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Russia’s war may deprive the world of three Ukrainian wheat harvests

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Russia’s invasion of Ukraine will create a global wheat shortage for at least three seasons by keeping much of the Ukrainian crop from markets, pushing prices to record levels, Ukraine’s agriculture minister told Reuters.

Ukraine, sometimes known as Europe’s bread basket, has had its maritime grain export routes blocked by Russia and faces a maelstrom of other problems, from mined wheat fields to a lack of grain storage space.

“Ukraine will fall out of the market for a long time,” Agriculture Minister Mykola Solskyi predicted in an interview.

“Now we are talking about three wheat harvests at the same time: we cannot take out last year’s crop, we cannot harvest and take out the current one, and we do not particularly want to sow the next one,” he told Reuters.

Ukraine traditionally grows winter wheat, which farmers begin to sow from the end of summer, but producers this year are having second thoughts about sowing that crop because exports are so difficult.

Farmers have already switched to sunflower from corn this spring because oilseeds weigh less per hectare, but sell for more. A similar switch may happen from wheat, said Solskyi.

He said that sunflower and rape were in great demand in Europe, and that these two agricultural crops “will displace everything, clean everything – both wheat and corn”.

“My… personal opinion is that the fall in the area of winter wheat (for the 2023 harvest) in the territory under our control could be a significant percentage,” he said.

Ukraine sowed a total of 6.5 million hectares of winter wheat for its 2022 crop, but only 5 million hectares could be threshed by farmers on government-controlled territory.

That leaves at least 5 million tons of wheat from the remaining 1.5 million hectares in occupied territory that cannot be harvested, Solskyi said.

Even without that shortfall, Ukraine’s wheat stocks could still reach 23 million tons, with domestic consumption at 5 million.

BOTTLENECK

Ukraine used to export up to 6 million tons of grain a month in peacetime, but the blockage of seaports cut the volume to 300,000 tons in March and around 1 million tons in April.

Exports in the first ten days of this month were around half the levels seen a year before.

The government has said it is trying to boost exports through its western border and via small Danube river ports, and Solskyi said the total export volume could exceed 2 million tons in June, up from 1.7 million in May.

But even growing export capacity is not able to ease the huge surpluses that may amount to 55 to 60 million tons of grain and oilseeds combined, and which there is simply nowhere to store.

Solskyi said that in autumn when the corn harvest is over, the shortage of storage capacity could reach up to 15 million tons.

Diplomatic efforts led by Turkey to negotiate safe passage for grain stuck in Ukraine’s Black Sea ports have not produced a breakthrough.

Kyiv has said that Moscow is setting unreasonable conditions, and the Kremlin has said free shipment depends on an end to the international sanctions against Russia.

The conflict has already helped drive U.S. and European wheat futures to record highs this year.

Physical prices have also soared, with Egypt, one of the world’s biggest importers, paying $480 a ton including shipping for wheat in its last tender, a 41% increase from the previous round prior to Russia’s invasion.

“All this is very bad for the rest of the world. They think that in a few months there will be a new harvest, and the war is somewhere far away, or maybe the parties will reconcile, or maybe something else will change,” Solskyi said.

“But what will happen when they come to buy grain in July-August, and they are denied, or the price is $600 per ton?”

(Additional reporting by Gus Trompiz in Paris; Editing by Tom Balmforth and Jan Harvey)

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SourceReuters

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