Ukraine's grain exports to drop in MY 2024-25 amid lower supply, smaller output estimate

Ukraine's grains exports will likely decrease in marketing year 2024-25 (July-June) because of lower supply as a result of reduced production volumes, with the Ukrainian Grain Association estimating the country's total grain exports to reach 35.5 million mt in MY 2024-25on March 12.

The USDA's Foreign Agricultural Service's Kyiv (Ukraine) attaché also estimated on April 15 lower wheat and corn exports in MY 2024-25 amid a lower output forecast.

According to Ukraine's agricultural ministry's preliminary estimates April 17, grain production in 2024 will be at 52.4 million mt, down from 60 million mt estimated for 2023. Planting area for grains in MY 2024-25 is seen decreasing as Ukrainian farmers find oilseeds to be more profitable.

"Sunflower, for many farmers, is more profitable than corn... in the current season. They will plant less grain than in the previous season," Andrey Sizov, Managing Director of SovEcon, a Black Sea agricultural market research firm, told S&P Global Commodity Insights.

Ukrainian farmers began allocating more areas for oilseeds compared with the pre-war period, said Oleh Khomenko, General Director of the Ukrainian Agribusiness Club.

"In MY 2024-25, the area under oilseeds will increase by 5% compared with the previous period -- about 8.8 million hectares. At the same time, the area under grain crops is expected to still be large -- about 10.5 million hectares," Khomenko added.

According to Andrey from SovEcon, wheat production in MY 2024-25 is expected to decline, which in turn will affect exports.

Ukraine's corn and wheat exports in MY 2023-24 reached 22.9 million mt and 15.77 million mt, respectively, ministry data showed May 1.

Impact of recent Black Sea attacks

The damage caused to port infrastructure in the Odesa region due to the recent Russian attacks slowed transit of grain shipments to Black Sea ports, although this is less likely to affect Ukraine's grain export volumes in the near term.

"There was a great deal of infrastructure and industrial damage done by Russian attacks in April, including to ground transport infrastructure, which may slow transit to the ports," said Lisa Milton, who tracks shipments through the grain corridor under the Black Sea Grain Initiative. "However, Ukraine has been quick to repair any damage they possibly could."

Russia has launched numerous waves of missile and drone attacks against Ukraine's energy and transport infrastructure in recent weeks. On April 19, the port of Pivdennyi in Odesa was struck by Russian missiles, resulting in the destruction of grain storage facilities and significant damage to port infrastructure. Due to the attacks, agricultural products intended for exports to Asia and Africa were destroyed.

"This, of course, has a negative effect on Ukraine's ability to export by sea... the pace of exports will be lower but Ukraine will still be able to export," said Khomenko.

Despite the attacks, the ports have continued to operate. Ukraine shipped over 40 million mt through its own grain corridor in a little more than six months, more than the volume transported during the Black Sea Grain Initiative's functioning, official data showed.

"In fact, Ukraine now has regular container ship traffic to Romania via two ships that run back and forth constantly and we've seen larger containerships booking trips as well," Milton said.

In April, the country exported 4.13 million mt corn and 1.93 million wheat compared with 2.77 million mt and 2.07 million mt recorded in March, ministry data showed.

EU restrictions to limit grain exports

The EU's import restrictions will likely impact Ukrainian agricultural export volumes, including grains, to a certain extent. With these restrictions in place, Ukraine will not be able to sell products at the kind of volumes that were exported in 2022 and 2023 to the EU, Khomenko said.

"Such measures on the part of the EU will cause additional costs to agricultural producers and exporters and certain losses to our state," said Artem Havrysh, agricultural market analyst at Ukrainian Agrarian Confederation. "We believe that Ukraine may lose Eur300 million-500 million ($321 million-$535 million)as a result of these restrictions."

Havrysh added that most of the products included in the sensitive list, including corn, which can trigger "emergency brakes" will not be profitable to export with duties.

The EU Parliament on April 23 approved the extension of its autonomous trade measures for Ukraine with safeguard measures. The European Commission can apply an emergency brake if imports of sensitive agricultural products, including corn, exceed volumes of H2 2021, 2022 and 2023. Although wheat has not been added to the sensitive products list, its import volumes will be closely monitored by the EC.

According to UAC data, Ukraine's share of wheat and corn exports to the EU among all grains in 2023 was 31.9% and 64.1%, respectively.

In MY 2023-24 (until February), the EU imported 8 million mt corn and 4.37 million mt wheat from Ukraine, EC data showed.