Column: Ukraine corn crop plunge balanced by huge stocks, aiding exports for now
NAPERVILLE, Ill., Dec 13 (Reuters) - The precariousness of Ukraine’s export situation resurfaced last weekend as Russian attacks on energy infrastructure around Ukraine’s busiest port of Odesa suspended grain loadings.
But Ukraine, a major exporter of corn, wheat and sunflower oil, has shipped products perhaps more efficiently than many market-watchers expected, allowing export estimates to drift higher even with disappointing harvest volumes.
Operations at Odesa resumed Tuesday with the departure of eight agricultural vessels and another 23 waiting to load, though Ukraine’s total grain shipments since July are down at least 30% on the year as not all export terminals are operational following Russia’s late February invasion.
The apparent success of the Black Sea Grain Initiative, which took effect in late July and is valid until mid-March, has substantially raised Ukraine’s export capability in recent months, pushing out some competition from other suppliers like the United States.
But that advantage could decline in the coming months as Ukraine is still trying to harvest its corn crop, and those losses could be larger than currently assumed. Still, there is a decent cushion in Ukraine’s corn stocks, though next year’s crop is never guaranteed.
It was well anticipated that Ukraine’s 2022 corn and wheat harvests would fall short of the 2021 records, but corn has recently taken an even sharper tumble. The U.S. Department of Agriculture on Friday cut the corn crop to 27 million tonnes from 31.5 million last month.
That is down 36% on the year but similar to average output levels from mid-last decade.
USDA’s Kyiv attache on Monday projected a much grimmer outlook of 23.1 million tonnes, down from 25.8 million last month. Around 40% of corn was unharvested as of early this month due to high moisture, expensive or inaccessible grain drying and financial losses to farmers due to the conflict.
It is common for USDA and its attache to hold different views, but both have turned more optimistic on exports. USDA upped Ukraine’s 2022-23 corn exports to 17.5 million tonnes versus 15.5 million last month and just 9 million forecast back in July.
The attache’s exports jumped to 20.2 million tonnes from 13.9 million last month based largely on the extension of the Grain Initiative. That would be a record-high 87% of the crop exported, though declining population and lighter animal production amid the war could allow for it.
Before the invasion, Ukraine was exporting nearly 80% of its corn crop annually, preventing large year-end stocks. Only 64% of last year’s harvest was exported due to the curtailed 2021-22 season.
USDA’s current estimate suggests 65% of the 2022-23 corn crop will be exported, up from 49% projected in November. But USDA expects above-average domestic consumption, leaving room for a possible export expansion.
Domestic corn use may be struggling based on farmers’ ability to sell. A survey published last week by analyst APK-Inform suggested nearly 70% of the 530 surveyed Ukrainian producers are having difficulty selling their grain and oilseeds due to low bid prices.
If that trend continues, it could negatively affect 2023 crop potential.
MORE CORN THAN WHEAT
Higher grain stocks in Ukraine have allowed export estimates to rise while production falls, though corn inventory is much more plentiful versus wheat.
USDA’s latest adjustment puts 2022-23 corn ending stocks in Ukraine at 6.9 million tonnes, up from 5.1 million the prior year. Before last year, those averaged about 1.3 million tonnes.
But compared with use, the stock buildup is even more impressive. Ukraine’s 2022-23 corn stocks-to-use per USDA’s estimates is 27% versus a pre-conflict average near 4%. That is the smallest ratio forecast so far this season, down from 38% last month and a high of 61% in July, before sea exports resumed.
To compare with the United States, a plentiful corn stocks-to-use is around 15% as in 2017-18 or 2018-19. But a ratio of 9%, projected for both this year and last year, is considered tight and has led to elevated prices.
Ukraine’s corn stocks-to-use has not been near 27% in more than two decades, though heavier wheat supplies were common not that long ago, before wheat exports took a significant step upward about seven years ago. Wheat stocks-to-use is seen at 19% in 2022-23 versus 20% last year and 6% two years ago.
Ukraine’s 2022 wheat harvest, down 38% on the year, was small enough that leftover supplies by mid-2023 are expected to be lower than this year, despite the large drop in exports. Ukraine sees a smaller wheat harvest in 2023 since winter sowing was 17% lighter than 2022’s harvested area.
Karen Braun is a market analyst for Reuters. Views expressed above are her own.
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