Ukraine is set to produce more wheat for animal feed and less higher grade bread-making grain this year, as rain damage has shifted the global exporter's quality balance, traders and analysts said. The altered backdrop is seen heaping further pressure on global prices, while also signalling tougher competition with other European countries producing more feed wheat.
New-crop wheat futures in Paris hit a four-year low last week as traders priced in the prospect of a glut of cheaper animal-feed wheat from this summer's harvest after several European countries saw repeated rain. Rain is now having a direct impact on Ukraine, which competes with Russia and France, the European Union's largest wheat exporter, to supply North Africa and the Middle East, analysts said.
"We expect the share of feed wheat to rise to around 35 percent (of the total wheat harvest) this year from 25-30 percent last year," said Mykola Vernytsky, head of Ukraine's ProAgro consultancy. "This will increase the competition on the feed wheat market."
More supplies of cheap wheat of low quality could dent foreign currency earnings to the country, already hit by conflict with pro-Russian rebels. Ukraine late last month said it could lose 500,000-550,000 tonnes of grain, out of a projected 60 million tonne harvest, because of fighting in the country's east. The country's major exports are grains, metals and chemicals. In 2013 total exports were worth $63.3 billion, of which $6.4 billion came in from grains supplies. Ukraine, targeting a large wheat harvest for the second year in a row, had cropped around 90 percent of the sown area as of August 1, with the harvest at 19.4 million tonnes.
