ANALYSIS: Ukraine’s marketing year exports showing slowdown signs

A combination of greater competition, low prices, and new domestic storage capacity are starting to weigh on Ukraine’s wheat and corn exports in the 2017/18 marketing year, Agricensus analysis of Ukraine government data has shown.

After a strong calendar-year performance through 2017, grain exports started to show signs of a slowdown in December which has pushed the 2017/18 marketing-year total below 2016/17.

Corn's Christmas slowdown

For corn, Ukraine’s government data shows corn exports increased over the course of 2017 versus 2016, to hit 19.39 million mt, up from 17.27 million mt in the previous year.

Buying from China tailed off over the course of the year, however, to come in at just over 2 million mt, down 25% versus the 2016 calendar year when exports topped 2.6 million mt.

A disappointing December has undermined expectations of solid corn flows, as exports to China slumped to 188,123 mt versus 532,017 mt in November.

Exports to the European Union have surged, however, topping 9.1 million mt, up from 6.7 million mt in 2016. Meanwhile the Netherlands is doubling its intake of Ukraine corn to 2.7 million mt.

That made the country Ukraine’s biggest customer for corn, followed by Egypt at 2.54 million mt, Spain at 2.1 million and China at 2 million mt.

China topped the list of exporters in 2016, followed by Egypt at 2.57 million mt, and Iran at 1.9 million mt.

In total, Asia took 5.8 million mt of Ukraine corn, down from 6.5 million, and Africa took 4.3 million mt, rising from 4 million mt in 2016.

The difference in the outlook of the 2016/17 market year’s crop versus the 2017/18 marketing year has been telling, with the stronger 2016/17 marketing year performance propping up the export volumes through the early part of the 2017 calendar year.

Ukraine’s corn production has declined during the marketing year, compared with the previous 12-month period. Exports in general fell as it faced a mixture of low international prices, fierce competition and expanded storage options that enabled farmers to hold stock rather than push it into the market.

Corn exports saw a strong start to the new 2017/18 marketing year, with August and September export volumes 49% and 43% above the previous year, but export pace dropped off dramatically from that point onwards.

October saw 500,666 mt of corn exported, a fall of 170% on the previous October’s 1.3 million mt, with November and December coming in well below the previous year’s export levels as well.

Wheat’s banana skin

On the wheat front, 2017 was another strong year for Ukrainian exporters, as 17.31 million mt of wheat was exported – the second-highest total on record.

The 2017/18 marketing year started strongly, with some of the biggest monthly totals recorded on the back of strong selling to Indonesia, India, and Bangladesh.

However, there have since been signs of a slowdown as December saw 1.26 million mt of exports – 31% lower than November and 10% lower than the same stage last year.

But while the headline figure looks bad, the marketing year total is only 2% behind where it was last year.

The slowdown is not necessarily the result of lower export availability – production was essentially consistent year-on-year, while domestic consumption was estimated by the USDA to have decreased 4%.

Instead, competition from neighbouring Russia is one of the primary drivers of this change.

Ukraine has lost part of its share of the global wheat trade to a neighbour which harvested a record crop and has since sold heavily to big customers Indonesia and South Korea.

As with corn, the results of the private sector’s investment in storage capacity is also being seen in the wheat market, with producers happy to store their crop and wait for more advantageous prices to emerge.

But it is not all doom and gloom, with the USDA expecting 2017/18 exports figure unchanged month-on-month at 17 million mt in its latest supply and demand forecast.

With the EU’s preferential tariff for Ukrainian wheat now exhausted, Asia and Africa are the most likely destinations over the remainder of the marketing year, particularly if Ukraine can compete with Russia on price.