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Opinion: Ukraine farmers' export hopes too high

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Optimism is a prerequisite for being a farmer, they say.

Never more so than in Ukraine.

Here, agriculture trade group the Ukrainian Agrarian Confederation foresees that the country can meet domestic needs of about 27m tonnes and still have enough change over after a 48m-tonne harvest to export up to 24m tonnes.

That would appear to leave the Black Sea state 3m tonnes short.

The country may be able to rely to some extent on stocks left over from last year. But there are limits, lower than those the UAC sees, even to Ukraine's grain shipments.

Silo issue

One is on the amount of crop in a fit state to sell.

Ukraine's grain dynamics, as seen by the UAC (year-on-year change)

Production: 48m tonnes (-10%)

Domestic consumption: 27m tonnes

Exports: up to 24m tonnes (-8%)

Year end stocks: 5m-6m tonnes (-25-38%)

Egypt, the world's biggest wheat importer, suspended imports from Ukraine last year on quality grounds.

And that was Ukraine's shipments were nearly all of fresh stuff. To meet the UAC's objectives, Ukraine would be relying on grain which had been sat around for a year or more.

Politics factor

Even if enough quality grain can be found, it's doubtful there would be the political will to let it all go.]

It's been in both the interests of farmers, who need money for winter sowings, and the government, which needs foreign sales to prop up Ukraine's crumbling currency and economy, for grain exports to set a cracking pace so far into 2009-10.

That alliance may not last far into 2010.

Ukraine's presidential election

...will take place on January 17, when incumbent

Viktor Yushchenko

faces challenges from former prime minister

Viktor Yanukovich

and current prime minister

Yulia Tymoshenko

.

Mr Yushchenko is currently seen as having only a small chance of re-election.

By June, Ukraine's inventories as a proportion of consumption, a key measure of market tightness, would have fallen to a snug 18%.

That ratio isn't not far off the stocks-to-use ratio for, say, wheat two years ago, when Ukraine limited exports to a trickle to keep bread prices in check.

And that's assuming the UAC's estimate of an 8m-tonne stocks overhang is right.

Plug in the less sanguine figure from analysis group UkrAgroConsult, and Ukraine would be left with a stock-to-use ratio of less than 1%.

Game of two halves

The first 12m tonnes of Ukraine's exports have been the easy bit. The next 12m will be altogether more tricky.

For that, Europe's grain exporters, who have been fighting an uphill battle against Black Sea competition, will be grateful.

By Agrimoney.com

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