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Ukraine: Grain and Feed 2008

Prepared by:
Olena Pereyatenets, Agricultural Specialist

Report Highlights:
Grain and pulse production is expected to increase by 20% over the previous year and will result in an increased export surplus of wheat, barley and corn. Feed and food consumption is predicted to remain relatively stable. The export quotas limiting exports of grain are expected to remain in place through marketing year 2007/2008. The Government of Ukraine (GOU) is again expected to intervene in the grain markets during marketing year 2008/2009.

Executive Summary

Grain and pulse (wheat, barley, corn, rye, oats and peas) production in Ukraine are expected to increase by about 20%. The increase in grain production will be propelled by a 36% increase in wheat production. If the government decides not to implement new export quotas on grains for marketing year 2008/2009, then the increase in production will result in higher exports (wheat, barley and corn). Consumption of grains for feed and food is expected to increase slightly due to increase of poultry inventories.
The Government of Ukraine (GOU) can intervene in the grains market in marketing year 2008/2009 by:
— Purchasing wheat (mainly milling wheat) through the Agrarian Fund;
— Monitoring and possibly controlling the volume of grain exports during the first quarter of the marketing year (July-September);
— Monitoring and regulating grain prices during the beginning of the marketing year, especially for wheat and barley.

Most grain experts expect the GOU will continue to intervene in the grain market for several reasons. First, the presidential elections will take place in 2009 and grain is always a political issue. Second, candidates always use prices for sensitive items like meat and bread as political issues so there will be an attempt to lower prices for these commodities leading up to the election. Third, GOU is strongly convinced that by keeping grain prices lower, they will be able to insure stable meat and bread prices and put downward pressure on inflation.

Production

In 2008, wheat production is expected to increase by nearly 36%, over the previous year. The expected good harvest will be a result of the 10% increase in the winter wheat sown area (0.7 million hectares), minimal winter-kill losses due to the mild winter, lower then expected frosts and higher than average yield expectations.

Winter weather conditions in December 2007 through February 2008 were exceptionally mild. The average temperatures from September 2007 through mid February 2008 were 2 degrees higher then the historical average.

Temperatures in January and February were also abnormally high. The average nighttime temperature ranged between +2 degrees to -5 degrees Celsius. The average daily temperature ranged between +5 degrees to -2 degrees Celsius. Only once in three months did the temperature drop to -10 to -15 degrees Celsius resulting in a frost during the night. The frost caused minimum damage to the crops due to sufficient snow cover (from 2 to 5 centimeters) during those days. The estimated losses in the winter wheat sown areas are expected to be about 5%.
According to the Ukrainian Meteorological Center, 90% of the winter crop is categorized as «good» or «satisfactory». Only 10% is categorized as «weak» as of February 2008. These indicators are good when compared to the past four years (the comparisons were taken between February 15 through 20):
February 2008 — 90% is in good or satisfactory condition. 10% is weak;
February 2007 — 91% is in good or satisfactory condition. 8% is weak;
February 2006 — 70% is in good or satisfactory condition. 30% is weak;
February 2005 — 89% is in good or satisfactory condition. 11% is weak;
February 2004 — 98% is in good or satisfactory condition. 2% is weak;

Consumption

Increased wheat production in 2008 will result in slightly higher wheat consumption when compared to marketing year 2007/2008.

The charts below clearly show the strong upward trend in compound feed production. The increases began during marketing year 2001/2002 and production continues to increase by an average of 30% per year. Compound feed production in July-November 2008 increased 24% over the same period last year.
Flour production has been on a downward trend for the past two years due to the close linkage between flour production and the wheat harvest, and the government's control over bread prices.
Flour production increased 8% in marketing year 2007/2008. This means the industry's consumption of wheat will remain relatively stable for marketing years 2007/2008 and 2008/2009.
The increase in consumption of feed wheat is probable due to expansion of poultry production. Monthly poultry inventories increased by 1-5% in 2007.

Date:  28.03.2008

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