April 12 2014, 10:28 Source: APK-Inform Views: 3901

Grain exports from Ukraine – present-day challenges


Being one of the largest grains exporters on the global market, Ukraine should save the  reputation as the stable partner despite the domestic problems. The stated material is about the prospects of the export program 2013/14 realization and challenges the exporters are facing to date.


According the data of the official statistic, the Ukrainian agro-industrial complex reached the record rate of grain harvest exceeded 63 mln tonnes. Thus, in the current season the Ministry of Agrarian Policy and Food of Ukraine estimated the rate of grain exports at the level of 34 mln tonnes, over 50% of the general production, the record as well. At the beginning of the current MY the number of experts stated Ukraine will reach the expected rate due to the logistic problems. But in November 2013 the grain exports reached 4.23 mln tonnes, and in December the stated rate was at the level of 4.85 mln tonnes, so there were no doubts, the export program to failure not due to logistic problems.

After the problems caused by the technical issues, the agro-inductrial complex faced more complicated issues – worsening of political and economical situation in Ukraine. The one, being the challenge not only for the agro-industrial complex, but for each person as well. And the stated factors form the challenges, that the State, agrarians or exporters face today.

According to the Economist of the Food and Agriculture Organization of the United Nations, Dmitry Prikhodko, to date the government and business should unite and act in cooperation for assuring their partners that all the Ukrainian commitments under the contracts will be executed. At the same time, the expert stated that if Ukraine has to decrease grain exports, other countries will replace it which will influence on the prices formation on the global grain market.

In the recent five years the global grain market responded to negative factors (export limitation, political factors, natural environment). If Ukraine decreases the grain export by 30-50% in the next season, the world prices will rise by 2-4% owing the fundamental factors (without considering the speculations and implies that other major exporters production to remain unchanged).

Till the end of the current season Ukraine to export nearly 6 mln tonnes of grain, i.e. in the three months (five months - for maize). Considering the loss of Crimean ports by Ukraine (annually exporting nearly 5 mln tonnes of grain) and the eventual problems with ships passing the Kerch Strait, it is possible to reach the rate of 6 mln tonnes by shipping from the Black Sea ports. Thus, it is possible to state Ukraine is able to export the expected rate despite the logistic difficulties.  Therefore there are no objective reasons for export failure. As for subjective ones...

Problems faced by Ukrainian traders

The traders stated the first and the major problem is grain supplies deficit delaying the export parties formation. But, the Ukrainian grain trade companies are ready to execute their commitments.

According to the traders, the grain supplies deficit is caused by depreciation and instability of the national currency due to the  worsening of political economic situation in the country. In turn, the stated issue was the reason of the grain prices increase and their daily fluctuation on the domestic market. Thus, some traders make dollar contracts. But, agricultural producers, expecting the price significant increase, prefer to limit the grain realization (wheat first of all).

At the same time, grain trade companies stated that some shipowners apply for deposits – assurance providing, but it will not influence on the export program passage.

Traders declared that the Ukrainian grain trade companies are in the high-risk area, due to trade financial programs reducing by banks, as opposed to transnational companies, getting funds from the parent banks. At the same time, if there is importers' demand decrease for Ukrainian grain, only transnational companies will be able to export. It will negatively impact the small-scale and large-scale Ukrainian traders and agricultural producers as well, because the transnational companies are able to pressure the domestic prices. As a result, the financing influx to the agriculture sector will slow-down.

Outside point of view

As for the Ukrainian grain exports, there are importers' opinions on the current events eventual influence.

Turkey. The country is situated close to Ukraine and Russia. At the same time, the country purchases small-scale parties of grain, shipped from the Azov Sea ports. According to the poll of APK-Inform, most of Turkish importers of Ukrainian grain decided to decrease the purchasing volumes and provide them only as required. First of all, grains imports reduction caused by good grain harvest in Turkey in the current year. Besides, one of the reasons is unstable prices for grains, set by CBOT. At the same time, importers are apprehensive about Ukrainian grain purchasing due to the eventual logistic difficulties caused by the current situation. In particular, it is due to the conditions uncertainty of ship passage through the Kerch Strait. At the same time, Turkish importers stated there are no problems with supply of Ukrainian import commodities and the contracts performed in term.

Egypt. The country is one of the major costumers of Ukrainian grain and it is important to know the opinion of the Egyptian traders, though it is different. The importers of Ukrainian grain in Egypt stated there are no problems with the grain supplies, and at the same time the political situation worsen did not influence on the cooperation between countries and the commodities supplies volume as well.

According to the representative of the Egyptian company AboDonkol, as of to date there are no problems in cooperation with Ukraine. There is the sufficient number of supplies from the Ukrainian grain exporters, and the political situation did not influence on the grain market work. There is another problem - price situation instability. The reason is the speculation on the CBOT. Maybe, two weeks ago shipowners had some problems with Ukraine. There are stable negotiations with the Ukrainian grain supplies and there is information that the instable price situation is caused by CBOT. Egypt will continue cooperation with Ukraine. Egypt is one of the largest markets of Ukrainian wheat and maize. The quality is also sufficient.

Italy. According to the representative of the Italian companies, there are no problems with the Ukrainian grains supplies. Besides, as of to date the previously concluded contracts are executed, and also there will be new contracts when required.

In total, there are no objective reasons for export program-2013/14 failure. Ukraine is ready to save the reputation as the stable partner on the global grain market. It is necessary to accept the current challenges, caused by the objective and subjective factors as well, as the possibility for further development. For example, the Head of Business Projects Division of APK-Inform Agency stated the loss of Crimean ports control and the eventual difficulties in Azov Sea ports work should be the impulse for port industry development in Odessa-Danube region.


Alina Styozhka, APK-Inform Agency


As of to date there is rather complex situation on the grain export market. The global analytic services stated some importers are aware about shipments stability from the Black Sea region, in particular from Ukraine, due to the political situation worsening. At the same time, the grain exports from Ukraine face stable rates without significant failures. Another factor is the commodities consignment delaying by the agrarians, due to the currency fluctuation and necessity to get the maximum profit for the field works rising costs covering. On the other side, it is necessary to promote sales in order to get floating assets for the stated field works.

Since the beginning of the current season the grain and grain legume exports have reached the level of 27 mln tonnes, up 38% compared to the rate of the same period of 2012/13 MY, or 87% of the potential we forecast (31.1 mln tonnes).  In February the shipments of maize – the major export crop – totaled 2 mln tonnes, and in March – 2.4 mln tonnes, and in April 1-3 the stated rate reached nearly 200 thsd tonnes. Meanwhile the agrarians more prefer to hold wheat sales shipments of which were low in the second half of the season. Note, the barley export potential was exported in the beginning of the season. Considering the current export trends and the March updating of the grains and legumes supply and demand balances the wheat exports forecast was decreased to 9 mln tonnes as opposed to 9.5 mln tonnes expected previously, barley – to 2.2 (2.5) mln tonnes. Meanwhile maize exports forecast was increased to 9.5 (9.3) mln tonnes.


Andrei Kupchenko, grain market analyst of APK-Inform Agency



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