Ukraine to Cut Back its Wheat Exports in 2022 Amid Rising Bread Prices

Wheat

Ukraine

Published Jan 3, 2022

In 2020, Ukraine’s wheat export volume touched as wheat-producing giants like Russia, the United States, and Canada faced trade and supply disruptions. While the export tax on wheat imposed by Russia limited the volume available of exports, the US and Canada witnessed severe droughts which reduced the volume of wheat harvested and exported. However, the increasing exports came at the cost of limited wheat supply in domestic markets of Ukraine which is caused the prices of bakery products to increase in the country. Ukraine is likely to consider limiting milling wheat exports to manage the increasing prices in the coming months.

In marketing year (MY) 2021/22, Ukraine’s wheat exports touched new records thanks to the changing market dynamics of wheat-producing giants in the world. The country exported 15.4 million tons of wheat (as of 20th December 2021) in MY 2021/22 (June - July) which is 27% more than the volume recorded during the same period in MY 2020/21. USDA projects that Ukraine’s wheat production will touch 24.2 million tons by the end of MY 2021/22. Based on the current production volumes and stock of wheat, Ukraine can export roughly 4 million tons of milling wheat and 6 million tons of feed wheat more in the current MY without impacting its own demand-supply dynamics.

In general, Ukraine’s wheat exports were mainly driven by disruption in supplies from other major wheat exporting countries like Russia, the United States, and Canada. Major reasons and situations which pushed up the exports are as follows:

Export tariffs imposed by Russia on wheat to curb exports since the beginning of 2021resulted in a fall of 37.5% in the number of shipments. There were severe supply constraints from Russia due to floating taxes and export quotas. Countries that relied on Russia for wheat were scrambling to find alternative and competitively priced wheat.
The exports were also driven by a higher volume of wheat harvest during the current MY as the country harvested around 33 million metric tons of wheat, 23% more than the last year's volume.
Both the US and Canada witnessed persistent droughts which reduced the harvest and quality of wheat produced. The entire 2021 was a nightmare for wheat farmers across as the production and export volumes plummeted.

Source: Tridge, Price Charts.

While Ukraine enjoyed its position as the go-to wheat exporter this year, the higher volume of exports has driven up the milling wheat (wheat flour) prices in the country. There are concerns regarding the limited supply of wheat and the pressure it would create on the domestic prices of high-quality bread-making wheat. It is expected that the price of bakery products in Ukraine may increase by as much as 35% by September 2022 if a similar trend continues. According to recent sources, Ukraine is likely to consider limiting milling wheat exports in the upcoming year to manage the domestic prices.