Ukraine's political stability, for now, has not ended the fallout to agriculture
markets from the unrest which prompted the ousting of President Viktor
Yanukovych, Macquarie said, forecasting that the country's grains harvest may
fall well short of official hopes.
The appointment of an interim government in Ukraine, and
pledges by the likes of the International Monetary Fund of conditional financial
support, will resolve problems such as a rise in grain export prices, as
exporters remove risk premium and farmers resume crop sales, Macquarie said.
Ukraine growers have, aping Argentine peers, hoarded grains
during the crisis as a dollar-denominated hedge against a tumbling local
However, fob prices of corn, Ukraine's main crop export,
have "come back since the beginning of the week", analysis group Agritel said,
fallings up to $6 a tonne to $222 a tonne in Odessa.
Last week, farmgate corn prices rose by some 100 hryvnia a
tonne, about $11, with soybean values gaining 100-200 hryvnia as farmers "fearing
exchange rate fluctuations" withheld sales, Agritel said.
Such trends, which have underpinned higher-than-expected
export demand for US corn, "are mostly of a short-term nature", Macquarie said.
However, the bank warned the crisis would wreak longer-term
damage to Ukraine agriculture through a weaker hryvnia, which would lift the
cost of imported fertilizers, such as potash, and agrichemicals.
"In the short run, devaluation of the hryvnia has a positive
impact on the competitiveness of Ukrainian origin agricultural crop exports in
the international market.
"However, longer-term, we believe that rising production costs
will offset this advantage… due to rising domestic inflation and the fact that
the majority of crop protection, fertilisers and other inputs, along with
machinery, are imported."
The country lacks the potash reserves of neighbouring
Russia, but does possess a substantial nitrogen fertilizer industry.
Downbeat on corn
Furthermore, the financial pressures caused by Ukraine's crisis
could squeeze the availability of state support for farmers.
"The access to loans for the Ukrainian agri sector will be
tougher as the squeeze in the financial market in Ukraine makes loans more
expensive," Macquarie said.
The bank forecast Ukraine's grains output falling by nearly
16% to 44.5m tonnes in 2014-15 – well below the 51.4m tonnes that the agriculture
ministry has forecast, and reflecting in particular a lower forecast for corn
Macquarie pegged the Ukraine corn crop this year at 25m
tonnes, 5.2m tonnes below the farm ministry forecast, reflecting in part ideas
of a return to average yields after "perfect weather" boosted last year's output.
Also, low international corn prices will reduce the appeal
of the crop, and encourage farmers to plant spring sown oilseeds such as
sunflowers, rapeseed and soybeans instead.
The comments come as farmers are beginning spring sowings in
the southern Crimea region.