New season outlook: rising production costs and falling profits

UkrAgroConsult

Article author:

Elizaveta Malyshko

Head of Market Research

February is already a traditional month of active forward contracting of Ukrainian new-crop grains and oilseeds. Current prices of 2022 crop grains are on average USD 50 higher than in February 2021, UkrAgroConsult reports.

Price formation is influenced by the following factors:

Policy. Uncertainty in the east of Ukraine caused a sharp price increase in January. However, this factor’s role should not be overestimated. The lineup indicates that grain shipments by sea are unimpeded and there are no difficulties with cash flows / payment for goods.

Weather. No official data on crop conditions are available so far. However, the fall and winter conditions were somewhat worse than last year, and it is very likely that the 2021 record will not be reached again.

More expensive inputs. The fall and winter of 2021 featured a surge in fertilizer prices. Domestic prices of nitrogen fertilizers have doubled from a year ago – this has pushed up imports. The share of mineral fertilizers in grain production costs may expand to 20-25%.

Competition. The new season is expected to witness keener competition in the markets of both wheat and corn.

Pressure of inventories. Ukraine’s wheat and corn inventories are now the highest at least in five years that will pressure prices this spring if the 2022 grain harvest outlook remains favorable.

Full version of the article is available at AgriSupp:

https://agrisupp.com/en/dashboard/analytics/section/1/rubric/3/article/9736

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Tags: Ukraine, corn, UkrAgroConsult, grain, prices, wheat, fertilizers