Problems in Ukraine could help prairie farmers, say grain market analysts.
But until the situation in that wheat-exporting nation is better understood, prices aren’t likely to move.
“I think it’s pretty bullish,” said Winnipeg-based grain market analyst Brenda Tjaden-Lepp about reports that Ukraine may have substantially overestimated its 2002 wheat crop and has a much smaller winter wheat crop this spring.
“If the Ukraine doesn’t have as much of an export surplus as we thought, a weather problem in the U.S., Australia, Canada or any of the traditional exporters could move the markets (higher). That Ukrainian wheat won’t be there to backfill demand.”
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There is controversy in Ukraine over whether last summer’s wheat crop size was deliberately overestimated by unscrupulous analysts. Some believe that Ukraine may have to import wheat in the coming months.
This situation, if true, would be a dramatic reversal of Ukraine’s wheat market behaviour since last summer. Ukraine has exported millions of tonnes of wheat, helping cause high harvest time prices to slump lower on world markets.
This has been reflected for prairie farmers in the Canadian Wheat Board’s monthly pool return outlook, that shows wheat prices have consistently fallen for months.
Wheat board analyst Peter Watts said the board is watching the Ukrainian situation. He told a wheat board long range market outlook meeting that many observers have predicted production estimates for Ukraine that go far beyond the board’s more conservative forecasts.
“We’ve heard these unbelievable forecasts about production of 40 million tonnes in Ukraine,” said Watts.
He said he and his fellow market analysts were surprised when the board’s weather and production analysis section forecasted lower Ukrainian production in coming years than many were offering, but the recent news makes the board’s view appear close to reality.
Weather is also likely to reduce the ability of Ukraine to export large amounts of wheat in the next year. A cold winter has killed large acreages of winter wheat, which could cut more than five million tonnes from Ukrainian winter wheat production.
Tjaden-Lepp expects wheat prices to continue to be weak for at least another year, but questions about Ukrainian production could give wheat prices a bump up in the next two months.
