September 15, 2011


Ukrainian corn exports may increase twofold in 2012



Ukraine's corn exports are expected to double by next year to provide aid to global grain markets.


The increase in shipments makes the eastern EU nation the world's third-largest exporter of corn, surpassing Brazil for the first time in seven years. Ukraine is predicted to harvest a record crop after a devastating drought last year. Farmers there planted more corn and used higher quality seed to take advantage of strong prices. The crop also benefited from favourable summer weather.


Ukraine's exports could reach 12.5 million tonnes this season, up from 5.3 million tonnes last year, according to Ukrainian agricultural analysis agency APK-Inform. The USDA forecasts Ukraine to ship 10 million tonnes for the crop year that started this month, an 82% rise from last year.


The surge comes as corn prices stand at historic highs due to a hot, dry summer that trimmed the size of the US crop. The USDA in a report earlier this week forecast US farmers to receive record prices for the corn that is starting to come out of the field.


"If you are going to have surplus production for corn, this is the year to do it," said a senior grains analyst for Jefferies Bache, a brokerage in Chicago.


Still, Ukraine's exports sharply lag the US and Argentina, which are projected to ship 41.9 million tonnes and 19.5 million tonnes, respectively, according to the USDA. Global supplies are forecast to hit precariously low levels for a second straight year as demand by ethanol makers, livestock producers and food processors continues to grow. The UN FAO said last week its food-price index slipped less than a point in August to 231 points, just below a record high set in February.


Forecasts for the US crop have declined in recent months. The harvest is still expected to be the third largest on record, but falls short of expectations in the spring when farmers planted a huge crop in response to tight supplies and high prices.


Ukraine could step in to fill some of that void, with livestock producers in countries such as Egypt, Ukraine's biggest customer, benefiting. The surge in exports could ease price pressures as Ukraine "increases the amount of animal feed supplies that are available as an alternative to high-priced US corn," said a broker and analyst.


Analysts expect the increase in exports from Ukraine to be sustainable as long as high corn prices continue to encourage production. Increased wheat exports from the Black Sea region are already helping to expand global grain supplies and limiting price gains.


Taxes imposed on grain exports by Ukraine's government could be one limiting factor for the country's export growth, said the managing director of Moscow-based think tank Sovecon. Yet, most analysts played down the impact of the recently imposed duties, saying Ukraine's prices were still expected to remain below global levels. Svetlana Sinkovskaya, marketing manager at the Ukrainian body APK-Inform, noted the export taxes are due to be lifted at the start of next year anyway.

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