Export of grain – source of foreign exchange inflow or threat to food security? To answer the question, first we should determine how much foreign currency the grain sector of Ukraine can bring to the State treasury.In 2015 grain production was quite high – 54-55 MMT, and about 32 MMT can be shipped for export (Graph 1).
Currently, as I’m writing this article, the prices for new crop grain are ranged from USD 165/MT FOB Black Sea ports (corn) to USD 188/MT (milling wheat).
Focus on wheat
It should be noted that the expected production of wheat is 300% higher than food consumption in the country. Besides, a significant reduction in wheat processing was observed, despite an increase of harvest in 2014 compared to 2013. What was the reason? On the one hand, this was caused by decrease of wheat flour production in the eastern regions of Ukraine, on the other hand – by reduction in consumption of flour due to depopulation (Graph 2).
Despite significant decrease of wheat flour production, its exports will keep growing this season that also confirms the talking point about declining domestic consumption. By the end of the season the exports of wheat flour may reach 250 KMT (kilometre-tonnes). This is 10% more than last season and a record high level for Ukraine. Undoubtedly, it is much more economically advantageous for the country to export flour than raw materials. Therefore, the tendency of exports growth is welcome.
Moreover, the export geography also gives occasion to optimism, since such countries as China, Korea, Indonesia are among buyers, and consumption of grain in these countries is quite high (Graph 3).