the previous year’s crop of 4.3 million, “on a marked retreat in yields.” Soybean exports are put at 2.5 million tonnes, down from 2.8 million in 2016-17.

Ukraine also produces rapeseed, with the IGC’s forecast for the 2017-18 crop unchanged at 2.1 million tonnes, up from 1.3 million the year before. The IGC’s forecast for the country’s 2017-18 rapeseed exports is also unchanged at 1.9 million tonnes, with the previous year’s exports at 1.7 million.

“Since the beginning of 2016 the Ukrainian currency stabilized with a trend toward small levels of devaluation,” the USDA attaché said in a report published in April 2017. “This has made domestic prices more predictable and decreased transaction costs to farmers, input suppliers and traders.

“This manageable level of devaluation favors grain exports as well as allows farmers to stabilize their business models. However, the unstable economic situation in the country that began at the end of 2013 had an impact on crop structure. Farmers decreased total areas under grains, which provided lower profitability.”

Instead, area of oilseeds, which are generally more profitable, rose.

wheat
 

Flour Production

Domestic consumption of wheat is mostly for food purposes, the attaché said, noting that flour production significantly decreased in 2014-15 due to reduced demand associated with decreased incomes and Ukraine’s loss of control of the Crimean Peninsula. The report did not expect growth in flour production in 2017-18, “pending no significant changes to domestic macroeconomic policy.”

In the summer of 2017, there were more than 550 mills in Ukraine, with 335 of them operating. The 20 biggest companies produced more than 50% of flour production in 2016.

According to the attaché, bread production has been decreasing, in line with a decline in population and the loss of control of parts of the country’s territory.

“In addition, middle-income consumers are switching away from purchasing ‘social’ types of bread in favor of premium bakery products and home bread making,” the attaché’s annual report said. “While large, mostly state-owned, bread making enterprises have been reducing production quantities, various private specialty bread producers have been opening small stores and supplying grocery stores in larger cities, catering to the changing tastes of consumers where the majority of income increases occurred.”

The loss of access to the Crimean Peninsula and certain regions of Eastern Ukraine has triggered a search by millers for new markets, with flour exports in July 2016 to January 2017 at 242,000 tonnes, up almost 14%.

“The major factor was a boost in exports to a number of countries in Africa, 50,600 tonnes, a five-fold increase compared to the same period of the previous year, and the Middle East (mainly United Arab Emirates and Palestine), 48,000 tonnes, a near 50% increase,” the attaché said. “Substantial amounts of flour were directed to: China, 47,000 tonnes; Israel, 19,000 tonnes; and Panama, 9,000 tonnes.”

The attaché cited “industry insiders as saying that those countries might not be the final destinations. There were also sales to traditional buyers, including Moldova at almost 20,000 tonnes and North Korea at almost 26,000 tonnes.”

“Imports of wheat in Ukraine are virtually non-existent,” the attaché said. “The country produces enough wheat to satisfy its domestic consumption needs.”

The only imports that do come in are typically high protein wheat varieties for production of premium pasta products, and seeds of some special wheat varieties for breeding purposes in Ukraine.

barley
 

Barley, Corn plantings

Barley planting is seen by Ukrainian farmers as an “insurance policy” in case of high winterkill and a low cost, because it is a low maintenance crop in demand on domestic and export markets, according to the attaché.

“However, in recent years, producer preferences have shifted toward production of corn,” the annual report said. “The main factor behind the drop in production is lower yields for this crop compared to winter wheat. Additionally, barley is harder to sell than wheat and corn.” The feed demand comes from poultry and pork producers. Malting barley accounts for less than 10% of barley production.

Maize is popular with farmers, fitting well into crop rotations, with high yields, as well as high costs, compared to other grains.

“Farmers produce corn from hybrid seeds produced domestically, both by large multinational companies, as well as from domestic varieties,” the attaché said. “According to farmers’ opinions, to date domestically bred corn varieties offer similar yields as international brands under ‘normal’ weather conditions and their cost is significantly lower. Their productivity drops significantly under adverse weather conditions compared to imported hybrids.”

Farmers are spending more on quality seed and agrochemicals, and major seed producers are transferring hybrid seed production into Ukraine.

The attaché, in an annual report on oilseeds, noted that oilseed crops in Ukraine achieve “relatively strong profitability.”

“It should be noted that the increased profitability for all major crops is largely attributed to constant competition between exporters and crushers for stocks available on the domestic market,” the attaché said.

Sunflower seeds are the most profitable, but “they cannot maintain ever expanding areas due to exponential growth of production costs when crop rotation requirements are not met,” the attaché said. Duties were imposed on sunflower seed exports in 1999 and almost all sunflower seed produced in Ukraine is crushed domestically.

Soybean profit margins have been positive for seven years and have “significantly surpassed that of rapeseed and grains,” for the last three.

The attaché reported that production of GM crops is not allowed as none have passed the approval process.

“However, industry rumors still indicate that Roundup Ready soybeans continue to be produced in the country,” the attaché said.

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