Ukraine: War Slowed Shift to More Corn Acres
Grain production in the Black Sea region is determined by three principal players:
Russia, Ukraine, and Kazakhstan. (Though Kazakhstan is a landlocked country, up until now, most of its grain was exported through Black Sea ports). Grain production in these three countries (as well as exports) is practically stable. In 2013-2014, the three nations produced 38.6 million metric tons (mmt) of corn (1.5 billion bushels). Total grain production, including barley and wheat, was 151 mmt.
There has been a shift in corn’s share from 10% to 25%. Barley, as the coarse grain, has become less and less important. It is difficult to differentiate the grades of wheat (milling or feed) since the standards in the former USSR states are different from the ones used in Western countries. It is typical for governments in the years of poor wheat crop or low quality to manipulate the figures.
Ukrainian corn production for the 2014-2015 marketing year was projected to fall to about 25 mmt, down from 26 mmt the previous year.
Last year, 46% of Ukrainian corn was exported to the European Union (EU). Another 14% of the crop went to Egypt and 11% went to South Korea. The remaining major markets were Japan (7%), Iran (6%), Israel (3%), Tunisia (2%), China (2%), and Syria (1%). About 9% of Ukrainian corn went to other destinations. In 2013, Ukraine began exporting corn to China – 519 thousand metric tons (tmt).
Ukraine remained one of the world’s largest exporters. Last year, the U.S. had 36% of world trade, Brazil had 17%, Ukraine had 16%, Argentina had 14%, and Russia had 3%. Remaining export nations accounted for another 14%.
Russian corn production has more than tripled in the past decade. According to IKAR, Russia’s Institute for Agricultural Market Studies, it was 3.2 mmt in 2005. By 2012, Russia harvested 8.2 mmt. In 2013, it grew 11.6 mmt, and this year, Russia was forecast to harvest 11.7 mmt of corn. Russia’s exports will be down. (See chart at right.)
Traditionally, sunflowers are the principal oilseed used in food in the Black Sea region. Crude sunflower oil, due to its excellent flavor, is used as dressing, while refined sunflower oil is used for cooking and frying. The health benefits of sunflower oil are about equal to olive oil, although its price in the region is about five to six times less than that of olive oil. Ukraine now grows about 11 mmt of sunflower, and all of it is crushed at domestic mills. Domestic consumption of sunflower oil is about 0.5 mmt, while 90% of sunflower oil (crude and refined) is exported. Ukraine is the biggest exporter of sunflower oil in the world, with a market share of 60%.
Ukraine also produces rapeseed (about 2.2 to 2.3 mmt), but almost all of it is exported from Ukraine to the EU (mainly to Poland, Germany, and Austria) for biodiesel production. In recent years, a sharp increase in soybean production in Ukraine was caused by a fast developing poultry industry (and to a lesser extent by the pork industry). In Ukraine, Russia, and Kazakhstan, soybean oil is not used for food and is exported.
Kazakhstan does not export soybeans or soybean oil.
This year’s Ukrainian soybean crop is forecast at 3.5 mmt (128.6 million bushels), with almost half exported. (See table above.)
The main importers of Ukrainian soybeans in the 2013-2014 marketing year were the EU (47% of the crop), Egypt (13%), Russia (11.2%), Turkey (13%), Syria (3%), and Vietnam (3%). Other nations bought the remaining 6%.
Compared with the year before, the EU share decreased from 62%, while Turkey’s increased from 8% to 13%. Soybean oil production in Ukraine in 2013/2014 was 160,000 tons, and exports were 101,300 tons.
The importers of Ukrainian soybean oil in 2013/2014 were the EU (62%), India (7%), Algeria (5%), Iran (5%), Egypt (5%), Morocco (4%), United Arab Emirates (2%), Tunisia (2%), and other nations (8%).
Russia is a net importer of soybeans. (See chart above.) In 2013, Kazakhstan grew only 170,000 tons of soybeans.
The total annual capacities of grain terminals of Russia, Ukraine, and Kazakhstan in the Black Sea region are Ukraine (39.3 mmt), Russia (28.2 mmt), and Kazakhstan (.6 mmt). It is expected that under conditions of peace, in 10 years, the capacity of the Ukrainian grain terminals will increase to 55 mmt. Russia has very little potential to increase its grain terminal capacity for export (a few million tons in the shallow Azov Sea with the necessity to reload grain to big bulkers in the port of Kerch).
Domestic consumption of meat and dairy products in Ukraine is about half of the corresponding consumption in the U.S and the EU. The reason is low income for most of the population due to extreme inequality in national wealth distribution.
Ukraine’s livestock on January, 1, 2014, was 4.5 million head of cattle and dairy cows, 7.9 million hogs, and 230 million head of poultry.
The war with Russia has several negative consequences. The income of the population will decrease. Exports of food to Russia (Ukraine’s main market) will decrease. Any increase in exports to the EU will be very small, and exports to new destinations are unlikely in the short run.
The unpredictable development with Russia practically stops investments in Ukraine, in general, and for the production of food and infrastructure, as well. At the moment, the best that can be expected is a stabilization of the situation.
Three other countries in the Black Sea region must be noted: Turkey, Bulgaria, and Romania.
Turkey. This country produces 4 to 5 mmt of corn and only 130,000 tons of soybeans. Turkey is the big importer of soybean oil – 1.1 mmt in the 2013-2014 marketing year. Turkey exports no oilseeds and imports 2.1 mmt of oilseeds, 52% of which is soybeans. The biggest exporters of soybeans to Turkey are the U.S., Paraguay, and Ukraine.
In 2013, Turkey imported 1.4 mmt of vegetable oils, 45% of which was sunflower oil. The latter was imported from Russia, Ukraine, and Bosnia-Herzegovina.
Soybean oil was imported from Ukraine, Romania, and the U.S. At the same time, Turkey exports soybean oil to Turkish Cyprus, Iraq, and Sudan.
Bulgaria. According to the USDA, corn production in Bulgaria in the 2014-2015 marketing year will be 2.7 mmt. Corn exports in 2013-2014 were estimated at 1.9 mmt, mainly to the other EU countries.
Romania. According to the International Grains Council, Romania’s total grain production in 2014-2015 will be 17.2 million tons. In the 2014-2015 marketing year, corn production is projected to reach 9.25 mmt. Major EU export destinations included Spain (242,000 tons), Italy (194,000 tons), and Greece (102,000 tons). Exports to non-EU countries were greater than expected, as grain operators accessed new markets.
In the 2014-2015 marketing year, corn production is projected to reach 9.25 mmt. Romania exports half of its corn to other EU countries. The main destinations for Romanian corn outside of the EU are Egypt, Israel, Lebanon, South Korea, and Libya.
Soybean production in Romania flourished mainly because of growing GMOs before the country joined the EU. After joining, growing GM soybeans was banned, and now it is unprofitable to grow conventional soybeans.
Romania is a big importer of soybeans (about 500,000 tons a year). The biggest exporters of soybeans to Romania are Brazil, Argentina, the U.S., and Ukraine. In 2013, the port of Constanza handled 17.2 mmt of grains and oilseeds (31% of the total port capacity).
Iurii Mykhailov is editor in chief of Agrobusiness Ukraine.