Russia Ukraine standoff - how it impacts the grain markets

Ukraine crisis will not hit grain export volumes, says Kiev based analyst

By Jane Byrne

- Last updated on GMT

Ukraine crisis will not hit grain export volumes, says Kiev based analyst

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The Ukraine political crisis will not hit wheat and corn export volumes, says a Kiev based market analyst, as the growing threat of war between that country and Russia has sent global wheat prices soaring this week.

Ukraine is as a leading exporter of milling wheat and feed grains to the global market. 

On Monday, European wheat futures jumped to their highest in almost three months and, on the US side, Chicago wheat climbed 6% to a 2 and a half month high, reports Reuters. 

As production volumes are not an issue in 2013/14 for Ukraine, it is the ability of that country to move grain into export markets that is creating nervousness.

But Olivier Bouillet, manager of the Kiev office of Paris-based agri-consultancy Agritel, remains optimistic:

“We are not revising our forecasts and expect Ukraine grain export levels to remain in around 19 million tons (Mt) for corn and 9.7Mt for wheat for the 2013-2014 campaign.”

He told FeedNavigator.com that ports are operating as normal with two separate grain shipments of 20,000 tons and 25,000 tons leaving Ukraine this week for Italy and Spain respectively. 

In fact, we estimate that export levels are continuing at the same rate since January 2014,”​ said Bouillet. 

Local traders are revising prices upward in a bid to encourage farmers to continue to supply the export market, he added.

Demand could switch to US and South America

But Jack Watts, market specialist with the UK’s Agriculture & Horticulture Development Board (AHDB), in a note on Ukraine, said it is still up for grabs as to whether “new sales can be maintained or whether traders and consumers will take a safer approach and move demand to other origins such as the US and South America.

Certainly from the broader and fragile Ukrainian economy perspective, maintaining exports will be critical to any government.”

The 2014 spring planting season is just starting with Crimea.

Bouillet said if the pace of sewing in that part of Ukraine was not at the normal rate it was more due to "the amount of rain in the region and not as a result of the political situation."

Meanwhile, on Monday, the Ukrainian Agriculture Ministry, in a bid to quell concerns, said planting had begun on time. 

Record corn exports

2013 production levels in Ukraine were good with the US Department of Agriculture (USDA) estimating that 22.28Mt of wheat was produced, up 7Mt on 2012. 

The country is expected to be the world’s third largest exporter of corn this season, behind the US and Brazil, with a record crop of 30.9Mt - up 10Mt on 2012. 

Ukraine still has about 4Mt of corn and 2.5Mt of wheat to ship as part of its 2013-2014 export campaign, said Bouillet.

Harvesting time is critical

In Ukraine, said Watts, wheat and barley crops are harvested mid to late summer, which enables the marketing seasons of these crops to progress ahead of that of maize (corn) which is harvested in the autumn. 

Based on the USDA total season forecasts, Ukrainian exports of wheat and barley at 67% and 82% are well ahead of maize at 47%.

Essentially this means that any export disruption caused by the situation would likely have a bigger impact for the progression of maize exports,” ​he said.

 

 

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