Situation in Ukraine could have lasting impacts on markets: Grain market daily

• UK feed wheat futures (Nov-22) closed yesterday at £280.05/t, down £4.20/t on Wednesday’s close. The Nov-23 contract closed at £269.70/t, down £4.45/t over the same period.
• Domestic wheat market followed the Paris and Chicago wheat market down across the day. Pressuring the grain markets lower were heightened fears that global recessionary problems could impact demand for grains.
• Furthermore, U.S. maize harvest pressure added to losses amid lacklustre demand for US exports. U.S. maize export sales (to Sept 29) were at 277Kt, down 56% from a week earlier, below the low end of market expectations.
• Paris rapeseed futures (Nov-22) closed at €616.75/t, down €16.00/t on Wednesday’s close.

A couple of weeks ago our Knowledge Exchange team hosted a webinar on the impacts of the Ukraine situation on UK farmers and processors. Duncan Farrington (Farrington Oils Ltd) and I discussed what the war in Ukraine meant for global markets and domestic oilseed markets.

Full recording of this can be found here:

Rapeseed: what the war in Ukraine means for farmers and processors in the UK?

At the time due to technical issues, we were unable to hear how this war has impacted Ukraine from Roman Slaston of Ukrainian Agribusiness Club (UCAB).

However, after the webinar we spoke to Roman on what the situation is really like for Ukraine agriculture in this current crisis This recording is now embedded into the recording of the webinar.

Below I am going to discuss the key takeaways from Roman’s insight.

What is happening in Ukraine

Roman’s insight into what is happening on the ground in Ukraine clarify that:

• There is still a lot of unknowns around this war.
• The impacts of this war are going to change the dynamics of Ukraine agriculture for years to come – which will inherently impact the global grains and oilseed market.

Ukraine harvest-22

With the war starting at the end of February this had significant impacts on Ukraine plantings. Roman explains that Ukraine have harvested 25% less grain for 2022 harvest. Yields for maize have been below average. There have been high prices for drying due to natural gas prices and lack of storage capacity.

For oilseeds in Ukraine controlled territories, 16Mt of oilseeds have been harvested with rapeseed making up 3Mt of that, with yields regionally dependant but nationally higher-than-expected.

Expectations for harvest-23

Ukrainian farmers started sowing rapeseed for 2023 harvest at the end of July, with the campaign now finished its expected that 1.2-1.3Mha has been sown. With the area anticipated to increase as growers switch from grains to oilseeds as margins are better. For winter wheat and barley, he expects area to be down 25-30% on average.

For spring cropping, Roman explained that there will be an increase in the share of sunflower and soyabean area over maize. Interestingly, due to the geographical location of where maize is grown in the country (central, northern) the costs of transporting (insurance, freight) to suitable ports is between $150-$180/t depending on location. This is adding to the switch from grains to oilseeds, as they are higher in value and offer some form of profitability, grains are just making losses.

Exports

Exports are leaving Ukraine via the Black Sea due to the current grain corridor, anticipation are exports via sea will reach 4Mt per month. Roman suggests 2.5Mt of goods still goes via railway and trucks to EU ports, with some exports leaving via the Danube River.

Inputs

Roman said that Ukraine fertiliser application is going to reduce by 40% for 2023 harvest. This is due to high prices and the unavailability of fertilisers.

Furthermore, lack of finance is an issue in constraining inputs. Ukrainian farmers have been holding stock of large quantities of grain and are unable to sell. Internal prices are very low meaning that they are being sold below cost of production.

All of this is posing a big challenge for inputs in 2023 harvest and yields are expected to reduce because of that. However, Roman did explain that the situation could change, especially going into spring if the grain corridor continues and financial situations improve.

What about the future for Ukraine?

In western and central parts of Ukraine Roman explained that these regions will suffer financially due to reduced yields. But recovery for these two regions would be expected in 1-2 years.

In North and Eastern parts of Ukraine the impacts of this war are going to have a long negative impact on the regions agriculture from destroyed infrastructure and machinery. Also, fields damaged from shelling and missiles. He cited that this will be a long process to recover, with some land in this region never going back to agricultural use and will need conservation.

For the full video please see link below:

Rapeseed: what the war in Ukraine means for farmers and processors in the UK?

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