August 6, 2009

                          
Ukraine grain output seen down in 2009-10
                              


The harvesting campaign is underway in Ukraine, and more than half of early grains area has already been harvested. Grain production is estimated to decrease in the 2009-2010 marketing year compared to the record grain crop harvested in 2008, according to a US Department of Agriculture attache report posted Wednesday (August 5) on the Foreign Agricultural Services Web site.

 

The Ministry of Agrarian Policy of Ukraine forecast grain exports at 15-17 million tonnes in MY 2009-2010, which is higher than average, thanks to relatively large production and carryover stocks. The Government of Ukraine takes actions to support grain prices, but the effectiveness of these measures is still under question.

 

The grain harvesting campaign is underway in Ukraine. By July 23, 2009, Ukrainian farmers had already harvested wheat and barley from approximately 60 percent and 50 percent of planted area, respectively. Area planted with grains this year is officially estimated to be 0.25 million hectares (ha) larger compared to one year ago, which is mostly attributed to an increase in area planted with barley by over 900 thousand ha. Average grain yields are lower than in 2008, but grain production is expected to remain at above-average levels. Because of bumper grain production in 2008, as well as large carryover stocks and a decrease in domestic consumption, Ukraine's grain exports hit record highs in MY 2008-2009 and reached 24.7 million tonnes. Grain exports are expected to ease in the 2009-2010 marketing year, due to an expected crop reduction, but an export surplus is estimated to be larger than average. In spite of significant state budget constraints, the Government of Ukraine (GOU) tries to implement policies to support farm prices through conducting state grain purchases or facilitating grain exports by private companies.

 

By July 23, 2009, Ukrainian agricultural companies and farmers had already harvested 11.8 million tonnes of wheat and 6.4 million tonnes of barley with average yields of 2.91 tonnes per ha or 15 percent year over year and 2.52 tonnes per ha (-19 percent year over year), respectively. The decrease in average yield is attributed to less favourable weather conditions for the 2009 crop (including a period of dry weather and some frosts in April), as well as to lower use of agricultural inputs, due to the financial constraints related to the credit crunch. It should be noted that the financial crisis did not lead to a decrease in total grain planted area. On the other hand, the breakdown of planted crops changed, considering grain price changes over MY 2008-2009 and farmers' expectations.

 

The Ministry of Agrarian Policy of Ukraine (MAPU) forecasted wheat production in 2009 at approximately 20.0 million tonnes, barley production - at 10.0 million tonnes, corn production - at 10.5-11.0 million tonnes, implying total grain exports of about 15-17 million tonnes in the 2008-2009 marketing year. In spite of a high wheat crop in 2008, flour production by large and medium enterprises decreased to 2.4 million tonnes during 11 months (July-May) of MY 2008-2009, which is 7 percent less compared to the same period of MY 2007-2008.

 

The decrease was mostly attributed to lower production of bread and bread products which decreased by 7 percent to 1.7 million tonnes in July-May of MY 2008-2009 compared to the same period of the 2007-2008 marketing year. On the other hand, wheat flour exports in July-May of MY 2008-2009 hit record highs and exceeded 204 thousand tonnes.

 

Wheat for food consumption is expected to decline slightly in the 2009-2010 marketing year, which is mostly attributed to an estimated decrease in wheat production. About 3.5 million tonnes of compound feed was produced in Ukraine by large and medium enterprises in eleven months of the 2008-2009 marketing year (July-May), which is 5 percent less compared to what was produced in the same period of the 2007-2008 marketing year. It should be noted that compound feed production accelerated in the last months of MY 2008-2009. In May 2009, Ukrainian companies produced 354,725 tonnes of compound feed, which is 10 percent more compared to production in May 2008.

 

The bumper crop and substantial carryover stocks resulted in record grain export sales in the 2008-09 marketing year, promoting Ukraine to the list of top world grain exporters. Based on statistics, grain exports from Ukraine totalled 24.7 million tonnes, including 12.7 million tonnes of wheat and 6.3 million tonnes of barley. Grain exports are expected to slow down in the 2009-10 marketing year, but to remain on above average levels, particularly thanks to increased carry-over stocks. The Ministry of Agrarian Policy estimates total grain exports in MY 2009-10 at 15-17 million tonnes, and some industry unions estimate total grain exports in a range of 17-19 million tonnes.

 

Domestic prices of most major grains are currently pressured by the new crop supplies. Grain interventions by the GOU have a slight impact on prices, which are mostly determined by purchasing grains by trading companies for export sales amid stable domestic demand.

 

Ending stocks of grains stored by farmers, elevators and processors increased by 35 percent in the 2008-2009 marketing year and reached 7.3 million tonnes (this stock information does not account for grains stored by small farms and private households which accounts for up to 20 percent of all wheat produced in Ukraine).

 

In marketing year 2008-2009, ending wheat stocks held by farmers, elevators and processors stood at 3.4 million tonnes, including 0.9 million tonnes stored by agricultural enterprises, and barley stocks were estimated at 1.8 million tonnes, including 0.9 million tonnes stored by agricultural enterprises.

 

Grain silos and processors held 4.4 million tonnes of grains (+23 percent year over year), including 2.8 million tonnes stored by silos (+21 percent year over year). Ending stocks of most major grains are expected to decrease in the 2009-2010 marketing year, based on an anticipated decrease in production and considering the continuation of liberalised grain exports.

 

The President of Ukraine signed into law the legislation that amends the law "On State Support of Agriculture in Ukraine", which introduced some changes to the mechanism of intervention purchases. Based on the law, the GOU conducts intervention purchases and sales of agricultural and food commodities to influence (increase or decrease) prices. In June 2009, the GOU amended minimum and maximum prices for wheat and rye and set the prices for barley (minimum and maximum prices are the indicators to start market intervention purchases and intervention sales, respectively) for the 2009-2010 marketing year. It should be noted that Ukrainian authorities introduced a new wheat standard that came into effect since the beginning of the 2009-2010 marketing year.