FORT COLLINS, (Colo.): Ukraine has significantly climbed the ranks in grain exports over the last decade, this year aiming for No. 3 in wheat and No. 4 in corn, though the latest conflict with Russia has instilled fear in markets over whether Ukraine’s export efforts can succeed.
The timing of this potential export disruption is poor since the world is still trying to recover from last season’s historic supply tightness and multiyear-high prices across all grains and oilseeds.
Traders have clearly expressed their nervousness. At Tuesday’s close, Chicago wheat futures were up 5% so far this week, hitting two-month highs, and Paris-based Euronext wheat rose more than 6% to one-month highs.
Russia has amassed 100,000 troops on Ukraine’s borders, but Moscow denies planning an invasion. NATO on Monday said it was putting forces on standby and major energy-producing countries are discussing the protection of energy supplies, but Ukraine’s leader urged calm in a televised address Tuesday.
It is uncertain how exports might be affected, if at all, should the conflict escalate. Although not a direct comparison, the Russian occupation of Ukrainian territory eight years ago did not necessarily hamper grain exports, though the destabilization in Ukraine’s currency raised crop worries.
Global food security is of top concern if Ukraine’s exports are disturbed as much of its grains are destined for Middle East and African nations that depend heavily on imports. Recently, more than 40% of Ukraine’s annual corn and wheat shipments have headed to the Middle East or Africa.
By comparison, the United States’ proximity disadvantage means less than 10% of its corn and wheat exports set out for those regions. Historic droughts in the Middle East and North Africa last year have exacerbated grain needs with rising domestic food prices and lingering shortage fears.
Grain exports are a cornerstone of Ukraine’s economy. The country this year is expected to export more than three-fourths of its domestic corn and wheat crop. That compares with one-fifth for the United States.
Ukraine is increasingly important for oilseeds as it accounts for half of the world’s sunflower oil exports and is the No. 3 rapeseed exporter. Many global oilseeds, particularly vegetable oils, have hit record-high prices within the last year.
This year, Ukraine is predicted to account for 12% of global wheat exports, 16% for corn, 18% for barley and 19% for rapeseed.
As of last Friday, Ukraine’s grain exports since July 1 were up 28% from a year ago and up 6% from two years ago following a record 2021 harvest. The country’s wheat shipments usually peak in August or September, but more than half of Ukraine’s expected corn volume must be shipped in the next five months.
Much of that corn is destined for China, as Ukraine was its top supplier before the United States took over last year. It is unknown whether China is confident in fulfilment, but there have not been significant Chinese purchases of US corn since May, signaling it is not yet seeking alternatives.