July 10, 2012

 

Ukraine's corn export forecasts bolster by US drought

 

 

Severe US drought has boosted Ukraine's grip on corn export markets in the Middle East and North Africa but rapidly expanding markets in the Far East should remain largely out of reach, analysts and traders said.

 

"Our markets are the Middle East and North Africa. It makes no sense for the US to export in significant volumes to these markets, while we could improve our position there," Mykola Bezugly, Ukraine's First Deputy Farm Minister, told Reuters.

 

The USDA is expected on Wednesday (July 11) to sharply reduce its forecast for yields in the world's top producer due to the drought, further tightening a market where stocks have already fallen to a five-year low.

 

Ukraine was the world's number three corn exporter in 2011-12 and is expected to maintain that position in the 2012-13 season, according to International Grains Council figures.

 

According to data provided by UkrAgroConsult, Ukraine exported 12.5 million tonnes of corn in 2011-12, mostly to Egypt, Iran, Algeria, Syria. A slight rise is expected in 2012-13.

 

ProAgro consultancy said on Monday (July 9) it forecast the export of a total 20.8 million tonnes of grain in 2012-13 including 13.7 million of corn.

 

"We have different markets. The US exports large volumes of corn to the developed markets of Japan, China, which are sensitive about the quality of corn," said Mykola Vernytsky from ProAgo consultancy.

 

He said Ukraine had also exported corn to the Far East, but the volume was much smaller.

 

Japan is the world's top corn buyer with imports in 2012-13 forecast by the IGC at 16 million tonnes while China is a rapidly growing market and is projected to import seven million tonnes, up from just 400,000 tonnes three years earlier.

 

Egypt is the largest importer in the Middle East/North Africa region with expected imports of 6.3 million tonnes in 2012-13, according to IGC data.

 

Any slight advance in shipments from Ukraine will also barely register in a global marketplace dominated by the US which produces nearly twice as much corn as its nearest rival and accounts for almost half of global exports.

 

"Ukrainian corn could not compensate for the decrease in American exports because our outputs are disparate - 350 million tonnes of corn in the US and 30 million tonnes in Ukraine," Bezugly said.

 

The outlook for Ukraine's corn exports has also been hurt by diminished prospects for its own crop. In May, Ukraine expected a harvest of 25-27 million tonnes of corn but after one month of drought and record high temperatures the government has lowered the outlook to about 23 million tonnes.

 

Weather forecasters earlier this month cut their corn crop forecast to 20-21 million tonnes from a previous level of 22 million, saying that hot weather had damaged crops significantly.

 

"Plants have started dying from the heat," Tetyana Adamenko, head of the centre's agriculture department, told Reuters.

 

Analyst ProAgro lowered its corn production outlook to 22.1 million tonnes from 23.6 million tonnes, while consultancy UkrAgroConsult reduced its forecast to 20 million tonnes from 21.2 million.

 

"In early June, we forecast the harvest (of corn) at 22.7 million tonnes. Today we cut the forecast to 20.5 million tonnes. It is too hot for corn," a trader from a large foreign trade house said.

 

Ukraine sowed a record 4.6 million hectares of corn this year against 3.5 million hectares in 2011. Ukraine, which harvested 6.4 million tonnes of corn in 2006, threshed a record 22.7 million tonnes in 2011. Last year, the corn harvest exceeded the wheat crop, which totalled 22.3 million tonnes and Farm Minister Mykola Prysyazhnyuk told Reuters that farms had to continue corn expansion as corn was much more profitable than barley or even wheat.