Russia and Ukraine Grab Increasing Share of Global GrainMarkets

on May 14, 2012

In the coming years Russia and Ukraine are set to have a surgein their global wheat and cornexport markets, reaching a 30-35 per cent shareof the total global grain export market, as compared to the current 12-17 per cent.Fuelled by record harvests, the former USSR countries are also expected to provide new investment opportunities in related equities and these agricultural commodities.

According to the Russian Institute for Agricultural Market Studies (ICAR), this year Russia will export over 20 million metric tons of wheat, which is a significant surge when compared to the four million metric tons exported last year. After thedisappointing 2010/11 agriculturalyear, badly affected by drought, Russia’s agricultural sector has reboundedthanks to beneficial climate conditions,increasing global demand,low domestic overheads and robust production and inventory.With an expectation for exports of20.5 million metric tons of wheat in 2011/12, Russia will return to its 2009/10 rank as the world’s second biggest wheat exporter after the United States. And while the global wheat inventory isalso growing,Russian wheat producers are confident that they will remain competitive by surpassing their current record with exports of 22-25 million metric tons in the next agricultural year.

Working to the advantage of Russia’s wheat producers,Ukraine restricts its wheat exports by governmental policy.This yearUkraine exported only 23 per cent of its wheat production compared to 44 per cent in 2009/10, before the export quota was imposed.Notwithstanding the low wheat exports, Ukraine is carving out a strong position in the global grain market thanks to the country’s corn production.

!m[](/uploads/story/68/thumbs/pic1_inline.png)According to figures from the United States Department of Agriculture (USDA), this yearUkraine’scorn production reached 21 million metric tons, 15 million metric tons of which were exported. This is a record amount which almost doubles the previousyear’s results. With this record-setting year, Ukraine became one of the world’s top-five corn producers and top-three corn exporters. What is more, for the coming2012/13 agricultural year, Ukraine aims to overtake India’s corn production with 24.5 to 25 million metric tons of production, which is about a 30 per cent increase on this year’s harvest season.

Analystssay the resurgence of Russia and Ukraine will have a significant medium-term impact on the dynamics of the world’s grain markets, including the launch next month of futures contracts for Black Sea wheat, the first for the region. The grain export growthis also expected to help drive new investment to Russian and Ukrainian agriculture-related equities and trigger a round of Initial Public Offerings (IPOs) in the sector.Among the companies that havealready reported IPO plans are the Loture-Agro and Agropolis

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Group of Companies in Ukraine, with offeringsbeing planned for the second quarter of the year. In the context of the agricultural investment opportunities in the former USSR countries,Konstantin Fastovets, an agriculture analyst with Renaissance Capital in Kyiv, Ukraine, said: “Russia and Ukraine are among the few countries in the world where investment in agriculture is possible.”

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