Equator of the grain season-2019/20 in Ukraine: success & challenges




Six months have passed since the beginning of 2019/20 MY on the Ukrainian grain market, which means it is high time to sum up the interim results of the market work. What will market participants remember about the six month? What features and innovations did they face, and what difficulties did they had to overcome, and most importantly — what to expect in the second half of the season?

The article of APK-Inform Agency focuses on the reporting issues.


Role of Ukraine on the global market

For several recent years, Ukraine demonstrated the consistently high increase of the harvest volumes of grain crops, and continued increasing its importance both in the Black Sea region and on the global market.

According to the forecast balances of APK-Inform analysts, due to the record production of wheat, barley, and the second after the record volume of corn harvest, in 2019/20 MY Ukrainian agrarians provided the general harvest of grains and pulses in the country at the level of 73.9 mln tonnes, up 5.5% compared with 2018/19 MY. In particular, wheat production was estimated at 28.3 mln tonnes, up almost 15% compared with last season, barley — 9 mln tonnes (up 22.3%), and corn — 34.6 mln tonnes, down 3.3% only compared with 2018.

According to the USDA, Ukraine took the 8th position in the rating of the global grain producers with the share of 3.3-3.5%, and provided almost 15% of the needs of global exports, as well as took the good second best position in the rating of global exporters in 2019/20 MY.

For three recent seasons, Ukraine consistently took the 4th and 5th positions in the rating of the global exporters of corn and wheat. Taking into account the upward dynamics of the global grain production, and the increasing of the export volumes, the situation indicates the growing importance of the country on the global market. According to the USDA estimations, since 2010 the share of Ukrainian wheat in the global exports increased from 3.2% to 11.3%, or from 4.3 mln tonnes to 20.5 mln tonnes in absolute terms; corn — from 5.5% to 18.4%, or from 5 mln tonnes to 30.5 mln tonnes. In addition, in 2019 Ukraine increased the volume of barley export potential from 3.6 mln tonnes to 5 mln tonnes, with the share of 17.4%, and rose in the rating from the 4th to 3rd position, and almost caught up with Russia, which takes the 2nd position, with the estimated export volumes of 5.6 mln tonnes.


Key features and innovations

Despite the positive dynamics of production, every year Ukrainian agribusiness faces new challenges and barriers, both within the country and on the global market. In addition, the market became oversaturated with both fundamental factors (supply/demand balances, currency exchange rates volatility, etc.) and political factors (escalation of conflicts and trade wars, toughening of sanctions and phytosanitary requirements, imposition of customs duties, etc.), which makes it increasingly difficult to make any long-term forecasts.

In the beginning of the season, the officials imposed a new state standard for wheat in Ukraine.

In addition, in the new Government the Ministry of Economic Development and Trade united with the Ministry of Agrarian Policy and Food into one single department, as well as the ambiguousness of the issue of opening of the land market, significantly disturbed the minds of all market participants.

As for another pressing issue — logistics, then in terms of the planned development of river and container transport, the issue of railway logistics in Ukraine and the condition of approaching lines to the port oblasts remains painful.


Strengthening of hryvnia and other troubles

Before the start of the season, all participants of the agricultural business of Ukraine already realized that the market will function in terms of "high harvest - low prices".

It should be noted that since the beginning of the season (July-December of 2019), the selling prices of milling wheat with 12.5% protein content on FOB basis reduced by nearly 23 USD/t compared with the figures for the same period in 2018/19 MY, feed wheat — down 17 USD/t, and feed barley — down 51 USD/t. The bid prices of traders on CPT-port basis also significantly decreased compared with the last season figures. Since the beginning of 2019/20 MY, wheat purchasing prices in the deep-seaports reduced by nearly 1250 UAH/t, feed barley — down 2100 UAH/t, and corn — down 735 UAH/t (October-December).

In September 2019, hryvnia updated its three-year maximum level of the exchange rate and reached 24.08 UAH/USD, and on the eve of the New Year it even strengthened to 23.22 UAH/USD, thus catching unawares all participants of the agricultural market of Ukraine.

