Export sales of Ukrainian wheat are growing, with more than 2 million tons contracted since the beginning of February, which could be a record supply for the season.
According to the analytical cooperative “Start”, created within the framework of the All-Ukrainian Agrarian Council (AAC), 1.4 million tons of wheat have already been sold in March.
“Traders say that Indonesia is very actively involved in purchases of Ukrainian feed wheat. This Asian country has sky-high prices in the domestic market and is interested in importing grain. The demand price from Indonesia is $260-265/ton CIF,” the analysts said, adding that it is very profitable to export Ukrainian wheat to Indonesia.
According to them, the “fly in the ointment” in these plans is the conflict in the Red Sea, where there is a high risk of shelling of the merchant fleet. This is still a systemic problem that negatively affects trade in the Black and Mediterranean Seas. The risk is holding back Ukrainian traders from fixing their positions in this direction.
“There are expectations in the market that in the second half of March the passage of ships through the Red Sea may stop completely. A logistical solution would be to detour ships by sea through Africa, but this will raise the cost of freight by $10-12 per ton,” Pusk said.
In addition, experts noted that Ukrainian wheat continues to be the cheapest on most international markets.
Last week, Ukraine sold wheat with a protein content of 12.5% to Egypt for $224 per tonne with delivery to the country. For comparison, Russian wheat cost $245 on an FOB basis. Ukrainian wheat is very cheap compared to other grains in the EU, Egypt and Turkey. The trade tries to keep prices low to make it worthwhile to trade on many bases. Price gaps are large, which keeps the CPT market at low levels. Nevertheless, more and more sellers are coming forward on FOB basis for wheat, with many farmers willing to sell at $195 per tonne in the Danube ports. At the same time, on CPT terms, wheat costs $175-188 per ton, and by the end of the week, the price tags may lose another $2 per ton, according to the analytical department of Pusk.
In December 2023, KSG Agro agricultural holding exported 4600 tons of wheat to Spain, the company’s press service reports.
According to the report, the wheat was purchased by grain trading companies.
“In wartime, any export delivery is always a task with many unknowns. However, despite numerous difficulties, we continue to export grain to international markets. In the current most difficult period of Ukraine’s history, the food security of many countries depends on us, agricultural producers and exporters,” said Sergiy Kasyanov, Chairman of the Board of Directors of KSG Agro, as quoted in the report.
As reported, in the first quarter of 2023, KSG Agro exported 4,200 tons of grain crops mainly to Asia and Africa. Deliveries were made as part of the “grain corridor” through the ports of Odesa and Odesa region.
KSG Agro, a vertically integrated holding company, is engaged in pig breeding, as well as the production, storage, processing and sale of grains and oilseeds. Its land bank is about 21 thousand hectares in Dnipropetrovska and Kherson regions.
According to the agricultural holding, it is one of the top 5 pork producers in Ukraine.
In January-September 2023, KSG Agro received $1,336 million in net profit, which is almost 14 times more than in the same period in 2022. Its EBITDA for the three quarters of this year increased by 67% to $4.5 million, and sales revenue increased by 16% to $11.9 million.
The US Department of Agriculture (USDA) has raised its forecast for Ukrainian wheat production in the 2023/24 marketing year (MY, September 2023 – August 2024) by 0.9 million tons to 23.4 million tons and for exports by 1.5 million tons to 14 million tons.
According to the USDA’s January report, Ukraine’s ending stocks will also increase by 1.8 million tons to 4.38 million tons.
For corn, the USDA left the harvest, exports and ending stocks in Ukraine unchanged: 30.5 million tons, 21 million tons and 6.82 million tons respectively.
In general, the updated global wheat crop forecast for the 2023/24 grain year was improved by 1.9 million tons to 784.91 million tons, due to the positive revision of estimates for Ukraine and Russia, while the forecast for China was lowered. The forecast for global wheat exports was also raised by 2.35 million tons to 209.54 million tons. The experts also revised the forecast for global wheat ending stocks upwards by 1.83 million tons to 260.03 million tons.
For corn, the forecast for global production in January was raised by 0.0137 million tons to 1.235 million tons, while exports were lowered by 0.57 million tons to 200.89 million tons. Ending stocks will rise by 10 million tons to 325 million tons.
Bulgaria has authorized licensed imports of Ukrainian sunflower, rapeseed, corn and wheat, according to the website of the Ministry of Agriculture and Food of Bulgaria.
According to the report, during an online meeting on Friday, the Ministers of Agriculture of Bulgaria and Ukraine Kirill Vatev and Nikolay Solsky agreed to implement a licensed export regime for sunflower, rapeseed, corn and wheat seeds and agreed on the details of its application.
“The Ministry of Agriculture and Food has kept its promise to limit imports of these agricultural products as much as possible until November 30, according to the Memorandum signed between the government and the Initiative Committee of Protesting Farmers,” the Bulgarian ministry quoted Minister Vatev as saying.
He emphasized that after this period, the two countries will “strictly monitor that there are no market distortions and that the interests of Bulgarian producers, processors and consumers are not undermined.”
Imports and data exchange between the two countries will continue, the Bulgarian ministry emphasized.
As reported, in November 2023, the Minister of Agrarian Policy of Ukraine Solsky expressed the opinion that Bulgaria, which refrained from imposing a unilateral ban after September 15, could become the first frontline country to lift the ban on Ukrainian agricultural products.
