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More to Ukraine’s recent grain export success than meets the eye

Ukraine’s grain exports have recently increased to within striking distance of the year-ago numbers, but that could be a brief phenomenon as the recent harvest is significantly smaller than last year’s record.

Part of the latest success is likely to do with spillover supplies from the prior year that did not get exported during the five months when Ukraine’s seaports were completely inoperable. This is especially the case with corn, as its export season was most disrupted by the Russian invasion in late February.

October grain shipments through Monday of 2.12 million tonnes were just 2.4% below the same period a year earlier. This might be explainable given that October 2021 corn shipments were down 30-40% from the previous two Octobers, just as the record 2021 harvest was coming in.

Additionally, wheat and barley shipments, which typically peak between July and September, were not as strong last year as the crop success might have suggested. Those exports in the first four months of 2021-22 were up about 20% on the year despite a harvest nearly 30% larger, though big volumes in the following months made up for this.

The same happened with corn, as Ukraine’s November and December 2021 exports hit new highs as the new harvest became available. Big volumes were set to continue from at least March through May, but the Russian invasion held those near zero.

Still, Ukraine’s total grain exports for the 2021-22 year ended June 30 rose 8.5% on the year, but 2022-23 is well behind last year’s pace even with the October boost. Some 10.8 million tonnes of grain have been shipped since the 2022-23 season started on July 1, down 35% from a year ago.

Leftover 2021 corn supplies are making a difference in the overall exports as evidenced by an unusually large September corn volume of 2.08 million tonnes, up 45% on the year. Old corn could continue padding near-term corn shipments despite an incoming harvest down 25-40% on the year.

The gap between 2022-23 and 2021-22 grain shipments is closing, having been down 55% at the end of August and 40% at the end of September, but the continuation of this trend will depend on the harvest size, last year’s inventories and Ukraine-Russia relations.

Quality concerns may arise when shipping old grain, especially if storage was questionable, but there have been no known complaints since Ukraine’s first export-deal cargo was rejected by its Lebanese buyer in early August due to the lengthy delay.

Moscow in recent weeks has suggested it might not support a renewal of the Ukraine export deal, set to expire in about a month, with hindrance of Russia’s grain and fertilizer exports the primary complaint. U.N. officials confirmed Monday that talks of the deal’s extension would continue after positive discussions with Moscow.

The export agreement among Ukraine, Russia, Turkey and the U.N. restarted port operations in late July, since then facilitating more than 6 million tonnes in Ukrainian agricultural exports, mostly grain.

Russia’s invasion of Ukraine sent wheat prices to new highs as the two countries could previously account for nearly 30% of global wheat exports. Ukraine is a top four corn supplier.

Concerns have eased since the invasion as global wheat prices are generally near the late February values, though relative to demand, global wheat supplies among major exporters are set for 15-year lows by mid-2023. Ukraine’s next wheat crop may already be in jeopardy on lower area and poor weather at sowing.

In the meantime, Ukraine and Western allies are looking for new ways to distribute Ukrainian grain to the world. A new grain terminal near Hungary’s border with Ukraine began operating on Tuesday, and it is expected eventually to handle a maximum of near 600,000 tonnes per year.
Source: Reuters (Editing by Matthew Lewis)

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