FEATURE: Ukraine grain exports soar amid price shifts and supply cuts

The landscape of Ukraine's grain exports has been dynamic over the last three months, with prices initially rising at the start of the 2024-25 marketing year (July-June), followed by a downward trend as demand dynamics shift.

However, the country succeeded in ensuring the flow of almost double the grain out of its seaport than the previous year, despite challenges during the growing and harvesting period.

Grain exports

Since establishing its own Black Sea corridor in August 2023, following the end of the Black Sea Grain Initiative, Ukraine has rapidly continued its grain exports despite ongoing Russian attacks on its ports.

Demand remained robust, with grain exports for the 2024-25 season (July-June) nearly doubling to 12 million mt, up from 8.3 million mt the previous year, according to the agrarian ministry as of Oct. 21. This included 7.2 million mt of wheat, an 80% year-on-year increase, and 3.8 million mt of corn, up 18.3%. Moreover, the reliance on deep-sea ports has led to a 13% year-on-year decline in the previously significant route through Constanta.

Despite these record export levels, Ukraine faced challenges from diminished production due to dry weather, resulting in crop failures for the 2024-25 season. The country is projected to produce 25 million mt of corn, down 7.5 million mt, with farmers having harvested more than 50% of the area so far. Wheat production also decreased, with 22.4 million mt harvested, a drop of 600,000 mt. As planting for the 2025 wheat crop begins, Ukraine has achieved 75% of the projected area ahead of last year's schedule. Consequently, exports are expected to decline: wheat by 16% to 15.6 million mt and corn by 25.4% to 22 million mt, according to S&P Global Commodity Insights data. To ensure adequate local supplies, the government imposed a wheat export quota of 16.2 million mt.

Dynamic global demand

Spain currently leads as the top importer of Ukrainian wheat, with 1.6 million mt this season. Indonesia follows with 944,000 mt, and Vietnam with 478,000 mt. Egypt, Algeria and Bangladesh are also competitive in sourcing wheat from either Russia or Ukraine. Recently, Ukrainian wheat prices have become more competitive in Bangladesh, offering prices around $277/mt, $4-$5/mt lower than Russian wheat, with freight costs at $45/mt. "Ukraine 11.5% is way more competitive now," one buyer said.

Additionally, some sellers anticipated a shift toward Ukrainian wheat after Russia announced it would sell directly to state buyers without intermediaries. "Maybe certain destinations will switch to Ukraine," one Ukraine-based seller said.

Meanwhile, the corn marketing year has just begun (October-September), with Spain again leading as the top EU importer at the start of the season, driven by strong demand from the EU feed industry. Competitive buying interest has emerged from Spain, Italy, the Netherlands and Portugal, as buyers find maritime trade more cost-effective than rail transport from Eastern EU countries.

An Italian feed mill source said, "The ones that are willing to pay are because the replacement from Eastern EU by train is much more expensive."

In the previous marketing year (2023-24), Spain increased its import of Ukrainian corn, with a 60% rise during the first eight months of 2024 compared to the same period in 2023. Ukrainian corn accounted for over 60% of Spain's total corn imports from January to August 2024. During the first week of October, CIF Spain Mediterranean offers were at $250/mt for one-month forward delivery, with buying interests in the mid-$230s. However, the offers dropped to $243/mt on Oct. 21, with bids heard at low $230s from the buying side.

However, high prices have slightly diminished the competitiveness of Ukrainian corn in the EU market, particularly against competitors like Brazil and the U.S.

A Spain-based trader said, "I guess American origins are going to be drivers," highlighting the diminishing competitiveness of Ukrainian corn.

A source from a Spanish feed mill added, "The one dominating pricing now is the U.S."

Meanwhile, Turkey has become an attractive destination for Ukrainian corn, with buying interest reaching $239/mt during the second week of October for one-month forward delivery. The Turkish government recently reduced its import duty from 130% to just 5% for up to 1 million metric tons until Dec. 31, spurring buyers to seek spot deliveries. However, this has led to a drop in domestic prices, making Turkish domestic corn more competitive and subsequently reducing demand for Ukrainian corn. CIF Marmara bids dropped from $239 in early October to $232/mt on Oct. 21 for November shipment. Platts, part of Commodity Insights, assessed Ukraine corn FOB POC at $216/mt on Oct. 21, down by $6 from the previous week.

Another key destination for Ukrainian corn is China. However, in the first nine months of 2024, Ukraine's corn exports to China fell by 34% year-on-year, with Brazil and the U.S. expected to emerge as primary suppliers in the 2024-25 season. This anticipated decline is largely due to low Ukrainian supply and limited demand, as the Chinese government has imposed restrictions on corn imports to bolster domestic prices and production. Previously, Ukraine supplied 35% of China’s corn imports, but data from August 2024 revealed a steep drop, with imports from Ukraine plummeting to 167,000 mt, down from 675,000 mt in July and reflecting a 48% decrease compared to August 2023.

Corn and wheat usage in European and North African feed industries

The price spread between feed wheat and corn in Ukraine has narrowed from August to October due to a drop in feed wheat prices, driven by abundant global supply. This decline has led to a 2%-8% replacement of corn in several European feed mills. Market participants in Spain estimated that this overall replacement would result in about 2% less corn and 2% more wheat being used from October to December. A procurement trader at a Spanish feed mill noted that imported wheat has become more competitive than corn, as inland demand has already utilized significant quantities of wheat and barley. The trader added, "Wheat has more protein, so that usually tips the scales in favor of wheat." Platts assessed Ukraine wheat FOB POC at $228/mt on Oct. 21, down by $1 week on week.

In contrast, the situation in North Africa differed significantly. Moroccan feed mills primarily rely on corn, which is more readily available and stable in price. Consequently, even when feed wheat prices fall, the transition from corn to feed wheat occurs only in small ratios. This limited flexibility arises from two main factors: feed mills cannot completely replace corn with feed wheat, and the feed produced is primarily for poultry, which has different dietary requirements compared to ruminants or pork. While ruminants can consume feed wheat, poultry benefits most from corn, yielding optimal results for the predominant poultry types in the region.

A source from a Moroccan feed mill said, "European feed mills can switch from feed corn to feed wheat easily, but we still use mainly corn."