Ukraine’s plunging currency is raising concern that farmers may reduce purchases of fuel and pesticides later this season even as spring planting accelerates to the fastest pace in six years.
The hryvnia tumbled 24 percent in 2014, making it the worst-performing currency this year, amid political unrest and economic concerns that spurred the country to seek a bailout from the International Monetary Fund. While farmers in Ukraine bought most of the seeds needed for spring planting before the crisis, the declining currency will make other inputs more expensive, and corn yields may drop from the past year, said Dan Basse, president of Chicago-based researcher AgResource Co.
“For small- and medium-sized farms, the deliveries of all inputs including fuel could be a problem,” Sergey Feofilov, the general director of agriculture researcher UkrAgroConsult, said by telephone today from Kiev. “Poor agrarian technology and worse weather could result in lower yields and lower grain production.”
Ukrainian farmers planted 1.5 million hectares (3.7 million acres) of early spring crops including wheat and barley as of today, 52 percent of the intended area, the country’s Agriculture Ministry said. Farmers are planting at the fastest rate in six years, according to UkrAgroConsult. Corn sowing doesn’t usually start until April. Ukraine is the world’s third-biggest corn exporter, sixth-largest wheat shipper and top grower of sunflower seed, U.S. Department of Agriculture data show.
Ukraine’s corn harvest may be about 26 million metric tons in 2014-15, Basse said, similar to an estimate of 25.7 million tons from the Institute for Agricultural Market Studies, a Moscow-based researcher. That would be 16 percent less than the prior season’s harvest of 30.9 million tons, USDA data show.
World leaders gathered in The Hague today to discuss Ukraine amid growing concern over a Russian build up on its neighbor’s border as pro-Kremlin troops seized a Ukrainian base in Crimea. Ukraine is seeking a $15 billion bailout loan from the IMF after reserves sank to a nine-year low, while foreign-currency debt due this year totals $10 billion.
“Political instability makes people cautious,” Kees Vrins, the president and founder of Allseeds, a Kiev-based sunflower oil trader, said in an interview in Geneva on March 21. “It makes them delay decisions, such as purchasing delays and investing in new machinery.”
Corn prices in the Black Sea region have climbed about 21 percent since the beginning of the year to $248 a ton on March 21, according to a gauge from the London-based International Grains Council, which tracks weighted average prices from Ukraine and Russia. Prices on the Chicago Board of Trade, the global benchmark, rallied 14 percent this year after tumbling 40 percent in 2013 on prospects of record global production.
The USDA said March 12 that while delivery of most input products including fuel and fertilizer hasn’t been interrupted in Ukraine, use of some chemicals and hybrid seeds might decline from last year if currency exchange rates don’t improve.
“We are uncertain yet about supply availability, especially as we start to look at some of that fuel coming from Russia,” AgResource’s Basse said in an interview last week at the company’s outlook conference in Geneva. “It’s going to cost Ukraine more in their local currency.”