March 8, 2010

Ukraine grain production seen declining


Ukraine's grain and pulse production is expected to decrease in 2010 compared to the better-than-average crop in 2009, according to a USDA attache report.

Estimates contained in attache reports are not official USDA data. The abstract of the attache report follows.

According to the State Statistics Committee, the grain crop totalled 46 million tonnes in 2009, which is 13.7% less than the record grain crop harvested in 2008, but still better than average.

Last year the good crop helped farmers to plant 8.56 million hectares with winter crops, including 6.67 million hectares planted with winter wheat. Winter weather conditions were worse than a year ago, but still relatively favourable for crop development, with only 10% of winter grains estimated to date as "weak".

Total grain production is seen to decrease in 2010, which reflects an expected decline in average yields. The financial crisis and the following credit crunch forced farmers to be self-sufficient and not to rely on any banking loans. The budget constraints will likely leave farmers without any significant direct subsidies as well, but tax legislation remains favourable for the industry. The situation with overdue value added tax (VAT) refunds was exacerbated in the 2009-2010 marketing year, and it negatively reflects on future farm incomes, as grain trading companies are likely to pass the risks of government failures to refund VAT to local producers through price discounting.

Domestic consumption is influenced by the economic meltdown, while grain prices kept stable thanks to high pace of grain export sales in the first half of the 2009-2010 marketing year. Export sales are expected to slow down in the remaining months of this marketing season, but total grain exports may exceed 20 million tonnes in marketing year 2009-2010 and will definitely be the second largest grain exports in Ukraine's history (after almost 25 million tonnes of grain exported in marketing year 2008-2009). FAS-Kyiv forecasts grain exports to decrease in the 2010-2011 marketing year, due to possibly lower crop, but to remain at relatively high level.

In 2010, wheat production is expected to decline by 8% on lower harvested area and possibly lower average yield. According to the data from the State Statistics Committee, 6.67 million hectares of winter wheat (usually about 95% of Ukraine's total wheat output) were planted for 2010-2011 crop, compared to 6.89 million ha planted for 2009-2010 crop. However, winter wheat harvested area may decrease in 2010, due to a possible increase in winterkill.

In the 2010-2011 marketing year, Ukraine's wheat exports are expected to decrease by 17% year over year totalling 7.5 million tonnes, which still constitutes the third largest wheat exports in Ukraine's history. Total wheat exports are expected to reach 9.0 million tonnes in the 2009-2010 marketing year due to both large crop and carry-over stocks. Similar to the previous season, wheat exports sales were very active in the beginning of the current marketing year. Ukraine exported record 6.9 million tonnes of wheat in July-December of the 2009-2010 marketing year. Among the biggest buyers there were traditional buyers from North Africa (Tunisia, Egypt), Middle East (Israel, Jordan, Syria), Asia/Oceania (South Korea, Bangladesh), as well as Europe (Spain), as well as some new markets (e.g. Kenya).