PARIS (Reuters) — Rising turmoil in Ukraine and persistent dry weather throughout the Black Sea region prompted French analyst Agritel to cut all its 2014 grain output forecasts for the region, a note seen by Reuters on Monday showed.
Ukraine and Russia, among the world’s largest grain exporters, have struggled to raise financing to sow spring grains including corn, with lenders tightening payment procedures due to the instability in the region.
The risk of a conflagration has risen over the weekend with Ukraine’s president on Monday threatening military action after pro-Russian separatists occupying government buildings in the east ignored an ultimatum to leave.
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In its April estimates for crops in Ukraine, Russia and Kazakhstan, the analyst lowered by 3.9 million tonnes the combined estimate for Ukraine and Russia’s corn crops to 33.1 million tonnes, now down 14.2 percent on 2013.
For Ukraine only, among the world’s top three corn exporters with the United States and Brazil, the fall would be of 17.6 percent on last year, it said.
“This drop in output is the direct consequence of the crisis that the country is going through. Local producers are facing a devaluation of the hryvnia, the local currency…and financing restrictions,” Agritel said.
The uncertainty in the region led to a rally in wheat and corn prices in Chicago on Monday.
“Growing (corn) in Ukraine costs 50 percent more than other crops,” Agritel’s director Michel Portier said.
In addition to rising concerns about the political tensions in the region, operators would focus on dry weather, which may also affect winter crops if they were to worsen, Agritel said.
The spring grains sowing campaign started in Ukraine and Russia several weeks ago. Kazakhstan usually starts spring grain sowing in May.
“The weather-market in April will be decisive…If the weather becomes drier, farmers may revise down their acreage expectations especially for corn,” it said.
For winter grains, Agritel said conditions had so far been generally favourable in the region but warned of dry weather.
“The water (rainfall) deficit is very significant as it has reached about 50 percent (below average) over the last six months in the key winter crop production areas,” it said. “Moreover, no significant rains are awaited in those regions on a 15-day horizon.”
The analyst reduced by nearly four million tonnes its forecast for the three countries’ combined wheat crop compared to the one it issued in February, to 81.5 million tonnes, now more than nine percent down on 2013.
It cut its forecast of Ukraine’s 2014 wheat crop by 1.6 million tonnes to 18.4 million tonnes, now seen 16.5 percent lower on 2013, while Russia’s wheat crop would shed 7.8 percent on 2013 to 48.1 million tonnes, a drop of 1.8 million tonnes on its February estimate.
Agritel also lowered its barley crop forecasts for both countries with the region’s total now at 25.4 million tonnes, down 4 percent on 2013. (Reporting by Sybille de La Hamaide; editing by Keiron Henderson)
