Last year wheat exports ran to 11.3mmt and the year before 9.8mmt, so on the face of it a 16.6mmt cap shouldn’t come into play but what is actually written in the MoU?
Does it contain caveats that allow the Min of Ag to change the cap without getting the traders around a table?
I doubt it but it does make you wonder why the agreed to a limit that is highly unlikely to be breached anyway.
With the current total Ukraine harvest about to reach 60mmt the Minister of Agriculture, Oleksiy Pavlenko is sticking with total exports at 36mmt and domestic consumption at 24mmt saying “these figures provide the appropriate level of food security and increasing export ambitions".
The important bit there being "increasing export ambitions" as despite Fitch raising Ukraine's long-term foreign currency default rating to 'CCC', the country is desperately short of cash with grain exports being one of the few options to generate income.
Elsewhere rains arrived in the dry Black Sea regions, probably too little and too late to have much of an effect in Ukraine but farmers in southern Russia are telling me they had a good soaking last week with double the amount of rain they had this time last year.
Farmers north of central Russia are also tell me things aren’t too bad so the issue seems to be around that central area of Voronezh, Rostov and Volgograd.
(If we have enough time before snow sets in I hope to go and have a look.)
On a more upbeat note the Russian PM, Dmitry Medvedev declared this week that Russia will double its grain export volumes to 35-40mmt by 2020.
Not to be outdone Ukraine’s Minister of Agriculture also announced this week that Ukraine is capable of doubling agricultural production when investment in agriculture is increased.
Sounds easy when you say it fast but considering that collectively Ukraine and Russia account for around a fifth of the world wheat trade then even a modest increase in production would have repercussions for grain growers around the world.
It’s also worth keeping in mind that Ukraine currently limits itself to only using domestic wheat varieties, many of which are low yielding and predate the revolution (you decide which one).
But a swift change in legislation could readily allow the import and use of much higher yielding western European varieties with immediate impact on production.
It’s also worth keeping in mind that the current Minister is actively focusing on de-regulating Ukraine’s bureaucratic agriculture sector.
Praemonitus praemunitus, have a good weekend.