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Ukraine’s grand grains vision blunted on investment doubts

Ukraine’s grand grains vision blunted on investment doubts

KIEV: Already one of the world’s powerhouses for agricultural products, Ukraine’s plans to bolster grains production to cross the 100 million mt threshold by 2020 are ambitious, market sources told Agricensus Monday. The country, already one of the world’s major corn and sunflower oil exporters, has consistently signalled in recent years its intent to maximise further its growing potential, most recently during a press conference just before Christmas. In late December, the president of the Ukrainian Grains Association, Nickolay Gorbachov, spoke of improved yields and larger area propelling the country’s grains production to over 100 million mt by 2020  although acknowledged that logistic constraints would struggle to accommodate such production volumes. Currently, according to the USDA’s January WASDE estimates, Ukraine is on course to produce some 26.5 million mt of wheat, 25 million mt of corn and just under 10 million mt of other course grains in the 2017/18 marketing year. That will be a slight fall on the 2016/17 marketing year, when near perfect weather bolstered production and drove the country to produce some 26.8 million mt of wheat, 28 million mt of corn and 11.26 million mt of course grains. “It’s not enough to rely on the weather – it would need investment. According to the UGA, Ukraine has seen spectacular improvements in its wheat yields in recent years, with Luhansk and Donetsk seeing yields improve by 79.5% and 82.5% respectively, while many other regions of Ukraine seeing yield improvements of between 10% and up to 50%.

Maintaining such performance would be key to propelling the country to the 100 million mt mark, according to the UGA’s forecast. Collectively, grains and oilseeds currently push Ukraine’s agricultural production towards 85 million mt, with just under 50 million mt exported to world markets, according to UGA data. On average, the country has seen double digit improvements in its yields since 2006 and the UGA forecasts a yield increase of 19% to 4.02 mt per hectare. This, when combined with a 7% increase in acreage to 25.2 million ha and a relative flatline in domestic demand, would be enough to push crop production to 100 million mt. Exports in turn could hit 70 million mt.

However, land could be the main problem in achieving such growth, with available area falling 1% over the period 2010-2014 and 2014-2018. But a second challenge would be handling such a crop – currently the country has a loading capacity of 715,000 mt a day, but a rail capacity that is a sixth of that total. Some 117,000 mt can be moved by rail per day, while discharge capacity at ports stands at around 182,000 mt, according to the UGA. Mexico is the USA’s biggest export market for corn, and sources within the industry are acutely aware that Brazil and Ukraine are well-placed to benefit should the agreement unravel.