Ukraine — forecast of grain production in 2018

Forecasting of crop production is the integral and one of the most important parts of the market analysis in the segment of grain crops. Every new season, the market analysts, who deal with the forecasts, face new risks and factors of formation of the harvest volumes in such terms as climate changes and significant transformation of the global patterns of grain production and consumption.

Forecasting of the grain production in 2018 in Ukraine developed under the influence of a special weather "surprise" at the end of March 2018, the growth of prices for barley and corn, as well as uncertainty on the sales of new crop peas. The following article contains the detailed information.

Factors

Analysis of the fundamental factors influencing the structure of the planted areas is the essential component of the crop production forecasting, as well as the forming perspectives, and risks of changes in the yield of agricultural crops.

Winter crop areas

Winter crop areas plays rather significant role in the grain segment in forming the structure of the future harvest. In the current season, winter crops formed almost 47% of the general harvest of grain and pulses, which covered 49% of the general planted areas. Therefore, first we analyzed the trends and major figures of winter grains.

According to the Ministry of Agrarian Policy, agrarians planted winter grains the harvest-2018 throughout the areas of 7.2 mln ha, which corresponds to the previous season figures. But the structure of crop areas showed some changes. Thus, the areas under winter wheat increased by 2% compared with last year, but barley and rye areas decreased by 8% and 12%, respectively.

The weather conditions in the autumn for planting works and crop condition in the beginning of the spring vegetation processes are quite important to estimate the potential of re-planting of winter crops. The traditional phenomenon of the autumn drought resulted in the long-drawn planting campaign of winter crops in the autumn 2017, which led to some reduction of the areas under barley, and formed concerns about the results of crops overwintering. Abnormally warm December 2017 caused the further concerns, when there were observed active vegetation processes, and the country faced a high risk of crops frost-killing, in terms of a sharp temperature drop. But January and February were relatively warm, and in the period of significant decrease of air temperature, most crop areas were protected by snow cover. As a result, as of March 29, 2018, nearly 11.6% of the crop areas were in poor and thinned condition, as opposed to 14.4% on the same date in 2017. In addition, last year Ukraine lost crops throughout the areas of 5.6 thsd ha, while in 2018 the figures totaled 0.1 thsd ha only. Thus, we can surely say that winter grain crops for harvest-2018 safely passed the winter, and re-planting works will cover rather low-scale areas.

Agro-climatic factor

In the current season, the winter was quite favourable for winter crops, but it turned out as very prolonged, and ended with heavy precipitations in the form of snow in late March in most regions of the country. On the one hand, such weather conditions formed the soil moisturizing at the optimum level in almost all regions of the country, which become a rare event for several recent seasons, but on the other hand, the start of the spring planting campaign was significantly delayed. The Ministry of Agrarian Policy announced the start of the active crop planting works on April 3 only. It was noted that agrarians managed not to loss the optimum planting time yet, but the planting campaign will be very tight.

Due to displacement and reduction of the period of spring planting works, the planted areas under spring barley and peas will face the most significant risks. On April 3 last year, agrarians managed to plant the crops throughout 56% and 66% of their areas, respectively. Therefore, in the current season Ukraine will somewhat reduce the planted areas under the crops. At the same time, good soil moisturizing in the very beginning of the planting campaign will be a favourable factor for possible expansion of the planted areas under late grain crops, including corn. Also, there are some concerns about possible development of diseases, due to heavy precipitations and high moisturizing in the early spring.

The reporting climate changes are characteristic not only for Ukraine, but also demonstrate more global nature, which also should be considered in the forecast.

Market situation

For the recent decade, the demand and prices for certain grains is one of the key factors determining the structure of crop areas. In the current season, Ukraine faced a lot of short-term changes, which make to think of changes in the planted areas under many agricultural crops. For example, in 2017/18 MY peas production increased by 47% compared with last season, and totaled almost 1.1 mln tonnes. The situation developed due to active demand from exporters, but also has a reverse side. In terms of the large supply, the prices started decreasing since October 2017.

Also, we should note the high demand for barley and corn on the global market which causes the following growth of grain prices. Due to the short period of planting campaign, Ukraine will fail to increase the areas under spring barley in the current season, but the segment of corn has the potential for areas expansion.

Plans of agrarians

The traditional spring polling of Ukrainian agricultural producers conducted by APK-Inform experts, showed a high level of uncertainty among agrarians concerning the changes in the structure of planted areas under spring crops. As of the end of March (the polling took place in the second and third ten-day period of March), more than 38% of the questioned agrarians who plant spring grains, did not specify with the planned changes of the areas for the harvest-2018.

As for major crops, the market segment of oats demonstrated the greatest uncertainty (60% of the agrarians growing the crop), as well as the corn segment (59%). At the same time, agrarians demonstrated their confidence in the plans to change the areas under spring wheat and peas. The share of undecided in the reporting segments was estimated at 29% and 39%, respectively.

Despite possible troubles with sales and the long spring period, the large share (47%) of farmers still plan to expand the planted areas under peas, whereas 13% of respondents plan to reduce the areas for the harvest-2018. The similar situation developed in the segment of spring barley, where 31% of agrarians plan to expand the planted areas, and 22% — to decrease.

While analyzing the reasons of increasing of the planted areas under the major spring crops, it should be noted that agrarians mainly planned the reporting upward operations within the approved crop rotation. So, 67% of the agrarians cultivating spring wheat named the reporting factor, as well as 43% of the agrarians cultivating corn, 41% — spring barley, and 40% — peas.

As for the agrarians growing oats, there is also a high share (42%) of the respondents which called other technological and economic reasons as the major factor for increasing of the areas under the crop. As for the reasons for the areas reduction, the factor of crop rotation also dominated. In addition, in terms of such crops as spring barley, corn and spring wheat 18-25% of the respondents reported that in the current season they decided to decrease the areas due to expansion of the areas under other crops, including oilseeds, etc.

Forecast

Taking into account the reporting factors and the analysis of long-term dynamics of grain production in Ukraine, APK-Inform analysts formed the first forecast of grains and pulses harvest in Ukraine in 2018, which estimated the general figures at 65.8 mln tonnes, up 6% compared with the current season (61.9 mln tonnes). In terms of the prevailing weather conditions, the average yield of grains will reach 4.6 t/ha, up 8% compared with the average figures in 2017/18 MY (4.25 t/ha).

The planted areas under spring barley will reduce by 4%, to 1.55 mln ha, which in terms of the expected average yield at 3.27 t/ha, will provide the harvest volumes of 5 mln tonnes. APK-Inform forecasted the planted areas under corn at the level of 4.62 mln ha (up 3% compared with the current MY). The corn yield will reach its average index of 6.23 t/ha, which will form the harvest volumes at 28.5 mln tonnes. As for wheat, APK-Inform estimated the general production in 2018 at almost 27 mln tonnes, up 3% compared with the figures in the current season. The general production of barley will total 7.8 mln tonnes (down 6%).

Generally, in a new season Ukraine will face a good harvest of grains, which in terms of the stagnation processes on the domestic market will need new markets and further modernization of the export infrastructure. Taking into account the high uncertainty regarding the crop areas structure, APK-Inform will continue monitoring and revising the market for a new risks or emerging trends.

Andrei Kupchenko, Analyst at APK-Inform Agency