Given the current conflict in Ukraine, the country’s ability to maintain its corn production has been in question. This is crucial for the global corn supply/demand balance as the country typically is a leading producer and exporter.
Will Ukraine’s corn production fall significantly? Has the conflict impacted planted and harvested areas? What can we expect for the 2022-23 marketing year?
In this Agriculture Insights podcast Argus’ Global Editorial Manager for Agriculture Jade Delafraye is joined by Senior Grains Analyst Alexey Yeromin, to discuss Ukraine’s corn crop conditions and the findings from the Agritel crop survey organised in the last week of August.
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Jade: Hello, and welcome to this Agriculture Insights Podcast, where we analyze the forces shaping the all-important global agriculture markets. This podcast is produced by Argus Media, a leading provider of commodity market analysis. This is the first episode of our Back From The Field series, where we discuss the findings from the Agritel crop tours. My name is Jade Delafraye, and I am the global editorial manager for agriculture. In today's episode, I am joined by Alexey Yorumin, our senior analyst for grains and oilseeds in Ukraine, to discuss the findings from the Agritel corn crop tour in Ukraine. So Alexei, let's set the scene. How important is Ukraine as a global corn producer and a global corn exporter?
Alexey: Hello, Jade. So when looking at production, Ukraine is the sixth largest producer of corn after the United States, China, Brazil, the EU, and Argentina. And the five-year average production stands at about 34 million tons, which is about 3% from global corn production. But some of the largest corn producer are in fact, not major exporters, as in the case for China or the EU. Ukraine consumes a lot less corn than it produce so the remaining volumes are viable for exports. When looking at the five-year, average Ukraine exported about 24 million ton per year on average, making it the fourth largest exporter after the U.S., Brazil, and Argentina. Ukraine is also a key corn supplier for China and the EU. For example, in the 2020/21 season, Ukraine shipped about 8.5 million tons of corn to China, where about a quarter of the country still took on imports. As well as about 8 million tons to EU countries which amounted to more than half of the union's current imports. For the 21/22 seasons, the expectation before the conflict started was that Ukraine would export a good 33 million tons. But the start of the conflict of course halted sea exports for several months.
Jade: Understood. It makes sense on the impact of the conflict on sea exports. And obviously, that is something that people are monitoring closely now with the establishment of the grain corridor. But when we talk about the conflict and its impact on Ukraine's agriculture sector, how has it affected planted areas and potential harvested areas?
Alexey: Firstly, I want to say that Ukrainian farmers are real heroes who have continued to do their work despite the conflict. Ukraine's corn planted areas decreased for the 22/23 season with about 4.6 million hectares, some compare it with last year's figure at about 5.5 million hectares, largely because of the conflict and the logistical difficulties faced by farmers. Planted areas decreased in temporary Russian control territories, as well as in fields that remained. Farmers also faced shortage of fields, fertilizers, and funds. Storage space was also constrained as interruption to sea export meant that they could not sell all of their previous harvest. High gas prices, which is a factor for corn as the crop needs to be dried also incentivized farmers to switch to other crops. That said, the main unknown factor for now is what areas will be harvested as a lot of farmers may decide to leave corn in the fields until even spring because of the high drying costs.
Jade: Right. So we will definitely keep an eye on this progress to the harvest when the data starts coming out to see how fast or how delayed the harvest is in certain places. And what about the weather conditions that prevailed for this year's corn crop? Were they favorable to the corn crop?
Alexey: That's interesting. The weather was not typical this season with so messy rains in the east and north of Ukraine, which was favorable for corn crop. But in the south and the west of Ukraine, the weather was hot and dry especially in August which affect the crop. Also some Russia controlled regions, the planting campaigns started later than usual. And farmers really experimented with hybrid seeds. But because this experiment was successful in the north and east of Ukraine, where yields could reach records. Additionally, farmers are hoping for dry weather before the harvest starts, as this can help them reduce drying cost for corn.
Jade: Yeah, it's obvious that high gas and energy prices are a concern for a number of markets, of course, and ours included. Now, let's talk a little bit more about this Agritel crop tour. What is the methodology used to produce the crop tour results?
Alexey: In recent years, our methodology has been based until, is it June, in which we estimate potential yields, and we combine this with survey of farmers located in major corn producing regions. We usually decide on which regions we visit and which farmers we survey basing on our model, which takes into account the largest producing areas but also takes into account historical yield deviation from averages. So the details on our methodology are available for our crop tour clients. Now for this year, we had to adjust our methodology to 100% on farmers survey because of the conflict, of course. And we want to, again, thank everyone who took part in the survey.
Jade: Yeah, it makes sense of course, that we had to adjust our methodology, given the ongoing events, but it's fantastic that so many farmers were willing to share with us their opinion of this year's corn crop. So thank you to them. So let's get to it. What were the conclusions of the Agritel corn crop tour for Ukraine this marketing year?
Alexey: So let's talk about the crop tour results. We expect that about 4.3 million hectares will be harvested this season. And estimate the yield at the national level at 7.06 ton per hectare, which is below last year's yields but still above the five-year average, with yields in the east and north of Ukraine above the last year and global results in the south and the west. Based on our estimates for harvested areas and yields, Ukraine's potential corn production could amount just over 30 million tons, down by around 12 million ton from a year ago. But bare in mind that the country's export capacity will be key for global markets. The majority of grains shipments that have left Ukraine's ports since the establishment of the corridor have been corn cargos. Meanwhile, shipment to the EU are also possible by land but land export capacity is lower. So this tells on Ukraine's shipments since the start of the grain corridor are viable through our agri-market service.
Jade: Understood. So the expectation and our estimate is production of around 30 million tons. Obviously that's lower than the record production that happened last year, but still not that far off the five-year average. Now, obviously everyone is gonna be watching closely what happens with the grain corridor and we'll keep our readers up to date of course. My final question to you is, are there still elements of uncertainty on the Agritel crop tour estimates?
Alexey: Sure. The main uncertainty in our opinion is around harvested areas. As we said early, because farmers may decide to leave corn in the fields until the spring largely because of high drying costs. So our estimates for harvested areas is subject to few revisions. If the harvest is delayed in some regions, the strong yield potential estimate of the north and the east of Ukraine could come under pressure. And that's an element that we'll be monitoring closely in the coming weeks or even months.
Jade: Indeed. We'll be keeping a close eye and hopefully get back in touch with you for an update on this. Thank you very much, Alexei, for joining me today to discuss this fascinating topic. And also one where many uncertainties have accumulated in recent months. Thank you to all our listeners for tuning in. For more analysis, crop tour insights, prices, and much more on grains, oilseeds, and vegetable oil markets, make sure to check out the Argus agri-market service. We'll be back next time with another look into key factors shaping and moving global agriculture markets.
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