In his opinion, the crop that Bulgaria will be ready to import from Ukraine will be sunflower. In Bulgaria, in the fall of 2023, a compromise was reached between farmers and processors to open the market for imports of Ukrainian sunflower from December 1. By this time, local sunflower oil producers, according to the Bulgarian government, will have to buy back the sunflower seeds produced by farmers, and they will need an additional 1.5 million tons of raw materials.
Earlier, Stepan Kapshuk, head of the industry association Ukroliyaprom, told Interfax-Ukraine that Bulgaria has 16 oil extraction plants that have significantly increased production in the 2022 season and intend to develop sunflower oil exports using sunflower seeds imported from Ukraine.
On September 15, the European Commission announced that it would not extend the restrictions on imports of agricultural products from Ukraine to five neighboring EU countries (Poland, Bulgaria, Hungary, Romania, and Slovakia) under certain conditions that will help avoid a new sharp increase in supplies.
The restrictions were introduced on May 2, 2023, and applied to imports of wheat, rapeseed, sunflower, and corn. These five Eastern European EU member states argued that Ukrainian agricultural products, when imported duty-free into the EU, were being deposited in their countries and were harming their local agricultural sectors.
After the restrictions were lifted, Poland, Hungary, and Slovakia imposed unilateral bans. Poland expanded its list of banned products to include rapeseed cake and meal, as well as corn bran, wheat flour, and derivatives. Hungary extended the list to 24 commodity items.
Ukraine filed a lawsuit with the WTO, accusing Poland, Hungary, and Slovakia of discriminatory treatment of its agricultural products.
Ukraine is currently negotiating a mechanism for licensing exports of Ukrainian agricultural products with mandatory verification in each of the five countries.
In early October, IMC Agro Holding completed sowing of winter wheat for the 2024 harvest on 20.3 thou hectares, the company’s press service reported on Facebook.
According to the report, the warm and dry weather in September allowed IMC to sow all the planned areas with winter wheat, and the precipitation in the second decade of October helped to get friendly winter shoots.
In addition, at the end of the second decade of October, the agroholding completed threshing sunflower on an area of 32.1 thou hectares, harvesting 92.7 thou tons with an average yield of 2.9 tons/ha.
At the same time, the yield on the land in the north of Chernihiv region, which was not cultivated last year due to the occupation and the subsequent need to inspect for explosive devices, amounted to 2.2 tons/ha. On the rest of the IMC areas in Chernihiv, Sumy and Poltava regions, the sunflower yield amounted to 3.3 tons/ha.
“As for the sunflower harvest, its average yield is not a record for IMC, given the above-mentioned objective reasons, but nevertheless, the total yield and quality of sunflower give hope for its successful sale for processing,” said Oleksandr Verzhykhovsky, Chief Operating Officer of IMC.
As reported, in the 2023 season, IMC obtained a record average winter wheat yield of 7.1 tons/ha, which was the highest result in the 25 years of the agricultural holding’s operation. The company allocated 33.3 thou hectares for the crop, from which it harvested 236 thou tons of grain.
“IMC specializes in growing grains, oilseeds and milk production in Ukraine. It cultivates about 123.3 thousand hectares of land in Poltava, Chernihiv and Sumy regions. It has storage capacities of 554 thousand tons of grains and oilseeds.
In January-March 2023, IMC Agro Holding posted a net loss of $4.10 million, down 2.6 times year-on-year, largely due to higher logistics and distribution costs. The holding’s revenue increased by 11% to $41.96 million, of which exports accounted for $35.03 million. IMC’s gross profit grew 3.9 times to $8.60 million due to lower costs. Due to a twofold increase in logistics and distribution costs (up to $9.40 million), the company recorded an operating loss of $2.85 million, which is twice as good as in the first quarter of 2022.
The U.S. Department of Agriculture (USDA) has improved its forecast for Ukraine’s wheat harvest in the recently started 2023/24 marketing year (MY) from 21 million tons to 22.5 million tons, and for corn from 27.5 million tons to 28 million tons due to larger than expected planted areas and the second-highest yields on record.
In its September forecast, the agency also raised its wheat export estimates from 11 million tons to 11.5 million tons, while corn exports remained unchanged at 19.5 million tons.
The USDA raised its domestic consumption forecast for wheat from 8.1 million tons to 8.8 million tons, while maintaining its forecast for corn at 5.5 million tons, and at the same time raising its carryover forecast to 4.43 million tons from 3.89 million tons.
In general, the global wheat harvest forecast for 2023/24 MY has been lowered by 56 mln tonnes to 787.3 mln tonnes, which is 3.25 mln tonnes less than last year, due to the decrease in production in Australia, Canada, Argentina and the EU, which will not be compensated by the increased production of Ukraine.
The forecast of world wheat trade was also downgraded by 2.1 million tons to 207.3 million tons compared to 219.9 million tons last year due to the decline in production in the above countries, which is only partially offset by the growth of activity in Russia and Kazakhstan.
The USDA noted that such annual decline in the world wheat supplies is the first since 2018/19 MY. The agency also expects the reduction of the global carry-over stocks by 7 mln tonnes to 258.6 mln tonnes, which will be the lowest level since 2015/16 MY.
