France's InVivo predicts 50% cut in Ukraine's MY 2022-23 cereal output, exports

Russia's invasion of Ukraine and the restrictions this has placed on farming are likely to halve Ukraine's cereal production for the marketing year 2022-23 (July-June), Thierry Blandinieres, CEO of French agricultural group InVivo, has told France Info radio.

The reduction in production numbers will also impact grain supplies from the country, he said.

"In July, it will be difficult for Ukrainians to collect the harvest," Blandinieres, whose company employs 350 people in Ukraine, said late March 22. "We're expecting a reduction of at least 50%, if everything goes well. ... That means 20 million mt will be taken off the international market because most of the volumes were destined for export."

He explained that the support for prices will be amplified if Russia holds back its stocks.

Sizable share of global wheat trade

Russia is the world's largest wheat exporter, while Ukraine is among the top five. Both the countries, combined, were estimated to account for around 26% of the global wheat trade in MY 2021-22 (July-June), according to the US Department of Agriculture data.

Ukraine was estimated to produce 33 million mt of wheat and 42 million mt of corn in MY 2021-22, according to the USDA's estimates.

One of Ukraine's biggest agroholdings, Harveat, said recently it had lost control of 98,000 hectares in the Donetsk region in the eastern part of the country, leaving it with just 22,000 hectares. The company's head of sales, Tatiana Alaverdova, said the company has lost contact with staff in the region and machinery may be destroyed or seized by Russian forces.

Grain prices, particularly of wheat, have soared to historical highs following Russia's invasion of Ukraine as supply concerns surround the market. The higher prices are likely to trickle down to consumers.

The surge in wheat global prices will quickly be seen by consumers with the price of a baguette likely to rise 10%-15% in France, said Blandinieres, who is based in the country.

Shortage ahead in North Africa

The problem will be more serious for countries in North Africa that depend on cereal imports.

"Imagine in three months, when the stocks have been exhausted," he warned, recalling the role bread prices played in sparking the Tunisian protests that launched the Arab Spring in December 2012.

"We absolutely have to send a signal to global markets that Europe is getting ready to produce more," Blandinieres added. "We could envisage a production increase of 5% to 10%. That would address just 30% of the crisis that we're facing."

He also called for a collective effort by major agricultural producers, such as the US and Brazil, to mitigate price inflation.

On the Chicago Board of Trade, wheat futures have climbed over 120% in the last year, while corn futures prices gained nearly 60% over the year.

According to S&P Global Platts assessments, on March 24, prices of 12.5% protein Russian wheat were at $421.5/mt, while 11.5% protein Ukrainian wheat prices were at $414/mt, both up 91.6% and 81.2% on the year, respectively.