Crimea tension upsets grain crops

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Bloomberg

Planting of cereal crops in Ukraine, the fourth-largest maize exporter, might be disrupted as tensions rise in the Black Sea region of Crimea, the nation’s grain association said yesterday.

Instability would force prices up while farmers of wheat, barley and maize might be drawn away from their fields as the government mobilised its army reserves, Ukrainian Grain Association president Vladimir Klimenko told a conference in Hong Kong.

On Monday, gains in everything from gold to oil drove commodity indices to the highest level since September last year as Ukraine’s turmoil boosted the appeal of haven assets and fuelled concern that energy and agricultural supplies will be disrupted. Ukraine put its military on high alert after Russia seized control of Crimea, sparking one of the biggest stand-offs with the West since the end of the Cold War.

“Because Ukraine has claimed mobilisation of the population, they have to defend their country,” Klimenko said. “Instead of doing their normal jobs, people have to see what sort of role they’re going to play in the crisis.”

The US Grains Council said last week that maize prices in Ukraine were rising as farmers slowed sales, holding grain as a hedge against the nation’s falling currency. While exports from Odessa and other Black Sea ports were continuing and vessels were being loaded, price increases might slow down future sales, it said.

Klimenko said the spring planting season had just started in Crimea, which exported about 1.5 million tons of wheat last year.

Ukraine is set to be the sixth-biggest wheat supplier this year, according to the International Grains Council.

Wheat rose the most since 2012 on Monday and maize rallied to the highest price since September last year as tensions built, though both fell in early Chicago trading yesterday.

Four of Japan’s biggest trading companies – Mitsui, Itochu, Marubeni and Sojitz – said yesterday that their Ukrainian operations were so far unaffected by the unrest. They all have resident officers in Kiev.

Korea Feed Association director Kim Chi Young said it had no shipments scheduled for delivery from Ukraine. If things got worse, that might limit choices for traders to supply grains to buyers, Kim said.

The increased tensions also raise concerns that Ukraine may have difficulty fulfilling a loan it signed with China in 2012, which was to be repaid in grain. The State Food & Grain Corporation of Ukraine had received $1.5 billion (R16.2bn) of initial funds, the company said on its website on February 26.

In the marketing year to June 30, the Ukrainian company said it was to deliver 4 million tons of grain to its Chinese partner, China National Complete Engineering. As of February 25, 2.6 million tons had been shipped, it said.

Ukraine was fulfilling the loan obligations, Alexei Kuzmenkov, the deputy director of the ministry of agrarian policy and food of the department on economic development of the agricultural market, told the Hong Kong grain conference yesterday.

China’s customs data show it received 570 tons of maize from Ukraine last month and 108 866 tons last year. Wheat imports from Ukraine were 14 123 tons last year and 3 956 tons in January. – Bloomberg


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