Kernel's grain exports soar despite Ukraine crisis

Kernel Holding supported ideas of Ukraine grain exports defying the country's crisis, revealing a doubling in grain sales volumes, and a sharp rise in exports too.

The Ukraine-based sunseed crusher-to-crop exporter said that its export terminals handled 1.03m tonnes of grain in the first three months of 2014, a rise of two-thirds year on year, despite the country's political turmoil.

Although this number included some 221,000 tonnes handled through Russia's Taman port, where Kernel has a 50% stake in the grain transhipment facility, even excluding these volumes export throughput rose 38% to 817,000 tonnes.

The continued strength in Ukraine's grain supplies, which is backed by government data, was also evident in the company's sales in the quarter, which doubled to 1.31m tonnes.

'Favourable price environment'

Kernel said that trade was supported by "record production", a reference to the country's bumper grains crop last year, and strong exports, "along with farmers actively selling their stock in the favourable price environment".

The weakness of the hryvnia for much of this year has raised the value, in local currency terms, of crops, which are traded internationally in dollars.

Some observers say some recent stabilisation in the currency has reduced the appetite of farmers to hoard crop, as a hedge against further hryvnia depreciation, rather than sell.

Indeed, Agritel noted that the "impact on the domestic [grains] market did not take long" from a recovery in the hryvnia's exchange rate this week to 11.4 to $1, from 13 to $1.

On Wednesday alone, "corn prices lost around 300 hryvnia from 2,000-2,100 hryvnia a tonne".

'Lack of finance'

Kernel added that "since the severe political crisis in Ukraine that began in November, the company to date has been operating in a normal course of business both in Ukraine and Russia".

Nonetheless, there are continued expectations of the crisis curtailing this year's harvest, in raising financing costs, and reducing farmers willingness to spend on inputs such as seed, fertilizer and agrichemicals.

"Lack of finance is likely to result in more home-saving of corn seed rather than buying better imported supplies," traders at a major European commodities house said.

"Likewise, although Ukrainian arable production is essentially low input, less fertiliser and seed is likely to be used."

Analysts are forecasting a drop in output of some 10-20% year on year, the traders said.

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