Ukraine wheat area declines

18.07.2016

Ukraine’s wheat area is forecast at 6.3 million hectares for market year 2016-17, down 10% compared to market year 2015-16, the U.S. Department of Agriculture’s (USDA) Foreign Agricultural Service (FAS) said in a July 11 report.

The estimated total areas for the other major grain crops for marketing year 2016-17 are: Barley 2.9 million hectares, corn 4.4 million hectares, rye 140,000 hectares. The USDA said decreased areas in wheat and rye might indicate that Ukrainian farmers were reluctant to invest in production due to the low level of domestic prices causing low margins on these crops as well as unfavorable weather conditions in the fall of 2015.

The USDA said due to heavy rains in the spring, soil moisture was quickly replenished allowing for optimistic yield estimates. However, the excessive moisture conditions stimulated fungus development and in some parts of the country the soil is excessively wet, preventing effective fungicide spraying. This might deteriorate grain quality due to increased levels of mycotoxins and aflatoxins. In certain cases, farmers could lose parts of their crop if they cannot ensure timely application of fungicides on their fields.

As of July 2, Ukraine had exported 17.3 million tonnes of wheat, 17.4 million tonnes of corn, and 4.4 million tonnes of barley since July 2015. The estimated wheat flour exports exceed 330,000 tonnes for market year 2015-16.

The report said domestic wheat consumption is dropping due to decreasing population as well as the loss of governmental control over the Crimean Peninsula and parts of the territories in Eastern Ukraine. According to industry insiders, flour mills in Ukraine are running at approximately 30% of their capacity and millers are trying to balance shrinking domestic consumption with exports.

The major trend during May-June 2016 was the surge of exports of both corn and wheat. These were driven by the need to free up storage capacity for market year 2016-17 grain. Additional factors stimulating wheat and corn exports were the increase of domestic prices for these commodities induced by international markets.

The surge of exports for both wheat and corn for market year 2015-16 have led to revision of domestic consumption levels. Corn feed consumption has been decreased, which is in line with 3%-4% decrease of animal numbers for January-May 2016 compared to the same period of 2015 in accordance with data from the State Statistics Service of Ukraine.

The decreased consumption of corn for feed purposes has been partially compensated through increased domestic consumption of wheat for feed purposes for market year 2015-16

At the same time, decreasing volumes of production of both flour and bread have been used as the rationale for decreased volumes of wheat consumption for milling purposes both for market year 2015-16 and 2016-17.


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