Ukrainian grain production stable, domestic consumption slides

20.10.2016

Ukraine’s wheat food consumption and feed consumption for all grains has been downscaled based on shrinking animal numbers, the difficult economic situation, and change in consumer preferences. Decreased domestic consumption and lower ending stocks for grains allowed for higher exports, the U.S. Department of Agriculture’s (USDA) Foreign Agricultural Service (FAS) said in an Oct. 11 report. Decreasing rye production opened the opportunity for imports of this crop for market year 2015-16.

Ukraine’s 2015-16 marketing year has been concluded for wheat, barley and rye. According to industry sources, 60% of wheat is of milling quality and 40% is feed quality. In 2016 farmers harvested: almost 26.6 million tonnes of wheat, 2.5% below the 2015 level; 9.7 million tonnes of barley, 13% above; and almost 402,000 tonnes of rye, comparable to the 2015 level, according to the State Statistics Service of Ukraine (SSSU).

Another growing market was the E.U., which bought 2 million tonnes of wheat in market year 2015-16, a 40% increase compared to the previous market year. Exports to this destination primarily were supported by a Tariff Rate Quota (TRQ) offered to Ukraine under the Deep and Comprehensive Free Trade Area (DCTFA). Recently, the E.U. announced a further increase of TRQ ceilings for a number of agricultural products from Ukraine, including grains that might further boost exports to the market.

Ukraine’s domestic wheat consumption is sliding down due to a decreasing population as well as loss of governmental control over the Crimean Peninsula and parts of the territories in Eastern Ukraine. According to the FAS, flour mills in Ukraine are running at approximately 30% of their capacity, and millers are trying to balance shrinking domestic consumption with exports.

A fall in domestic bread consumption is forcing Ukrainian millers to increasingly sell to international markets. For market year 2015-16, Ukraine exported 365,000 tonnes of wheat flour and products, an increase of almost 30% compared to the previous market year. The major growth destinations are East and Southeast Asian countries. According to the report, the major consumer of Ukrainian flour for this region remains North Korea, which is importing both directly as well as transshipping the commodity through China.

Total feed consumption for all grains has been decreased for market year 2015-16 compared to market year 2014-15. The reduction is based on a 6.7% decrease of poultry flock and a 3.4% decrease of the swine herd for January-September 2016, compared to the same period of 2015 in accordance with SSSU data.

Feed rye consumption has been decreased for market year 2015-16 and market year 2016-17 compared to market year 2014-15 because Ukraine began importing the commodity due to the decrease of domestic production, the FAS said.

The decline in consumption of rye and corn for feed purposes has been partially substituted by increased domestic consumption of wheat and barley for feed purposes for market year 2015-16. According to the FAS, domestic corn prices were higher compared to feed wheat and barley, so feed rations for animals likely have been rebalanced to include cheaper components.


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