Results of the first half of 2017/18 MY on the Ukrainian wheat market




In 2017/18 MY, wheat returned its leading position as the main grain crop grown in Ukraine, moving corn to the second position. At the same time, late beginning of the harvesting campaign in terms of some dampening of active sales of the grain by agrarians, led to development of high competition rates among grain processors and export-oriented companies in the beginning of the season. As a result, in the first half of the current season the market segment demonstrated an upward price trend.


Wheat production, yield and quality

According to APK-Inform analysts, in 2017/18 MY the planted areas under wheat increased by 2.7% compared with last year, and totaled 6.37 mln ha, which in terms of the stable yield at 4.2 t/ha allowed to Ukrainian agricultural producers to harvest 26.28 mln tonnes of the grain. It is worth noting that due to relatively stable level of the domestic consumption (3.49 mln tonnes in 2017/18 MY, against 3.51 mln tonnes in 2016/17 MY), the export potential in the current season significantly decreased.

Experts slightly disagree about qualitative characteristics of wheat of the harvest-2017, which already became a traditional process for Ukraine. There are two basic opinions among the prevailing ones. According to one point of view, in 2017/18 MY the qualitative figures of wheat match with the previous season results, and the ratio between milling and feed grain totals nearly 50/50.  According to another point of view, in the current season the share of feed and milling grain totals 60% and 40% respectively, which is more common for Ukraine, and shows a slight decline in the quality of wheat of the harvest-2017 compared with 2016, when in some regions the share of milling grain in the harvest structure reached 70%.


Wheat production in Ukraine


2015/16 MY

2016/17 MY

2017/18 MY

Planted areas, `000  ha

6 867

6 201

6 368

Yield, t/ha




Production, `000  tonnes

26 532

26 043

26 279

Source, hereinafter: APK-Inform Agency


At first view, the stable rate of production in terms of downward forecast of the export potential and absence of problems with the quality had to reduce the competitive effect between consumers and price volatility on the domestic market. But taking into account a significant reduction of the carry-over stocks, in 2017/18 MY the total supply of wheat dropped by almost 2 mln tonnes to 28.4 mln tonnes, which in terms of some lagging of the harvesting campaign and slowing down of sales by agrarians, led to development of the price situation in a bullish trend.


Milling wheat market

The first batches of wheat started coming on the market in fairly inactive way, and there were mostly small-scale volumes. Therefore, in the beginning of 2017/18 MY wheat prices started significantly growing, and exceeded the last season starting prices by nearly 500-1000 UAH/t. So, in early July 2017 only a few consumers purchased 2- and 3-grade wheat at the price ranges of 4`600-4`900 UAH/t and 4`500-4`800 UAH/t CPT, respectively. Most market participants believed that in the following weeks the level of grain supply would increase, and the market prices would start falling. However, due to some dampening of sales by agrarians and the high demand from traders who needed to form large-scale grain volumes to cover their positions under previously concluded contracts, there was not observed any serious seasonal declining of prices in this market sector.

So, as of late January 2018 purchasing prices for 2- and 3-grade milling wheat usually varied within 4`900-5`650 UAH/t and 4`800-5`550 UAH/t CPT, respectively.

Representatives of grain processing enterprises were often forced to purchase the grain at the maximum prices due to insufficient volumes of large-scale batches of raw materials of milling condition. At the same time, the rates of trading and purchasing activity were estimated as moderate, due to dampening of sales of large-scale batches by agrarians, expecting for further price increasing.

"According to some estimations, the share of milling grain in the general harvest in the current season exceeds the last season indicators. However, I would not say that the quality of wheat of the harvest-2017 is better than last year. To date, the number of supplies of 2-grade wheat is even smaller compared with the last season figures. As our company purchases the grain in the central and south-western regions of the country, I can conclude that the qualitative figures of wheat of the harvest-2017 are worse than the last season figures, especially in terms of protein content. Yes, there is wheat with 11-11.5% protein level, but there is quite little 3-grade wheat on the market. In addition, many milling companies face difficulties with purchasing of high-quality 2-grade wheat, even at rather high prices. To date, agrarians prefer proposing wheat with low quality characteristics on the market. I should note that in the current season I often worked with the grain infected with smut, but almost did not face grain with fusarium," - said representative of an export-oriented company.


Feed wheat market

In the first half of 2017/18 MY, the price situation in the market segment of feed wheat developed in the similar way. Late start of the harvesting campaign and high demand from traders who needed urgent formation of grain volumes to cover their positions under previously signed contracts, became the key drivers contributing to dominance of an upward trend in the market sector in the very beginning of the season.

So, in July 2017 grain processors preferred purchasing feed wheat more active than milling wheat, but there were also mainly small-scale batches. The situation developed in such way because the main volumes of new crop wheat were shipped to the ports. In the reporting period, grain processing companies mainly purchased feed wheat at the price ranges of 4`000-4`550 UAH/t CPT.

In terms of increasing of the supply level in the key producing regions, there was observed a short-lived decreasing of the bid prices. To date (end of January 2018), many traders continued increasing the purchasing prices, and declared their within 4`350-5`580 UAH/t EXW, against 3`700-4`500 UAH/t EXW in the beginning of the season-2017/18, in order to attract large-scale batches of feed wheat. In turn, in the first half of the season the bid prices of grain processing enterprises increased by nearly 300-850 UAH/t – to 4`200-5`400 UAH/t CPT. At the same time, market participants managed to purchase only small-scale volumes of raw materials at the minimum prices. In particular, several companies in the central and southern regions, which faced most competition features from traders, were forced to raise their purchasing prices to 4`450-5`100 UAH/t and 4`600-5`400 UAH/t CPT, respectively.


Expectations of market operators

Most market operators of the wheat market agreed that in the short term, the reporting upward price trend will continue developing. At the same time, in the segment of milling grain the demand from flour milling enterprises will provide support to prices on the domestic market, but in the sector of feed grain the demand from traders will become the key factor contributing to the growth of prices, which in terms of the expected lowering of UAH/USD exchange rates and relatively stable interest from major importers, will continue increasing the bid prices.

At the same time, we should not forget that the condition of winter crops areas also makes a significant influence on development of the price situation. To date, the weather conditions in Ukraine are more than favorable for overwintering processes and further vegetation of winter crops.


Anna Tanskaya, APK-Inform Agency


Comment by Andrei Kupchenko, grain market analyst at APK-Inform Agency

Despite reduction of the export potential of wheat in the current marketing year, in the first half of the season the export rates were very active. In July-December period, Ukraine supplied 11.29 mln tonnes of the grain on foreign markets, down 0.2 mln tonnes only compared with the same period last season (11.51 mln tonnes).

There were some changes in the list of the key countries-importers of Ukrainian wheat. India lost its leading positions, because the government imposed the import duties on wheat at 20% in order to protect local farmers. In addition, the key importers, except for South Korea, significantly increased the purchasing volumes from Ukraine. So, Indonesia increased the import volumes by 33% compared with the same period last MY, Bangladesh – up 23%, Egypt – up 14%, and the Philippines – up 28%. The shipments to South Korea declined by 32%.

As for the domestic market, there was observed a continuation of the stagnation processes. According to APK-Inform estimations, in July-December of the current season the production of flour in Ukraine decreased by 7.2% compared with the previous year, and mixed feed production – down 7.1%, which somewhat reduced competition rates for grain raw materials on the domestic market.