Spring crops face major challenge

UKRAINE/RUSSIA NEWS

Spring crops face major challenge

The Ukrainian planting season is expected to be heavily impacted by the Russian invasion of the country, with spring crops facing major challenges, AgriCensus reported on 16 March.

Although around 80% of farmers had enough supplies of inputs, a shortage of oil – specifically diesel – was a major problem. Another concern was that farmers might not be able to reach land for planting due to conflict zones or areas occupied by the Russian army.

With corn, sunflower, soyabean and spring rapeseed planting usually starting at the end of April and running through to June, there was still some time to carry out planting should the war come to an end, AgriCensus wrote. Currently, the regions most affected by fighting were the land around Kyiv, Sumy, Donetsk, Luhansk, Kherson, Mykolaiv and Chernihiv, where Russian troops were actively engaged in military operations, the report said.

In the worst-case scenario, where all the impacted areas would not be available to complete spring sowing – the total volume could amount to 36% of total corn production, 48% for spring barley, 24% for soyabeans and 44% for sunflower, AgriCensus wrote. While there was no official forecast, local media had reported deputy agriculture minister Taras Vysotskiy as saying that spring sowings would be completed on 50% of planned areas.

Meanwhile, farmers in the region around the city of Lviv in western Ukraine – an area relatively unscathed by the Russian invasion to date – are expected to increase their planted area for this year, AgriCensus reported on 17 March. According to data from the Department of Agro-Industrial Development, sown areas under spring grains, legumes and oilseeds in 2022 will increase by at least 2%, with the total area including winter crops reaching 706,300 ha.

Last year’s gross grain and legume harvest in the Lviv region amounted to 1.8M tonnes and 540,000 tonnes of oilseeds.

Meanwhile, the government had introduced a measure to help ensure adequate food supplies by exempting key agriculture sector employees from military operations during the harvest period, AgriCensus wrote on 7 March.

IN BRIEF

Ukraine would require traders to obtain export licenses for wheat, corn and sunflower oil, among other agricultural commodities, with the country’s state-run railway saying it would move those exports by rail, Reuters reported on 6 March.

The country normally exported its grain, vegetable oils and other food products by ship, but the country’s Black Sea ports had been closed because of Russia’s invasion.

Ukrainian Railways said it was ready to organise “agricultural products delivery by rail urgently” and that it could transport grain to borders with Romania, Hungary, Slovakia and Poland, from where it could be delivered to ports and logistics hubs of European countries, the Reuters report said.

Meanwhile, the government had also banned the export of essential products and limited grain exports following, AgriCensus wrote on 7 March.

The measures restrict exports of essential goods such as buckwheat, rye, sugar, millet, oats, salt, live cattle and the meat and other sub-products of of cattle.

EU faces sun oil, rapeseed shortage

Bombed and blockaded ports, an export freeze and failure to make sowings for this year's harvest are likely to considerably cut Ukraine sunflower oil supply to the EU in the current crop year, Germany's Union for the Promotion of Oil and Protein Plants (UFOP) said on 10 March.

EU imports of sunflower oil during 2020/21 totalled around 1.7M tonnes, of which 1.5M tonnes (around 88%), came from Ukraine, UFOP reported Agrarmarkt Informations-Gesellschaft as saying.

In the current 2021/22 crop year, the EU27 imported around 1.27M tonnes of sunflower oil until the end of February, of which some 1.09M tonnes came from Ukraine, a market share of 86%.

Ukraine was the top sunflower oil exporter to the EU, followed by Moldova, Bosnia and Herzegovina and the UK.

UFOP said if imports from Ukraine were to stop completely and in the medium term, the EU would face a serious supply problem

The war in Ukraine would also significantly affect global rapeseed supply, UFOP said on 17 March EU rapeseed imports in 2019/20 season

1.5 1.7 EU sunflower oil imports until 34th week of 2021/22 according to origin countries

2 2.3

1.5 1.8

1.4 1.7 Ukraine 86%

From Ukraine 1.4 1.6

EU27 sunflower oil imports (million tonnes)

2 6.5

From Ukraine 2.7 Total 6.0 EU rapeseed imports until 34th week of 2021/22 according to origin countries

1.9

1.7 4.2

4.3 Ukraine 50%

0.8 4.8

EU27 rapeseed imports (million tonnes)

Ukraine 86% Source: European Commission, Eurostat

totalled 6M tonnes, of which around 2.7M tonnes (45%) came from Ukraine.

In the past crop year, Ukraine's share of imports fell to 2M tonnes (31%).

EU27 rapeseed imports in the current crop year until the end of February 2022 amounted to 3.23M tonnes, with Ukraine supplying the largest share by far (50% or around 1.6M tonnes).

If imports from Ukraine were to stop completely and in the long term due to blockaded ports, the supply situation would likely tighten significantly, both within the EU-27 and globally.

