bne IntelliNews – Ukraine wheat and grain production forecast falls, but some exports start

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Production and export prospects for Ukrainian grain production this year have plummeted due to the raging war in the country, stoking fears of a global food crisis.

US analysts have lowered their forecast for wheat production in Ukraine. The United States Department of Agriculture (USDA) has revised down its forecast for global wheat production for the 2022-23 marketing year, reducing previous estimates by 2 million tonnes of wheat.

USDA analysts lowered their global wheat production forecast in the July report for the just-started 2022-23 marketing year to 771.6 million tonnes from the previously forecast 773.4 million tonnes. , which is also lower than last season’s result of 779 million tonnes. . Ukraine’s wheat production has been cut from 21.5 million tonnes to 19.5 million tonnes as harvesting kicks off in Ukraine, despite fighting.

Further downward adjustments were made for Argentina from 20 million tonnes to 19.5 million tonnes and the EU from 136.1 million tonnes to 134.1 million tonnes. At the same time, harvest forecasts have been revised upwards in Canada, Russia and the United States. Analysts said global wheat exports forecast for the 2022-23 marketing year reached 206.6 million tonnes from 205.4 million tonnes in the June forecast. An anticipated shortage of wheat pushed prices to multi-year highs.

The forecast follows analyst APK-Inform’s more optimistic forecast for overall cereal production released in late June which improved production prospects, due to a better-than-expected maize harvest. The consultancy said in a statement that Ukraine could harvest 52.4 million tonnes of grain in 2022, including nearly 18.2 million tonnes of wheat and 27.7 million tonnes of corn.

APK-Inform said exports in 2022/23 could also reach 40.6 million tons compared to the previous outlook of 39.4 million tons. Before the war, the government forecast that exports this season would reach 52.4 million tons (chart).

According to the State Customs Service of Ukraine, since the start of the 2022-2023 season on July 1 and until July 8, Ukraine exported 318,000 tons of cereals and legumes, the Ministry of Agrarian Policy informed. Before the war, Ukraine exported about 6 million tons of grain per month. This fell to around 1 million tons per month after the outbreak of hostilities.

The war has hit Ukraine’s agricultural sector, one of the country’s biggest moneymakers, hard. Ukraine’s grain production, including wheat, has skyrocketed in recent years to the point where it rivals Russia for the title of “world’s largest grain exporter”. After reaching an all-time high of 75.1 million tonnes of production during the 2018-2019 agricultural season, which saw 50.4 million tonnes of cereals exported, production fell slightly in the following years, but exports surged again in 2019-2020 to reach 57.2 million tonnes. cereals having become a major source of foreign exchange for the country, and production reached a record of 86 million tonnes in 2020-2021, 42.1 million tonnes of maize and 32.2 million tonnes of wheat.

After problems related to the coronavirus (COVID-19) pandemic caused both production and exports to plummet in 2020-2021, the country was on course to set a new all-time high for production of around 100 million tonnes of grain in the 2021-2022 season, which just ended, but production is down and exports have all but collapsed this year due to Russia’s naval blockade of Ukrainian ports.

Russia targets cereals

The production outlook for this year remains very uncertain as long as the war continues. Russia appears to have started deliberately targeting Ukrainian wheat fields, with social media showing images of firebombs landing in wheat and setting the fields ablaze.

Russian troops have captured about 22% of agricultural land in Ukraine. According to NASA Harvest satellite images, Russian forces now control about 22% of Ukraine’s agricultural land. We note that winter crops are mainly practiced in these territories: wheat, rye and barley. Data from Planet Labs satellites and the European Space Agency’s Sentinel-2 mission show that 28% of winter crops and 18% of spring crops, including corn and sunflowers, are under occupation. Also, according to images from space, part of the Ukrainian fields are no longer suitable for sowing due to damage from shells and mines.

At the same time, Russian troops allegedly stole grain from storage facilities, mixing it with Russian grain and exporting it to starving countries in the Middle East and North Africa (MENA) for profit.

Export routes are slowly opening again

Currently, it is estimated that between 20 and 30 million tonnes of grain are trapped in Ukraine, unable to leave due to a naval blockade of Ukrainian ports.

Ukraine’s grain export blockade may be starting to ease, following talks in Turkey where a coordination center was set up this week. Russia has said it has no objection to Ukrainian ships leaving its ports to transport grain to the rest of the world; however, the Kremlin says Ukraine must clear these ports first. Kyiv has been reluctant, arguing that this would open up these key facilities to naval attack by Russian forces.

However, after Russia’s withdrawal from Snake Island last week, the first safe sea route from Ukraine has been opened.

Last week, 16 ships passed through the mouth of the Bystre in Romania to receive Ukrainian grain for transport. Restoring navigation through this channel is an important step, which will also allow the unloading of grain through the Sulina channel and speed up the export of grain, Deputy Infrastructure Minister Yuriy Vaskov said last week.

Currently, the channel’s capacity allows it to receive only four to eight ships per day. Vaskov added that the ministry was negotiating with its Romanian colleagues and representatives of the European Commission regarding the increase in the number of crossings through the Sulina channel. More than 90 ships are waiting their turn to enter Ukrainian ports in the Sulina Channel. A total of 135 ships are waiting to enter the Romanian Sulina Channel.

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