Fundamentally Speaking
Joel Karlin DTN Contributing Analyst

Wednesday 05/07/14

Ukrainian Corn & Wheat Exports

Clearly wheat has been the story of the year as new crop July Kansas City futures are up 43% in value since the beginning of February as a devastating drought in the Southwest Plains has and continues to decimate the nation's hard red winter wheat crop.

Adding to the bullish tenor has been the increased tensions in Ukraine as government troops engage in war with Russian separatists and the world wonders how long Putin will refrain from sending Russian troops in.

For grain and oilseed markets, concern is that production in Ukraine, which has really expanded in recent years, will fall substantially this year due to lack of credit and perhaps a fall in planted acreage.

The latest USDA attaché report from Kiev notes that the plunging Ukrainian currency, the hryvnia, has collapsed due to the ongoing crisis and this has substantially hiked input costs including seed, pesticides and fertilizers.

Lower projected grain prices have also prompted producers to pare inputs and perhaps some intended ground.

Finally, ongoing dryness this spring is expected to weigh on wheat yields.

Actually, as reflected in the chart below, it is corn that may be more impacted for Ukrainian production, exports, and share of world trade has ballooned in recent years.

Their corn output that last year was a record 30.9 million metric tons may fall to 25.0 million with some estimates as low as 22.0 million resulting in exports 3.0 million down from 19.0 million that accounted for 15.9% of global corn exports last season.

The USDA is also forecasting Ukrainian wheat exports at 20.0 million tonnes, down 2.8 million from year ago levels with exports off 500,000 tonnes to 9.50 million.

(KA)

Posted at 10:14AM CDT 05/07/14
Comments (1)
The Ukraine situation and the current corn to wheat price ration may keep corn price stronger than the anticipated bearish WADSE report would suggest. Wheat, if it is going to be part of our livestock feeding rations, is generally fed in the first quarter of its market year. (The market year starts June 1.) The new corn harvest generally slows or stops wheat feeding. The relatively high price of wheat, generally good supply of old crop corn and generally slow corn planting pace - thus late new crop harvest - should keep the rail loaders busy moving old crop corn to the livestock areas. One would expect this to keep bids higher than if wheat was lower priced. Throw in ten states (IN IA KY MN MI ND OH PA SD and WI) that might not plant 200 to 300 thousand acres each or 2 to 3 million total unplanted corn acres and one might expect a more bullish corn environment, at least in old crop corn and at least to the June acreage report for conformation or not. The late start in North Dakota might eliminate the question of prevented acres from last year not being projected in this year's acreage estimates with North Dakota having a lot of those issues last year and again potentially again this year. The market may keep new prices "high" to and through the crop insurance final plant date, trying to keep the planters running. (Planting in the late plant period makes the less sense when potential new crop prices are below the spring insurance price.) Freeport, IL
Posted by Freeport IL at 11:03AM CDT 05/08/14
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