Ukraine nears its potential
When reports surfaced last week about feed grain from Ukraine being imported into Eastern Canada, my mind jumped back to a conversation I had in the early 1990s.
Harry Hill, former head of the Prairie Farm Rehabilitation Administration, had recently returned from Ukraine and was explaining the agricultural potential of the newly independent state.
Its deep, fertile soil and wonderful climate made Saskatchewan pale by comparison, he said.
But this potential was not attained. Farmers had neither the know-how nor the money for inputs to hit the yield potential. The storage and transportation system was woefully inadequate.
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But if Ukraine could get its act together, it could be a competitor to be reckoned with, he warned.
A half decade later, has anything changed?
Most reports say there are still production and logistical bottlenecks.
So how was it that the region exported feed grains to Saudi Arabia earlier this year? And now there is the 27,000-tonne ship of feed wheat bound to Bunge of Canada Ltd. in Quebec City.
Reuter reports the grain sold for $87 to $92 (U.S.) a tonne, cost, insurance and freight, basis Quebec City. That is $8-$13 a tonne less than Canadian feed wheat at Thunder Bay, Ont.
The situation is attributable to four things.
Although barley prices seem low, demand from the Western feeding industry has kept values here higher than world prices.
Second, ocean shipping rates are now low for vessels out of the Black Sea.
Third, continuing economic problems in the former Soviet Union countries make meat expensive so the livestock herd is rapidly shrinking, reducing feed grain demand.
Consumption of fodder grain in Russia has dropped by more than nine million tonnes over two years to 40.2 million tonnes last year. Subsequent low domestic prices make the export market more attractive.
Finally, there was a sizable feed grain harvest in the region last year. The United States Department of Agriculture estimates 1997-98 production at 68 million tonnes and exports of 3.3 million tonnes.
For 1998-99, it projects a smaller harvest of about 61 million tonnes and exports of 2.8 million, so they should be less of a factor next year.
But Ukraine and other former Soviet countries have proven they can produce more feed than their diminished herds can consume.
They will again have grain available for the world market and we can’t dismiss them.