IN BRIEF

Global agribusiness giants Cargill and Archer Daniels Midland (ADM) are scaling back their business activities in Russia, World Grain reported on 14 March.

Cargill did not provide details on which activities would be scaled back but said on 11 March that it would discontinue investments but carry on operating its food and feed facilities.

Cargill had about 2,500 employees in Russia and investments in grain and oilseed processing, animal feed, poultry processing and other businesses. It was also one of the largest non-Russian exporters of Russian wheat, the report said.

ADM, which has a smaller footprint in Russia, said on 14 March it would scale down its operations in Russia that were not related to the production and transport of essential food commodities and ingredients.

ADM has an arm of its WILD Flavors business in Russia and owns a 50% stake in Aston Foods and Food Ingredients, a sweeteners and starches business.

Of the world's four largest agribusinesses, only Louis Dreyfus Co (LDC), had publicly stated it was suspending operations in Russia, World Grain wrote.

LDC operates a grain export terminal on the Azov Sea, with annual capacity of about 1M tonnes, and exports 1.5-3M tonnes/year in total from Russia, according to its website.

Bunge, which had recently been scaling back its Russian grain trading activities, suspended new exports from Russia on 10 March, but said it would continue its oilseed crushing operations.

Cargill, Bunge, ADM and LDC had all suspended operations in Ukraine after the Russian invasion as the war had halted commercial shipping, the World Grain report said.

Edible oil prices to stay high but demand slows

Tight edible oil stockpiles and blocked shipments from the Black Sea area due to the war in Ukraine are expected to keep edible oil prices near record highs for the coming months, although global consumption will fall in the latter half of 2022, Reuters reported on 7 March.

Malaysian palm oil futures raced to an all-time high of 7,268 ringgit (US$1,736.26)/tonne on 9 March, while soyabean oil jumped to its highest level in 14 years, the report said.

Russia's invasion of top sunflower oil exporter Ukraine, dry weather in key soyabean supplier South America and labour shortages in the world's second biggest palm oil producer Malaysia had combined to slash edible oil supplies worldwide, the Price Outlook Conference and Exhibition (POC 2022) in Malaysia heard on 7-9 March.

The price surge had already slowed purchases in some key markets. "In many countries like Africa, India and Pakistan, consumers cannot pay these high prices," Oil World executive director Thomas Mielke said,

Edible imports by India, the world's top edible oil buyer, were likely to drop to around 13M tonnes in 2021/22 from 13.49M tonnes a year ago, Dorab Mistry, a director of Indian consumer goods company Godrej International, said.

China had lowered its edible oil import for the crop year 2021/22 to 8.53M tonnes, down from February's forecast of 9.3M tonnes, Reuters wrote. But before there was a broader drop in demand, prices were expected to rise further.

Palm oil prices could hit a record 8,100 ringgit (US$1,935)/tonne in coming months following a plunge in global edible oil stocks and a decline in export surpluses, LMC International chairman James Fry said.

He expected crude palm oil prices in Malaysia to range between 6,600-8,100 ringgit (US$1569-US$1,935)/tonne until July, easing to 6,200-7,000 ringgit (US$1,475-1,665) in the third and fourth quarters when supply builds and demand falls.

In Indonesia and Malaysia, total palm oil output in 2022 was likely to rise by around 3M tonnes from last year, the analysts said, far less than needed to offset supply disruptions in South America and the Black Sea.

Fertiliser companies cut production

European fertiliser firms are cutting output due to surging natural gas prices following Russia’s invasion of Ukraine, Luxembourg Times quoted from a Bloomberg report.

Natural gas was used as a feedstock for nitrogen fertilisers, usually accounting for around 80% of production.

With European gas prices currently about 10 times higher than a year ago, fertiliser firms including Yara International and Borealis were cutting ammonia production, which was pushing up farming costs, the 9 March report said.

Yara was temporarily curtailing production in Italy and France, it said. The two plants had a combined capacity of 1M tonnes/year of ammonia and 900,000 tonnes/year of urea but output would be reduced to 45% of capacity during the shutdown.

Borealis had also reduced its ammonia production, while considering halting output for

Almost every major crop in the world requires fertiliser inputs “economical reasons”, Luxembourg Times wrote.

Hungarian producer Nitrogenmuvex was also temporarily halting output of ammonia.

Firms could not continue to take the risk of making fertilisers with present gas prices and putting the product into storage for later sale, a Fertilizers Europe spokesperson said.

Meanwhile, the Russian ministry on trade and industry had recommended that its fertiliser producers temporarily halt exports until carriers resumed their work, Southeast AgNet reported on 7 March. Many international shipping firms had suspended cargo shipments to and from Russia to comply with sanctions. Russia produced 50M tonnes/year of fertilisers (13% of the world total) and had already banned ammonium nitrate exports in an announcement on 2 February.