Ukraine’s unmatched corn crop gains encroach on rival exporters – Karen Braun

Ukraine has been making headlines in the grain markets as traders mull whether geopolitical tensions could threaten exports, but this may not have been a big issue just a couple decades ago when the country’s crops were significantly smaller.

Remarkable developments in Ukraine’s corn output in particular have allowed it to steal export share and potential from traditional suppliers, and the United States has been the most affected.

Today, Ukraine accounts for 16% of global corn exports and 12% of wheat, but the Black Sea country was nearly a non-factor in trade at the start of the century, especially for corn.

None of the crops in the top corn, wheat and soybean exporting countries have grown as quickly in the last decade as Ukraine’s corn. That 140% growth has been driven by expansions in both area and yield, owing largely to better profitability and increasing foreign investments.

Leading corn exporter the United States has been keen to attract China’s business ever since it became the top buyer, but Ukraine appears to be the preferred supplier for now. Ukraine’s non-genetically modified corn is one likely factor.

The United States accounts for one-third of global corn trade, down from two-thirds just two decades ago. U.S. wheat exports in 2021-22 are set for a record low 11% of world exports compared with about a quarter in the early 2000s.

As of Wednesday, Russia claimed it is retreating from the Ukraine border despite Western intelligence suggesting the opposite. The uncertainty has sparked market volatility in recent weeks, especially in global wheat prices, though there is not yet evidence Ukraine’s exports have been or will be disturbed.

SURGING HARVEST

Ukraine produced a record 42 million tonnes of corn in 2021, an unfathomable volume just a decade earlier. This was possible due to a drastic increase in plantings, which has displaced some traditional Ukrainian staples.

As global grain prices rose early last decade, so did corn profit potential for Ukrainian farmers. They have increased corn acres about 90% since then, and the 5.3 million hectares harvested last year are a bit more than in the U.S. state of Iowa.

These same factors along with an intensifying global appetite have led to a 35% growth in oilseed area in Ukraine over 10 years, three-quarters of which is sunflowerseed. Excess crush capacity in Ukraine, which grew to 23 million tonnes in 2020 from 15 million in 2015 and 10 million in 2011, supports its role as the top sunflower oil exporter.

Wheat acres have taken a major hit in the United States as growers expanded corn and soybean plantings, but Ukrainian wheat area has risen about 8% in the last decade as it continues increasing its export market share.

Along with barley, the reduction in area under crops like millet, oats, buckwheat and sugar beets made way for Ukraine’s corn and oilseed boom without giving away space for wheat.

Ukraine’s corn yields have grown about 30% in the past decade compared with 11% in the United States. Corn yields in Ukraine first passed the world average a decade ago, and they now easily surpass Brazil and are becoming competitive with Argentina.

Ukraine also produced a record wheat crop of 33 million tonnes last year, approaching the levels of Australia or the entire U.S. winter wheat crop. Ukraine’s wheat yields have long been competitive with world yields though are recently much larger, and they easily outperform the former Soviet Union as a whole.

Ukraine’s expansion of grain production clearly had a global trade focus as evidenced by the huge increase in the share of crops it exports. Of the major four corn exporters, Ukraine ships the largest portion of its harvest at around 80% annually.

Argentina is close behind at about 73%, but No. 2 exporter Brazil sends about a third of its crop overseas and less than 20% of U.S. corn meets the same fate.

Just over two-thirds of Ukraine’s wheat crop ends up in the export market, similar to Australia and slightly more than Argentina, but below Canada’s average over 70%. That compares with top exporter Russia just below 50% and the United States at 50%.

Except for Russian wheat, those export-production shares for top corn and wheat suppliers have stayed mostly constant in recent decades. But Ukraine began realizing its export potential around the time of the 2008 commodities boom.

Just before that inflationary period, Ukraine was exporting about 20% of its wheat crop and 25% of corn, but those jumped to about 50% in the 2008-09 cycle. Since then, Ukrainian grain has built a reputation among importers for being competitively priced and increasingly reliable.

Karen Braun is a market analyst for Reuters

Tags: Brazil, wheat, Buckwheat, USA, oats, Australia, sugar beet, Ukraine, Argentina, China, Millet, sunflower oil, corn, sunflower