You're reading: No new records expected in this year’s grain harvest

Political turmoil, currency fluctuations and loss of territory will prevent major Ukrainian grain producers from enjoying another banner year. Analysts expect the grain harvest this year to reach 54-56 million tons, 12 percent down from last year’s record of 63 million tons.

Statistics do not include forecasted Crimean yield figures because Russia has annexed the peninsula.

The weather is expected to be less favorable to farmers than in 2012-2013. Other reasons for the drop in production include ongoing droughts in the more arid southern regions, and a smaller planted area linked to rising input costs – like fertilizers, seeds, plant protection agents – for some  producers.

Wheat yields will reach just 18.4-20.7 million tons, down 10 percent, while corn will be 24-25 million tons, or about 20 percent less than the record 31 million tons produced in 2013, foresees the French agriculture company Agritel. Barley should be the only gainer, rising by 2 percent this year to around 7.7 million tons, largely on account of the lower cost of raising this crop and diversification efforts of farmers.

Ukraine is the global leader in sunflower production and ranks near the top six for wheat and corn.

The U.S. Department of Agriculture predicts that Ukraine’s sunflower crop will be 10 million tons, a drop of 13.8 percent. This is understandable considering Ukraine’s record sunflower crop last year of 11 million tons that was already 32 percent higher than in 2012 and the expected poorer weather.

Grain was responsible for just over 10 percent of Ukraine’s total exports in 2013, earning a whopping $6.4 billion, according to the Revenues and Duties Ministry, and 38 percent of all agricultural exports. Export volumes are not likely to change much this year, experts predict, although revenues may be higher. Since November the average global price for high grade wheat has risen by 7 percent and corn by 48 percent, reports APK-Inform.

“We believe that, despite all the political upheavals and in the absence of an (emergency) situation, most leading agricultural holdings will finish 2014 with profitable financial results,” says agriculture analyst and partner Mykhailo Melnyk of global auditor Deloitte.

He believes the Crimean situation should minimally affect companies. Two major agriculture producers, however, have assets on the peninsula. Warsaw-listed KSG Agro’s land in Crimea exceeds 10 percent of its total land bank, while UkrLandFarning owns two egg processing plants there and farms 12,500 hectares, or 2 percent of its total bank.

Crimea accounted in 2013 for just 2.6 percent of the $31.6 billion that agriculture contributed to Ukraine’s gross domestic product, according to the Ukrainian Agrarian Conference. Crimea punches above its weight in grape growing, which goes into viniculture, at 20.6 percent of Ukraine’s total, and in fruits and berries.

Agriculture companies insist that the political turmoil has not influenced them. Kernel, one of the biggest local producers whose operations lie mainly in southern Ukraine, stated in its operation report published on April 18: “Since the severe political crisis in Ukraine that began in November, the company to date has been operating in a normal course of business both in Ukraine and Russia.

Ukrlandfarming Chief Financial Officer Natalia Smolyanets (standing) describes the various locations of company farms divided into 12 clusters that it tracks using real time data feeds. (Pavlo Rodufalov)

None of the other leading grain producers the Kyiv Post contacted admitted to any serious disruptions. Holdings in the restive Donbas report taking extra security measures, however.

The ​31​ percent decline in the Ukrainian national currency this year  – to Hr 11.9/$1 – is a boon for grain exporters. Some 40-60 percent of their inputs are denominated in hryvnia – rents, labor, some equipment and fertilizers, but their export revenues come in dollars, making these inputs cheaper, according to analyst Ivan Dzvinka of Eavex Capital. Other inputs, such as seed and fuel, are denominated in dollars.

In addition, unsold grain from last year’s harvest earmarked for domestic sale will bring a windfall if sold today.

The weakness of the hryvnia has raised the revenue of crop export sales in local currency terms. For instance, Kernel reported double grain sales revenue in the first three months of 2014,  partially supported by strong exports.

Sugar, grain and oilseed producer Astarta also reported a 10 percent rise in sales so far this year.
The improving outlook for Ukrainian grain producers is reflected on the Warsaw Stock Exchange, where most of these companies are traded. The WIG-Ukraine Index, which includes Kernel, Astarta and five other agriculture companies, has recovered 20 percent from its record low on March 14, after sinking like a stone from its Oct. 22 record high.

Kyiv Post staff writer Evan Ostryzniuk can be reached at [email protected].