Ukraine is expected to reappear in wheat export markets this year, but nothing like 2002-03 when it came out of nowhere to become one of the top exporting regions in the world.
Market analysts project Ukraine’s coming wheat crop will be 13-16 million tonnes, which would be the first average wheat harvest in the past four years.
Fred Siemens, manager of commodity markets services with Meyers Norris Penny, just returned from a trip to Ukraine working on behalf of the Canadian International Development Agency.
He said winter wheat, which represents more than 80 percent of Ukraine’s wheat production, has emerged in reasonably good shape.
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“They would be expecting an average crop, average to slightly above average.”
That would be something Ukraine’s growers haven’t seen in a long while. Last year’s 3.8 million tonne crop was the worst on record.
“When the wheat came up it had rain and the rain froze so it was sitting in ice. Whatever wheat managed to survive that and germinate, went through an extended period of drought,” said Siemens.
Nearly two-thirds of last year’s 16.6 million acre winter wheat crop suffered from winterkill, compared to five percent of this year’s 13.6 million acre crop, according to a report from the U.S. embassy in Kiev.
By all accounts, the 2003-04 crop year was disastrous for Ukrainian grain farmers. But before that they harvested two straight bumper crops of 21.3 million tonnes and 20.6 million tonnes.
Along with other former Soviet countries, Ukraine sent shock waves through international grain markets in 2002-03 when it exported record amounts of wheat, making inroads into markets considered the domain of Canada and Australia.
The unexpected tidal wave of low quality grain from the Black Sea region dampened world wheat prices and made headlines in farm newspapers around the globe.
Some people wonder if Ukraine will do to wheat what Brazil has done to soybean markets – fundamentally change the market dynamic. But analysts say that is unlikely for a variety of reasons.
The situation of two years ago was a happenstance where the Black Sea region’s record harvest coincided with crop failures in other major wheat producing regions.
“It was an anomaly because there was so little wheat available in North America and Australia to go into traditional destinations,” said Canadian Wheat Board market analyst Peter Watts.
“All the stars kind of lined up right for them.”
The country usually exploits the shipping advantage of its year-round access to the Black Sea to send grain to mills in the Middle East and Africa and feed markets in the European Union. But in 2002-03 it was able to export crop into non-traditional markets like Brazil, Peru and Indonesia.
“There were some unusual destinations for Ukrainian wheat,” said Watts.
He expects wheat markets to return to normal this year, with Ukrainian exports projected at 1.5 million tonnes compared to the 6.5 million tonnes shipped in 2002-03.
Watts sees significant production potential in Ukraine. Winter wheat yields average 37 bushels per acre, but with proper inputs and better varieties, farmers there could exceed the 76 bu. per acre achieved in France, which has similar growing conditions.
“Producers in (Ukraine) will literally be able to double or more than double their yields in the long term. The question is how long does it take to get there.”
The answer is a long time, according to Siemens.
“It’s going to be generations before they actually get their act together.”
The country is blessed with rich, black soil capable of delivering yields similar to Manitoba’s Red River Valley, he said. It has a lot of idle land that could be brought back into production and a significant freight advantage to many important markets.
But the highest grade of wheat Ukrainian farmers can produce is a No. 3 and, based on seed technology and agronomic practices, that’s not going to change for the foreseeable future, said Siemens.
“I certainly wouldn’t lay awake at nights thinking they are going to overtake (Canadian) markets.”
