Grain Exports Pouring Out Of Desperate Ukraine

Nogger reports that Grain Exports Pouring Out Of Desperate Ukraine.

(emphasis mine) [my comment]

Wednesday, 14 October 2009
Grain Exports Pouring Out Of Desperate Ukraine

Despite an anticipated fall in grain production of around 20% this season, cash-starved Ukraine continues to export grain ahead of even last season's record pace.

Up to Oct 13th over 7.5 MMT of grain (just over 4 MMT of it wheat) had been exported in the current marketing year which began on July 1st, according to Ukrainian Agriculture Minister Yuriy Melnyk. That's 240,000 MT more than at the same time a year ago.

This season's grain harvest will total 42.9 MMT,
said Melnyk, down sharply from 53.5 MMT a year ago. Exports in the current marketing year will total 16.69 MMT he said, a third lower than the 25.2 MMT exported last season.

That means that
just fifteen weeks into the marketing year, Ukraine have already exported 45% of their target for the entire year. That's some going that is.

If ever there was a time to sit back and let the cheap distressed sellers offload their wheat at whatever price they can get for it, then this must surely be it. So what's going on?

The country with easily the lowest credit rating of all the major global wheat exporters
needs cash desperately.

The IMF are in town, and Ukraine has violated the terms of it's deal agreed back in November 2008 to stabilise the Hryvnia and increase subsidised gas tariffs by September 1st.
With an election looming [Another example of a government mismanaging its food supply for political reasons] the government have failed to deliver on either promise, and the IMF may now decide to withhold the final $3.8 billion tranche of the $16.4 billion handout agreed last winter.

Against a backdrop like that, it's not remotely surprising that grain is pouring out of the country, with price an almost secondary issue. Let them get on with it I say, why bother trying to compete with that?

My reaction: Grain exports pouring out of desperate Ukraine.

1) Cash-starved Ukraine continues to export grain ahead of even last season's record pace.

2) Ukraine's grain production is down around 20% this season.

Conclusion: This is incredibly bullish for grain prices.

1) One reason wheat prices haven't started moving higher yet (despite huge drops in production), is that distressed sellers like Ukraine are mismanaging their grain supplies and dumping it on the market.

2) Ukraine is going to have little grain available for export during the second half of 2009/10 (when global food shortage will be at its worse).

3) Ukraine will end up exporting more grain than the current estimated 16.69 MMT, which means MUCH higher food prices in Ukraine (because less grain left for domestic consumption).

As I have stated before, gold and agricultural land/commodities will be the best performers over the next year. This is why I am starting a fund to invest in Russian agricultural land. Please email me for more information.

This entry was posted in Food_Crisis, News_Developments. Bookmark the permalink.

4 Responses to Grain Exports Pouring Out Of Desperate Ukraine

  1. Daryl Bennett says:

    The Western Producer a farm magazine in Canada is reporting that the Ukraine winter wheat crop for 2010 is a disaster because only 30% has sprouted due to drought. Ukraine is estimating wheat production to be down at least 50% for next year. They say rain now would be to late since it would now winterkill due to lack of development.

  2. Anonymous says:

    Thanks for following the agricultural disaster in process. Most people are so detached from nature and complacent about buying their groceries, they have no idea how tough putting food on the table is going to become, and are clueless about planting a garden. Yikes!

  3. Anonymous says:

    Cocoa rose to new 30-year highs on Thursday amid worries about a poor harvest in the Ivory Coast and expectations of rising demand from chocolate makers, extending gains that have seen cocoa soar 70% in a year.
    Wall Street Journal

  4. Ozzymandis said...
    you still havent answered the question or russian corruption, and how you are planning to protect your investors from it Eric.

    The question on russian corruption is itself flawed, as it implies that corruption in Russia is somehow worse than the rest of the world. This is false. In fact, in terms of investment in agriculture, far more investors have been screwed by investing in Brazil. Below is just one example:

    I am traveling to Cuiabá the week of Sept 14th. I have been asked by a client to open negotiations to settle a 30 year old land dispute in central Mato Grosso. On Saturday, Sept 12th the story made national media in Brazil (p).

    The English Press Release can be read by clicking here.
    The level of complexity with the above land dispute almost makes the Isreali-Palisitine dispute look benign in comparison. I have made this blog post not to toot my own horn. I have made this post to help educate those that are considering investment in Brazil. So many foreigners end up as just another statistic. Money invested and money lost because of a lack of cultural understanding. This happens time and time again. The above land dispute has merit. One could say Edmund was 30 years ahead of his time. The soybean boom came and made the Cerrado, which was thought to be worthless, turn into GOLD.

    I cannot stress loud enough for new comer Brazilian investors to understand the dynamics of what they are walking into. Cheap land with a fake title can turn into a 30 year legal battle.

    One must be so very very careful.

    Furthermore, compared to investments in the US where corruption is rampant in the Goldman-dominated government, investing in Russia is a safer bet. Russian, unlike the US/UK/etc, is not bankrupt.

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