Corn output estimates lowered for Ukraine on back of financial and political instability, says Agritel

By Jane Byrne

- Last updated on GMT

Corn output estimates lowered for Ukraine on back of financial and political instability, says Agritel

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Political insecurity in the Black Sea region and a lack of credit flow in Ukraine has hit grain sewing, forcing a leading grain analyst to downgrade its corn output expectations for that country.

Ukraine is a leading exporter of milling wheat and feed grains to the global market - the country is expected to be the world’s third largest exporter of corn this year, behind the US and Brazil.

The volatility in the region over the past 48 hours with pro and anti-government demonstrators clashing in the east of Ukraine, led to a rally in wheat and corn prices in Chicago yesterday.

The sewing of spring grains got underway a few weeks ago in Ukraine with the barley planting campaign now finished.

However, Olivier Bouillet, manager of the Kiev office of Paris-based agri-consultancy Agritel, told that only 6 percent of corn has been planted in Ukraine, with about one month of the sewing calendar left to go.

Corn sewing hindered by credit lending slowdown 

Corn and other grain producers, even the biggest structures, have been struggling to secure financing for planting, due to the ongoing devaluation of the local currency - the hryvnia - and subsequent insecurities over credit lending arising from the political instability.

In tandem with the lack of funding, farmers realized poor margins in 2013, so the combination of all these factors means sewing of corn has been particularly hit.

Corn production in Ukraine costs 50 percent more than other crops considering the quantity of feed inputs needed,”​ said Bouillet.

The analyst said Agritel is downgrading its estimates for corn tonnage output from Ukraine by 3.5 million tons to 23.3 million tons. Two months ago, the consultancy had been forecasting corn output in the region of 26.8 million tons.

Bouillet reckons corn acreage in Ukraine will be 4.4 million hectares – down from Agritel's original estimate of 4.7 million hectares.  And he predicts a drop in corn yields from 5.7 to 5.3 tons per hectare.

US corn exports boosted

The instability in Ukraine has been lifting corn exports from the US in recent weeks, with March 2014 export inspections reaching 5.1 million tons, the high point for the year so far, said the US Department of Agriculture (USDA).

The latest (April 2014) feed grains report from the USDA predicts that US corn exports for 2013-14 will be up 3 million tons to 45 million.

US corn exports for the trade year, said the US agricultural agency, had started at a relatively sluggish pace, with delayed harvest and intense competition from Brazil and Ukraine.

“Census corn exports for September 2013 through February 2014 reached only 18.9 million tons, the lowest level in a decade except for the previous year’s drought-devastated export pace." ​notes the USDA report.

But the agency expects outstanding US corn export sales in the second half of the trade year to be significantly better.

Recent US corn export pace has benefitted from a lull in competition:

“Brazil’s port capacity is occupied with exporting soybeans, Argentina’s corn crop has been marketed more slowly than normal due to macroeconomic and exchange rate problems, and Ukraine’s torrid pace of exports to date and political uncertainty limit prospects for additional corn sales,” ​said the report.

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