A scandal is brewing on the Ukrainian grain market. Today, during the 5th international conference "Grain Forum," analysts confirmed their forecast that the gross harvest of all grain and leguminous crops in the upcoming marketing year (MY) will amount to 32.7 million tons. This decline will occur mainly due to a decrease in the wheat harvest.
At the same time, Deputy Minister of Agrarian Policy Serhiy Melnyk said at a meeting in Poltava Oblast that the Ministry of Agrarian Policy confirmed its forecast for the gross grain harvest in Ukraine at the level of last year's harvest (which is 38 million tons). According to him, the gross wheat harvest this year will amount to 14 million tons, which will fully ensure the state's food security.
Experts say that about 12 million tons of wheat will be harvested in 2006. The yield of this grain will be 24 centners/ha (in 2005, these figures were 18.7 million tons and 28.5 centners/ha, respectively). This year's harvest may turn out to be the smallest in the last 6 years (not counting the disastrous 2003). Sown areas under winter crops have been reduced, and furthermore, part of them froze out in January-February. But it will also be necessary to take into account that no more than half of the food wheat (3rd class grain) will be harvested. Since monthly consumption in Ukraine fluctuates within 500-600 thousand tons of food grain, imports of grain suitable for baking bread will amount to no less than 1 million tons.
At the same time, grain exports will continue. The previously announced licensing of sales (which would have reduced exporters' profits) to foreign markets has not been introduced. Specialists say that about 2 million tons of wheat will be sold under export contracts. But this year there will be no cheap imports: At best, Ukraine will have to buy wheat at a minimum of $150/t.
Over the past week, the price of American wheat rose by $10/t and for the first time since October 2002 surpassed the $200/t mark. Market conditions played a role, including increased demand for feed in Europe after the easing of the bird flu threat and the falling dollar. But this is what concerns grain in the current MY. As for the future harvest, expectations are very tense. The world wheat balance in 2006/07 MY will most likely turn out to be lower than last year's.