According to preliminary estimations of APK-Inform Agency, for 6 months of 2019/20 MY Ukraine exported almost 15 mln tonnes of wheat at the average cost of 196 USD/t, 9.8 mln tonnes of corn at 176.9 USD/t, and 3.7 mln tonnes of barley at 182.9 USD/t, thus providing foreign exchange revenues at the level of 5.339 bln USD. Only due to the exchange rate differences, the sum of lost profit totaled nearly 17.298 bln UAH.

Thus, the high export rates were the consequences of low prices, and the way of compensating for missing profits, rather than the results of active interest from importers.


Record export rates

According to APK-Inform estimations, the export potential of the country's grain market in 2019/20 MY increased by 3.6% compared with the record figures of the previous season, and totals nearly 51.8 mln tonnes. In particular, in the market segment of wheat the increase of the export volumes can total 22.3% — to 18.9 mln tonnes, and barley — up 35.1% to 4.8 mln tonnes. Only in the corn segment after the last year increase of 68% (!!!), there will be observed a slight decrease (down 8.5%) to 27.5 mln tonnes, which is still 53.8% higher than in 2017/18 MY.

As a result of the record grain harvests, the lower purchasing prices formed on the domestic market and in the ports of Ukraine. Despite the long-term trend of revaluation of the national currency, grains of Ukrainian origin became very competitive and attractive on the global market, which together with the fairly active receipt of offers from agrarians allowed to traders to reach the record rates of shipments.

According to the statistics data of APK-Inform analysts, in the first half of 2019/20 MY Ukraine supplied nearly 31 mln tonnes of grains and pulses on foreign markets, thus realizing almost 60% of the export potential.

According to preliminary results of the first half of 2019/20 MY, Ukrainian wheat exports to the Middle East countries increased in 2.2 times — to 2.6 mln tonnes, due to the growth of imports by Turkey in 6.7 times to almost 1 mln tonnes, Yemen — up 3.4 times to 0.6 mln tonnes, Lebanon — up 1.6 times to 0.3 mln tonnes, and Jordan — up almost 3 times to 0.2 mln tonnes, as well as keeping of the fairly high interest by Israel.

The grain supplies to South Asian countries increased in 2.5 times — to 1.7 mln tonnes, due to the significant increase of the purchasing volumes by the Republic of Bangladesh.

The supply volumes to North Africa increased by 65% — to 3.7 mln tonnes, primarily due to increasing of the imports by Egypt from 0.6 mln tonnes to 2.2 mln tonnes.

At the same time, in the first half of 2019/20 MY Southeast Asia remained the main destination of Ukrainian wheat sales, which volume of supplies decreased by 1%, but remained very significant (4.2 mln tonnes).



For the first 3 months of the current season, Ukraine already increased the exports of barley by 41.5% compared with the previous year. At the same time, the further interest of importers in its purchases became more restrained, which often put pressure on the price situation or, at least, did not allow prices to grow more actively.

According to preliminary estimations for the first half of 2019/20 MY, Ukrainian barley exports to East Asian countries increased by 97% — to 0.9 mln tonnes, primarily due to the growth in Chinese imports by 2.7 times — to 0.87 mln tonnes, and to the EU countries — up 14.2 times to 0.4 mln tonnes, due to the active interest in its purchases by Spain, Italy and Portugal.

The Middle East remained the key sales region for Ukrainian barley in the first half of 2019/20 MY, while the export volumes in its direction decreased by 13% — to 2 mln tonnes, in terms of 60% decrease of the imports by Saudi Arabia.




Despite the variety of banking and exchange-traded risk hedging tools, all participants of the Ukrainian agribusiness somehow felt the impact of the currency factor.

Ukraine continued focusing on the exports of raw materials, but we should note the certain successes in increasing of the volumes of supplies of finished products in the current marketing year compared with last season.

In addition, according to the recent data, the areas under winter crops decreased by 8% — to 6.98 mln ha. The most significant reduction for the harvest-2020 is observed in the winter wheat segment, which areas decreased by 5%, and became the lowest ones since 2014. The reduction of the areas under winter barley reached 14%.


Anna Tanskaya, APK-Inform Agency