BLOG

Global breadbasket: Ukraine

02 June 20216 min reading

Wheat, which has become more and more significant after the Covid-19, continues to increase its strategic importance day by day. Ukraine, which has achieved great success in wheat production in recent years, is one of the countries with the highest production potential in the world in the field of agriculture with its fertile soil and favorable climate conditions. Ukraine is deemed as the breadbasket not only of Europe, but also of the world.

Ukraine's grain export continues steadfastly. Today, the government is trying to increase its harvest and open up new export markets. However, it is not yet clear whether the country will reach its full potential, due to the noisy conflict with Russia, as well as infrastructure and financial barriers.

Ukraine is one of the countries with the highest production potential in the world in the field of agriculture with its fertile lands and favorable climatic conditions. Ukraine is categorized as an emerging free-market economy. Ukraine is the third-largest country among the 15 republics that make up the former Soviet Union in terms of the square measure following the Russian Federation and Kazakhstan. 70% of Ukraine is low, 25% high, and the remaining 5% mountainous land. 55% of Ukraine's land is arable land.

Ukraine's population is 41.3 million by 2021. Its population and active workforce have been decreasing for the last 10 years. The population is getting older. The birth rate is also in a downward trend and the average life expectancy is also getting longer. 78% of the population is Ukrainian, 17% is Russian, and the remaining 5% is White Russian, Romanian, Bulgarian, Crimean Tatars, and others.

Having evaluated the figures for 2020, it is seen that Ukraine's total foreign trade volume has reached 103 billion dollars. Accordingly, Ukraine's export volume was 49 billion dollars in 2020, and its import volume was 54 billion dollars.

Ranking 52nd in the world with an export volume of 49 billion dollars (0.9% decrease) in 2020, Ukraine's main export countries are China (14.4%), Poland (7%), and Russia (5.5%). In the country's exports, Turkey ranks the 4th with a share of 4.9%.

The main products exported by the country in 2020 are Seed Oils (10.8%), Corn (9.9%), and Iron Ore (8.6%). China (15.5%), Russia (13%) and Germany (9.8%) are the top countries that Ukraine, which ranks 48th in the world with its import of 54 billion dollars (decreased by 11%) in 2020, is importing from. Turkey ranks the 7th with 4.5%.

CONSUMER PREFERENCES

Price is the most important factor for Ukrainian consumers. In addition, there is a great demand for Western products that are of higher quality than national products and are often difficult to obtain in the inner region. The quality of after-sales service is an important criterion by which a foreign company can increase its competitiveness. Therefore, consumers have a poor image of this aspect of sales in the country.

Locally produced promotional advertisements are an effective way to inform Ukrainians about new products. Including the Ukrainian distributor's name and the local address on the original packaging has an effect on consumer confidence.

Ukrainian buyers prefer companies that have an office in Ukraine with whom they can engage in fiduciary and proper communication. For this reason, proceeding with a representative office in Ukraine will provide important advantages to the companies in marketing their products.

In recent years, it has been observed that chain stores, internationally renowned stores, and supermarkets are opened by Ukrainian and foreign entrepreneurs mostly in the city centers in Ukraine.

Agricultural Commodities Broker Christina Serebryakova, who wrote an article about Ukraine in our sister magazine Miller Magazine, provides the following information:

As per latest update of the Ministry of Agriculture, the total grain area 2021 is likely to total 15.5 mln ha vs. 15.2 mln ha last year, including 7.6 mln ha of spring grains. Mild winter, low winterkill, rainy spring could help farmers increase the grain crop to 75 MMT this year from 65 MMT in 2020, as per the AgMin. The Ministry of Agriculture sees grain export 2021/22 at 50-53 MMT vs. 45.4 MMT expected for the current season.

Herewith, harvesting campaign could start a little bit later than usual, as this year’s spring planting started a few weeks later compared to the previous year due to a lingering cold weather in most regions of the country. Of course, all will depend on May and June weather development. As of 29 April, 2021 Ukrainian farmers planted 1.1 mln ha of corn (20% out of 5.33 mln ha), 168 KHA of spring wheat (95% of 176.6 KHA plan) and 1.28 mln ha of spring barley (92% out of 1.39 mln ha plan).

RECORD EXPECTATION IN WHEAT

Ukrainian Ministry of Agriculture forecasts wheat crop 2021 to rebound to 29-30 MMT vs. 25.1 MMT last year. Ukrainian Grain Association (UGA) is more conservative – 27.67 MMT; SovEcon at a record 28.6 MMT; FAS USDA sees Ukrainian wheat crop 2021 at 26.84 MMT vs. 25.5 MMT for 2020 crop in April WASDE report. The share of milling wheat in the 2021 output could be no less than 65%, almost the same as in 2020.

Ukrainian AgMin sees wheat export 2021/22 at 21-22 MMT vs. 17.5 MMT in 2020/21. In the new season, we expect Ukraine to preserve its positions in Indonesia, Egypt, Bangladesh. Pakistan should be left in the top destinations for the second consecutive year, as it is forecast to have a shortfall of 3 MMT of wheat in 2021/22, which should be covered by about 50%/50% by Russia and Ukraine, plus some part could be EU origin. At the same time, Morocco, Tunisia, Turkey most of all could decrease their imports. It is also an important question, whether China could increase its purchases of Ukrainian feed wheat due to switching its animal nutrition formula away from corn.

FIFTH IN WORLD

According to last year's figures, Ukraine ranked fifth in world wheat export. According to the data revealed by the Ukrainian Agribusiness Club Association (UCAB); Russia, the USA, Canada, and France are at the top of the list.

Egypt, which ranks first in the export of Ukrainian wheat, experienced a decline in the previous year. The top three importing countries were as follows: “Egypt - 11% with 3.1 million tons; Indonesia - 10% with 2.7 million tons; and Bangladesh - 5% with 1.5 million tons.”

Ukrainian suppliers also held leading positions in these markets. For example, Ukraine ranked second in Egypt's import structure with an indicator of 23%. Russia had a share of 63% and France 6%.

Imports from Ukraine in Indonesia accounted for 26% of the total. Argentina got the same share whereas Canada got 23%.

In the Bangladesh market, Ukrainian producers provided 27% of the supply. At the same time, imports made from Russia accounted for 35% of the total, while Canada made the top three list with 21%. In the first nine months of the marketing year 2020/2021, Ukraine has exported 14.4 million tons of wheat and 16.5 million tons of corn.

Articles in Consumption Research Category