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Ukraine's woes regain U.S. corn exports, for now

DANIEL LOOKER 03/04/2014 @ 1:34pm Business Editor

At one time, U.S. corn exports to Egypt and the rest of North Africa had a 90% share of that market. But as Ukraine's agriculture has modernized on its rich soils, American farmers lost all but a tenth of that market--until Russia's president, Vladimir Putin, shook the world by taking over Ukraine's Crimean peninsula.

U.S. Grains Council president and CEO Tom Sleight sees more U.S. corn currently heading to North Africa and expects that the U.S. might regain another 10% to 20% of that market, for now at least.

"We're more competitive in that region than we've been in quite some time," he told Agriculture.com Tuesday.

It's not that corn exports from Ukraine, the world's third-ranked exporter after the U.S. and Brazil, have suddenly stopped. In fact, very little corn goes through Crimean ports. Nearly all of it leaves the Black Sea city of Odessa, Sleight said.

"What we're hearing is that trade and shipping is continuing from Ukrainian ports," Sleight said. Boats are being loaded and contracts fulfilled.

The U.S. is now more competitive because it costs more to ship grain from Ukraine, Sleight said. In the uncertain environment of political tensions that remind some of the Cold War, insurance costs for Ukrainian grain shipments have risen, along with the potential for demurrage, charges for extra delays in loading or unloading grain.

That's adding between $7 and $8 per metric ton of corn, Sleight said, although that added costs change hourly and daily. ($8 would be about 20 cents/bushel.)

The longer term effects of the crisis aren't known. USDA and other analysts had been expecting Ukraine to increase corn production this spring but the question now is "will farmers have access to credit to plant," Sleight said.

"The Russians have withdrawn a major credit package," he said.

Sleight will be watching to see if the U.S., the European Union and others step in to ease Ukraine's financial difficulties and how much farmers will be able to plant.

"I still think there will be a lot of forces in place to protect their production," he said.

And, he shares the concern of nearly everyone who is watching the tension between Russia and an emerging democracy in Ukraine.

"We're willing to compete with Ukraine's corn on normal terms," Sleight said.

And, for American farmers, Ukraine is the perfect lesson that U.S. farmers compete in a marketplace shaped by global events.

"It's a reminder to farmers. They need to watch the headlines. Headlines affect them," Sleight said.

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