Ukraine’s Ministry
of Agriculture and grain traders have now signed a Memorandum of
Last year wheat
exports ran to 11.3mmt and the year before 9.8mmt, so on the face of it a 16.6mmt
cap shouldn’t come into play but what is actually written in the MoU?
Does it contain caveats that allow the Min of Ag to change the cap without getting the traders around
a table?
I doubt it but it
does make you wonder why the agreed to a limit that is highly unlikely to
be breached anyway.
With the current total
Ukraine harvest about to reach 60mmt the Minister of Agriculture, Oleksiy
Pavlenko is sticking with total exports at 36mmt and domestic consumption at
24mmt saying “these figures provide the appropriate level of food security and
increasing export ambitions".
The important bit there being "increasing export ambitions" as despite Fitch raising Ukraine's long-term foreign currency default rating to 'CCC', the country is desperately short of cash with grain exports being one of the few options to generate income.
Elsewhere rains arrived in the
dry Black Sea regions, probably too little and too late to have much of an effect
in Ukraine but farmers in southern Russia are telling me they had a good
soaking last week with double the amount of rain they had this time last year.
Farmers north of
central Russia are also tell me things aren’t too bad so the issue seems to be around
that central area of Voronezh, Rostov and Volgograd.
(If we have enough
time before snow sets in I hope to go and have a look.)
On a more upbeat
note the Russian PM, Dmitry Medvedev declared this week that Russia will double
its grain export volumes to 35-40mmt by 2020.
Not to be outdone Ukraine’s
Minister of Agriculture also announced this week that Ukraine is capable of
doubling agricultural production when investment in agriculture is increased.
Sounds easy when you
say it fast but considering that collectively Ukraine and Russia account for
around a fifth of the world wheat trade then even a modest increase in production
would have repercussions for grain growers around the world.
It’s also worth
keeping in mind that Ukraine currently limits itself to only using domestic
wheat varieties, many of which are low yielding and predate the revolution (you decide which one).
But a swift change in legislation could readily allow the
import and use of much higher yielding western European varieties with
immediate impact on production.
It’s also worth
keeping in mind that the current Minister is actively focusing on de-regulating
Ukraine’s bureaucratic agriculture sector.
Praemonitus
praemunitus, have a good weekend.