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Ukraine’s Wheat Price to Remain Low to Compete With Russian Crop

UkrAgroConsult, 22.09.17


Ukrainian wheat prices may have to remain low to compete against Russia’s record harvest and less demand from major buyers.

While Ukraine is expected to produce another hefty crop, albeit smaller than last season, Russian output is set to jump 12 percent, U.S. government data show. Export prices for Ukrainian wheat, near the lowest this year, were slightly cheaper than supplies from rival shippers Russia, France and Germany as of the end of last week.

A big problem for Ukraine may be where to offload grain. The Agriculture Ministry expects shipments to Egypt, traditionally one of its main buyers, to decline as it struggles to satisfy higher protein-content requirements. The country is also unlikely to repeat the kind of sales it made last season to India, which became its largest buyer after suffering from a terrible crop. With output rebounding, the Asian country has less need to import as much.

“Import needs from some of the key buyers are shrinking but supply is fairly heavy due to Russia,” said Stefan Vogel, head of agricultural commodities research at Rabobank International in London. Ukraine “needs to find a way to remain competitive and the only way to do that is through prices,” he said.

Wheat prices in Ukraine were at $183 a metric ton as of Sept. 15, compared with $186 for Russian grain, according to data from UkrAgroConsult and the Institute for Agricultural Market Studies. While Ukraine’s wheat exports slowed about 15 percent so far this season, Russia’s have accelerated.

Ukraine will probably sell 2 million to 2.5 million tons of the grain this season to India, according to Marina Sych, an analyst at Kiev-based UkrAgroConsult. That’s down from 2.9 million tons in 2016-17. Indian millers typically favor Ukrainian quality over Russian.

To make up for reduced sales, Ukraine may look to supply more to Indonesia, Bangladesh and Thailand, with exports to Bangladesh alone possibly climbing 18 percent this season, Sych said. Asian countries may be forced to ship in more from the Black Sea area this season after droughts hurt crops in North American and Australia, their top suppliers.

Ukraine’s Agriculture Ministry this month said it expects lower sales to Egypt for “at least a season” after the North African country’s state buyer raised its protein content requirement to 12.5 percent, a level that Ukraine may find harder to match than some other nations.

But the impact may be limited because the bulk of Egypt’s imports of Ukrainian wheat are conducted by private firms, who can have lower protein requirements than the state-run General Authority for Supply Commodities, according to UkrAgroConsult.

GASC accounted for less than one-fifth of Egypt’s purchases from Ukraine in 2016-17, the consultant estimates.

GASC’s new stance on protein may benefit Russia, which has already doubled shipments to Egypt so far this season. All the wheat bought in GASC’s latest tender was from Russia, with no Ukrainian supplies being offered.

“With Ukraine already struggling to meet General Authority for Supply Commodities specifications, Russia looks like it could well have a monopoly in the coming weeks,” AgResource said in a report last week.

Source: UkrAgroConsult

https://hellenicshippingnews.com/ukraines-wheat-price-to-remain-low-to-compete-with-russian-crop/



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