Russian invasion dents Ukraine's corn export, output prospects

The Russian invasion is seen clouding the prospects of corn exports from the world's fourth largest corn exporter Ukraine in the marketing year 2021-22 (July-June), and at the same time is raising concerns over new crop planting, due in a month.

Ukraine — a leading producer-exporter of corn — has grown its biggest ever corn crop in the ongoing MY 2021-22 at 42 million mt, according to the US Department of Agriculture.

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Ukraine exports almost 80% of the corn it grows, with this year's shipments seen at 33.5 million mt.

As of Feb. 23, Ukraine had exported 18.98 million mt of corn, with over 14 million mt still remaining to meet the USDA's export estimate for this marketing year.

Concerns have emerged over exports of the remaining amount of corn as the Russian invasion continues. According to recent media reports, Ukrainian ports are likely to remain closed until Russia's invasion ends and there are also reports of damages to Ukrainian infrastructure, which could impact exports.

The timing of this coincides with the peak corn export season in Ukraine as its corn exports typically remain heavy through the spring into the early summer (March-May).

Uncertainty ahead

Though uncertainty remains over how the situation is going to evolve in Ukraine, export disruptions in the country could send buyers toward US corn, the available option in the market, as the South American corn harvest is still a few months away.

"Major destinations for Ukraine corn, including China and the EU, will likely need to source more from the US, due to a weak outlook for South American production," a recent update by Gro Intelligence said.

The invasion is seen also denting Ukrainian MY 2022-23 corn production, the planting of which would typically begin in April, sources said.

Output worries

After a year of record production, in the upcoming MY 2022-23, Ukraine's corn production faces various challenges and uncertainties.

According to S&P Global Commodity Insights' initial estimates, Ukraine's corn production in MY 2022-23 is seen at 30 million mt, down 12 million mt, or 30%, from MY 2021-22. Corn exports are estimated at 23.5 million mt, also down 30% from the year-ago levels.

"The process of estimating Ukrainian corn production was not easy and was filled with many hypotheticals, but with less than 40 days to go until planting, it's impossible for us to believe a 'normal year' of production/exports is in the offing," according to S&P Global.

It added that the main concern with corn planting in Ukraine is the availability and distribution of inputs for the upcoming season.

Strengthening corn prices

Ukraine's invasion by Russia has lifted the already high global prices of corn. Futures prices of corn on key global exchanges have rallied to multi-month highs following Russia's invasion of Ukraine.

The most-active May futures contract on the Chicago Board of Trade breached the $7/bushel mark following the news of Ukraine's invasion on Feb 24. The contract was trading at an eight-month high of $7.37/bu at 1326 GMT on March 2.

Global corn prices have also been supported by sustained high prices of agricultural inputs and concerns of a smaller-than-projected corn crop in South America.

Ukraine corn export prices have also climbed, with Ukrainian corn FOB Black Sea assessed at a record $348/mt on March 1, according to S&P Global data. Prior to the invasion, on Feb. 23, Ukrainian corn was assessed at $289/mt.

Fertilizers

Beyond the immediate supply disruptions, the impact of Russia's invasion of Ukraine will also be felt in terms of higher fertilizer prices.

Russia is the top exporter of fertilizers globally. Though the Russian fertilizer scenario might not impact Ukrainian corn production, countries like Brazil rely on Russia's fertilizers, and sanctions or disruption on Russian fertilizer supply can impact the upcoming planting season in the global corn giant.

Corn is a fertilizer intensive crop and fertilizer prices will contribute to farmers' planting decisions as well as yields.

Russia is also key global player in natural gas, a major input to fertilizer production. Higher gas prices and supply cuts will further drive fertilizer prices higher, Gro said.

"Although the US doesn't directly import Russian fertilizer, higher fertilizer prices will impact production costs as US farmers soon begin planting their spring crops," it added.

The US in MY 2022-23 (September-August) is expected to produce a record amount of corn on expectations of trend yield even though the area is declining on the year. A lower yield may pull down US corn production numbers, which can add to supply tightness.

A rise in input costs or lower corn supplies can further lift the already high corn prices.