Ukraine will have to cut wheat exports for the rest of this marketing year if it wants to maintain the domestic balance between supply and demand. In the first half of the season, 27% more wheat was exported than a year earlier. If that pace is maintained, the expectation is that bakery products in the country itself will rise in price by 35% until September.
Wheat exports from Ukraine are heading for a record this marketing year, which runs from June 2021 to July 2022. Up to and including mid-December, 15,4 million wheat were exported, an increase of 27% compared to the same period a year earlier. The increase is driven by supply disruptions from other major wheat exporting countries. Think of Russia, the United States and Canada. The export tariffs imposed by Russia since the beginning of last year have led to a 37,5% drop in the number of shipments from that country. Ukraine was a good alternative for Russia's buyers.
In addition, the persistent drought periods in the United States and Canada play a major role. These have reduced both the yield and the quality of wheat in those countries. This while Ukraine itself harvested more wheat. The country achieved a yield of 33 million tons last harvest season, an increase of 23% compared to the previous season. Add to that the high wheat price – the Matif in Paris is trading at €279,25 per tonne at the beginning of the year (a plus of about 30% compared to a year ago) – and you have a very interesting reason to buy more to export.
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High prices for bread
At the same time, the United States Department of Agriculture (USDA) predicts that wheat production in Ukraine will reach 24,2 million tons by the end of this season. And that is where the problem lies for the country. There is currently a more limited supply on the domestic market. And that has consequences for, among other things, the price of bread. Analysts expect the price of bakery products in Ukraine to rise by as much as 35% by September if wheat exports continue in a similar trend.
In order to maintain the domestic balance between supply and demand, Ukraine cannot actually export more than 4 million tons of milling wheat and 6 million tons of feed wheat this marketing year. Sources report that the government in the Eastern European country is now seriously considering limiting the export of milling wheat this year to control domestic bread prices.