Jan 30 / Alef Dias

Grains, Oilseeds and Livestock Weekly Report - 2024 01 30

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Wheat: Planting and exports grow amid war in Ukraine

  • Looking at various indicators for Ukraine's 24/25 crop, everything points to another harvest of more than 20M mt - a lower level than that seen in the pre-war period, but far from a bad crop or failure. We expect a reduction of only 0.6M mt compared to the previous harvest, which saw record yields.
  • Planting data released until the end of November pointed to an increase in the area planted, while soil moisture remains close to the 5-year average. Snow cover has decreased recently, but temperature forecasts point to a low risk of winterkill.
  • Ukrainian exports have also somewhat surprised the market. In December, Ukraine shipped 4.8M mt of food, mainly grain, from its Black Sea ports, surpassing the volumes achieved by the UN-promoted grain corridor for the first time. However, the escalation of tensions in the Red Sea could change this scenario.


In recent reports, we have seen that, despite some risks, the main producers in the northern hemisphere have generally brought various bearish fundamentals to the wheat futures markets. In this report, we'll look at one more of these cases: Ukraine.

Another +20M mt crop is on the way

Looking at various indicators for the Ukrainian crop, everything points to another crop of more than 20M mt. Starting with the planted area, the data available so far leads us to believe that Ukrainian producers have planted a larger area in 24/25 compared to 22/23. By the end of November, the pace of planting was higher than in 2022, which was the first planting impacted by the war with Russia.

Soil moisture also contributes to this scenario. Although it is below the levels seen in the same period in the last twocrops, it is close to the average of the last five years.
Fig. 1: Planting progress - Ukraine (M ha)

Source: Minagro

Fig. 2: Daily soil moisture in the root zone - Ukraine (% within the top 1 meter

Source: Minagro

In other words, it's not an excellent scenario like the previous harvest - where Ukraine saw almost perfect weather conditions, leading to a record yield even in a context of war - but it's far from a bad one. And looking at the rainfall forecasts, we can expect this scenario to improve in the coming weeks.

On the temperature side, the situation also gives cause for optimism with regard to yields. Although the latest data points to a reduction in snow cover, temperature forecasts point to warmer than average weather in the coming days, reducing the risk of winterkill.

Fig. 3: Temperature forecast for the next 15 days (difference from normal, ºF)

Source: World Ag Weather

Fig. 4: Rainfall forecast for the next 15 days (% of normal)

Source: World Ag Weather

The country has managed to increase its exports, but the situation in the Red Sea poses risks

Ukraine has managed to increase its grain exports from the Black Sea to a level not seen since before the Russian invasion, although the Red Sea shipping crisis represents a new challenge for its important agricultural trade.

Kiev's success in replacing a UN-backed Black Sea export agreement with its own transportation scheme brought relief to Ukrainian farmers and importing countries, while at the same time representing a naval breakthrough for Ukraine's armed forces once the ground counter-offensive was paralyzed.

Kiev shipped around 4.8M mt of food in December, mainly grains, from its Black Sea ports, surpassing for the first time the volumes achieved by the previous corridor promoted by the UN.

Moscow abandoned the agreement last July, saying that commitments to safeguard its own exports were not being respected. Before Russia's invasion, Ukraine exported around 6M mt of food a month across the Black Sea.

However, grain ships are increasingly being diverted away from the Suez Canal - Red Sea route, which is likely to hurt exports to more distant countries in particular. Ukrainian grain exports by sea in January could fall by around 20% compared to last month, a senior Ukrainian official said last week, mainly due to the Red Sea crisis.

Fig. 5: Monthly wheat exports by ship - Ukraine (M mt)

Source: Refinitiv

In summary

In short, we expect a slightly smaller harvest in Ukraine, as the larger planted area is unlikely to compensate for the lower yields. However, in our view, this is far from a bullish argument, given that in the post-war context it's a relatively good crop, higher than 22/23 and with higher yields than many pre-war harvests.

High Ukrainian exports have also been a bearish force for futures contracts, since the more the country is able to export its cheap wheat, the less importing countries need to buy from more expensive origins. However, escalating tensions in the Red Sea could change this scenario.

Fig. 6: Production, Harvested Area and Yield Wheat - Ukraine (M mt, M ha, m/ha)

Source: USDA, *hEDGEpoint estimate

Weekly Report — Grains and Oilseeds

Written by Alef Dias
Reviewed by Natalia Gandolphi


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