Originally published in AgroTimes.

The stable operation of the Ukrainian export corridor has significantly boosted the country’s agricultural exports, which have accelerated by more than a quarter in the first nine months of this year. In total, 48.9 million tons were exported in the first three quarters of 2024, with 42.3 million tons being grain crops. Prices for Ukrainian grains and oilseeds have risen compared to previous years, setting new records.

Corn Frenzy

This season has been particularly unique, as Ukraine started the marketing year with the lowest corn stocks in eight years. This is reflected in the relatively slow shipments in September and October. For example, in September, the country recorded its lowest monthly export volume in four years, shipping only about 500,000 tons.

As of mid-October, Ukraine harvested about 14 million tons of corn, with approximately 900,000 tons exported.

At the same time, corn prices continue to rise, nearing peak autumn levels. A major driver behind this price surge was Turkey’s move to the global market to purchase 1 million tons of corn under reduced import tariffs, aiming to lower domestic feed prices.

Despite these market movements, Ukrainian farmers have been in no rush to sell their new corn harvest. This hesitation is largely due to the adoption of more cost-effective technologies in response to past challenges. Additionally, farmers have benefited from preferential loans and loyalty programs, easing financial pressure and allowing them to revert to more typical sales cycles. As a result, corn supply has been delayed.

Moreover, corn cultivation areas have decreased this year, while soybean and rapeseed plantings have expanded. Farmers typically sell these oilseeds quickly to meet their financial needs, reducing the urgency to sell corn.

These factors have converged to create significant changes in market participants’ behavior.

This year, Ukraine expects to export 19-20 million tons of corn. To ensure a smooth flow of exports, 8-9 million tons need to be shipped by the end of the year.

Currently, Turkey is the primary market for Ukrainian exports as of early October. However, Ukraine still needs to find buyers for an additional 7-8 million tons of corn in Europe, Africa, and Asia by year’s end, which presents certain challenges.

Asian markets remain relatively inactive. China, for instance, has its own production and is expected to enter the Ukrainian market only after the New Year. This is evident from exporters’ lack of demand for Chinese certification.

Africa’s market is somewhat saturated due to active consumption, so this region will likely see increased demand for Ukrainian grain starting in January 2025.

In Europe, interesting structural changes are taking place. This year, EU imports of American corn have surged almost tenfold, with U.S. corn now accounting for 20% of total imports. As Ukraine holds back its own corn sales, European markets are turning to alternatives, replacing Ukrainian grain with American or Brazilian corn, which is significantly cheaper. This creates substantial competition in Ukraine’s traditional markets. Without access to the European market, Ukrainian exports may struggle to balance and maintain favorable prices.

In terms of prices, as of mid-October, sales to Turkey were $10-15 higher per ton than those directed toward Europe. However, a downward trend in corn prices is expected in the near future.

Wheat Dilemmas

Feed wheat prices are somewhat linked to those of food-grade wheat but have a stronger correlation with corn. In Europe, the most flexible market, there’s an unwritten rule: the price of feed wheat should not exceed corn prices by more than €10. When it does, buyers tend to switch to corn due to cultural, technological, and industrial habits that tie the two crops together.

In August-October, corn prices rose. Now, with the market filling up with new harvest corn, competition and price pressure are increasing. As a result, feed wheat prices have stabilized and are beginning to adjust in response to corn prices.

Recently, corn prices dropped by about $10 per ton, while feed wheat fell by roughly $8 per ton, showing a close correlation. Meanwhile, the price of food wheat has remained unchanged. In early October, prices for food and feed wheat were almost identical due to difficulties in selling high-quality grain on the international market.

Europe’s wheat market is largely self-sufficient. Year after year, the balance between feed and food wheat shifts, but this market remains relatively self-sustaining. Food wheat volumes are balanced, making European buyers more interested in Ukrainian feed wheat.

Africa also poses challenges. Historically, it has been a major market for Russia, and this year Russian wheat exports there have increased even further, depressing prices and preventing any upward movement for food wheat.

While wheat prices have stayed relatively stable due to the drop in corn and feed wheat prices, the typical price difference between food and feed wheat has returned, currently standing at about $10 per ton.

As of October 15, Ukraine had exported nearly 7.5 million tons of wheat, primarily for feed.

Meanwhile, domestic millers are struggling to meet their needs as farmers are holding onto food-grade wheat, hoping for higher prices. However, no price increases are expected due to external market conditions, with Russian wheat exerting downward pressure on nearby markets. Farmers are holding out, expecting prices to rise to $240-250 per ton.

Ukraine is a net exporter of agricultural products, which influences farmers’ relationships with market participants. Farmers primarily focus on the export market, where exporters largely dictate domestic prices. Processors, in turn, look to exporters when setting their prices. However, this dynamic often leads processors to seek food wheat in distant regions rather than building long-term relationships with nearby farmers. Investing in these relationships would simplify access to high-quality wheat.

To ensure quality and quantity, processors need to invest in technology and offer farmers guaranteed prices that cover their costs and risks, including weather-related factors.

However, millers prefer to purchase quality wheat without investing in stable relationships with farmers, often relying on administrative measures like export restrictions.

The Oilseed Trio

The Ukrainian market is increasingly focusing on oilseeds, with soybean and rapeseed production expanding due to their profitability in recent seasons. This growth drives the development of domestic processing.

However, processors must also compete with exports. In 2024, Ukraine harvested around 3.6 million tons of rapeseed. By mid-October, approximately 2.5 million tons had already been exported to the EU, and the remaining 1 million tons will likely follow. As a result, domestic processors, unable to secure enough rapeseed, have shifted to soybeans and sunflowers.

The soybean harvest is expected to reach 5.4-5.5 million tons (compared to 4.7 million tons in 2023). Domestic processing in 2024 is projected to handle about 2 million tons as processors seek to avoid downtime caused by the rapeseed shortage.

Soybean prices have remained stable at around 18,000 UAH per ton for several months, with no immediate price increases expected. Meanwhile, sunflower prices continue to rise this season. Over the past month and a half, the oilseed has increased by 8,000 UAH per ton. This price surge has led farmers to hold off on selling large quantities, putting processors in a difficult position: to secure raw materials, they must pay higher prices, further fueling price increases.

Processors are also holding back on selling sunflower meal and oil. With a smaller oilseed harvest in Europe this year, Ukraine has become a key supplier for neighboring countries, leading to record prices for sunflowers and processed products. It’s likely that these records are not the last we’ll see.

Author: Oleksandr Solovey, Commercial Director of SPIKE BROKERS