Flour production in Ukraine: is there light at the end of the tunnel?

UkrAgroConsult

Article author:

Maryna Marynych

Grain Market Analyst

Flour production decreases from year to year – just 305.6 KMT was produced in the first two months of MY 2021/22 МГ (down 17% y-o-y). Market participants estimate that real output is much higher.

Nevertheless, wheat flour exports are also in decline – just 127 KMT was exported in MY 2020/21 (a decade low), UkrAgroConsult reports.

At the same time, flour imports to Ukraine is on the rise – at most 8 KMT a season had been imported since 2008.

Foreign demand for Ukrainian flour is unstable, having been in decline since 2020. For instance, China, a major importer in previous seasons, stopped buying Ukrainian flour from August 2020. In the first three months of MY 2021/22, most major importers reduced flour purchases from Ukraine compared to last season.

Rising freight and raw material costs also contribute to the fall in demand. Freight rates increased because of the coronavirus pandemic and delays in Chinese ports, while milling wheat prices are at the highest point since MY 2012/13.

Apart from growing prices of milling wheat, its portion in the 2021 harvest shrank due to wetter weather. Processing companies even proposed to separately specify in the Memorandum the export of milling wheat, but other participants did not support this proposal.

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Tags: Flour production, Ukraine, China, Ukrainian flour exports, flour