Steel harvest: Ukraine’s hardest marketing year delivers, but 2022/23 will be tougher

Ukraine’s marketing year started with huge promise – a country revelling in expectations of record-breaking corn, wheat and barley crops and still supporting sizeable sunflower and oilseed output.

As well, there were growing signs that international export markets would soak up more Ukrainian products than ever before amid record-breaking production, with economies around the world looking to power back after Covid lockdowns.

But at the dawn of the 2022/23 wheat marketing year across the country, the very existence of the country’s agricultural sector is in doubt amid a devastating war that has in its most recent phase clearly targeted agriculture-based logistics, stocks, farms and even fields.

All the promise evaporated on February 24 when Russian forces, using Belarus as a springboard, made a desperate lunge for Kyiv only to be repulsed and send both countries tumbling into an open-ended and hugely destructive conflict.

It had all been so different when the regional wheat marketing year, which runs from July 1 through to June 30, had kicked off.  

The May 2021 version of the USDA’s Wasde report heralded what promised to be a year that cemented Ukraine’s place on the international scene. It pegged corn production at 37.5 million mt from a total coarse grain production of 47.9 million mt, while forecasting wheat production at 29 million mt.

For sunflower, the US agency was confidently expecting high prices to enable farmers to allow “a recovery of sunflowerseed production for Ukraine, Russia, and the EU.”

The most recent version of the Wasde in June 2022 confirms the record-breaking performance - Ukraine’s 2021/22 corn production weighs in at an unprecedented 42.1 million mt, augmented by 10 million mt of barley – itself a 12-year high.

Sunseed was pegged at 17.5 million mt, according to the USDA, a 6% increase on the previous record set just two seasons earlier and a huge 24% recovery on the previous year’s output.

Wheat, at 33 million mt, was another record, surpassing the previous best of 30 million mt set in the year Ukraine achieved independence from the Soviet Union back in 1991.

Export powerhouse

Much of the 2021/22 wheat crop was already in the ground when the initial USDA estimates came out in May 2021. Still, government data released Friday backs up the record-breaking size of the crop and its potent export potential.

The country harvested a record grain crop and met the expectations of record exports - the pace set during the pre-war period was enough to carry it past previous highs.

That meant it was possible to show a year-on-year increase in total grain exports this year compared to the 2020/21 marketing year.

Wheat exports in 2021/22 totalled 18.74 million mt, 12.6% higher than 2020/21 but still 26% below the official estimate.

But that means there are still at least 6.5 million mt of wheat left in stocks.

For barley, the export target was exceeded - total exports reached 5.75 million mt, 36% higher than last year’s figures and also 5% above the ministry’s estimate.

The marketing year for corn has not yet finished - there are two months still to go - but as of July 1 exports total 23.5 million mt, a 2% increase from the same period of last year.

Alongside that, a gradual shift towards improving the quality of wheat has meant Ukraine was no longer relegated to playing a supporting role in the feed wheat market.

Improving protein levels have moved the export dial and meant Ukraine is competing more and more into milling wheat markets.

In 2021, GASC, TMO and Jordan’s MIT were among the tenderers that picked up 26 cargoes of Ukrainian milling wheat - they accounted for 1.3 million mt of product, according to data from the Agricensus Tender Dashboard.

That represented a 53% increase in the number of milling wheat cargoes sold in the 2020 calendar year and a 46% increase in outright volume.

That also came at a time when Russia’s pull was declining – 77 milling wheat positions were sold into tenders in 2020 naming Russian wheat as the origin, a figure that more than halved in 2021 to 34. Export taxes, quotas and rising prices complicated Russia’s export equation.

Volumes also slumped to a still-sizeable 2.4 million mt, but this was well below the 4.5 million mt recorded in 2020, reflecting the effect of the sliding export tax.

Road to war

In January 2022, Egypt’s GASC had again turned to the Black Sea for volume, booking seven positions of which Ukraine accounted for three cargoes, with Russia and Romania completing the line-up. The vessels were slated to load through March.

Ukraine’s volumes, sold by Nibulon and Inerco basis Ochakiv and Chernomorsk, were a full $3/mt below Russian offers at that final tender.

Whether the volumes ever loaded or were delivered is unknown. By March Ochakiv – just south of Mykolaiv – was virtually on the front line of the Russian invasion, while Odesa and neighbouring Chornomorsk hunkered down to await whatever bloody fate lay ahead.

Attention will now turn to the outstanding marketing years of corn, sunflower, rapeseed and soybean while the new marketing year brings the diametrically opposite dynamic to its predecessor – a year clouded by uncertainty and facing profound challenges ahead.

That there is a crop to speak of at all is testimony to farmers’ and government efforts to carry on.

But, with stock levels rising, deep water ports still inaccessible, rail and road logistics fraught with challenges and financing an increasingly major problem, Ukraine’s new marketing year is set to be its toughest ever.