Ukraine grain outlook bolstered by trade disputes

The outcome of trade disputes between China and the US and Canada will be a key determinant of Ukrainian export flows in the coming months and years, delegates heard at the Black Sea Grain conference in Kiev.

Negotiations between US and Chinese trade officials could draw to a close at the end of this month. Whatever the outcome, the end of the process is likely to dictate the direction of global grain prices and redirect international grain trade flows.

If a trade deal is reached China will import up to 4.3mn t/yr of corn from the US, Chinese trading firm Donlink Grain and Oil's director Renault Quach told the conference. If no deal is struck, the offtake will be well below that, and this could open opportunities for Ukraine to further increase its market share in China. Ukraine has been the largest single corn supplier to China since 2015, and does have theoretical capacity to export more — its overall exports were around 4.5mn t below production in 2018-19, according to the USDA.

Trade tensions could affect the fundamentals for barley also. China could import feed barley, which it uses interchangeably with sorghum, from Ukraine should no agreement with the US be reached. China also has stable demand for malting barley, for which it depends on imports from Australia and Canada. But Beijing has a trade dispute over Canadian canola exports, and is carrying out an anti-dumping investigation into Australian malting barley. Quach sees an opening for Ukraine here as well.

"There is a big opportunity for Ukraine to export [malting barley] to China", he said. However, Ukrainian feed grains are likely to lose Chinese market share if a deal is reached before mid-2019.

Ukraine's rapeseed growers could find a new opening from the trade conflict between Canada and China, according to UkrAgroConsult's oilseed expert Julia Garkavenko. Although Ukraine does not have a permit to import rapeseed into China, this could change.

"Ukraine's representatives have already left for China to solve this issue", Garkavenko told Argus. Until such time as a permit is granted, Ukraine sends rapeseed oil (RSO) to China.

"Ukraine could be an attractive alternative" for China, Garkavenko told the conference, adding that RSO exports to China have already picked up pace in the past year.

The prospect of a trade deal between China and the US is already buoying global grains markets, US agricultural advisory AgResource's president Dan Basse said in Kiev. With world stocks at long-term highs, grain prices should really be lower than they are, Basse said. He sees the chances of a trade deal as fairly high. Quach agreed, telling Argus: "I believe there will be a deal".

Quach said while the importance of US feed grain for China has been in steady decline, "There is no other market in the world to replace [Chinese] import volumes of soybean and sorghum" and therefore China is in a strong negotiating position. However, while China's grain sector could adjust to a no-deal scenario, trade disputes particularly threaten the country's manufacturing sectors, said Quach. Therefore "from an economic point of view, our country does need agreement with the US", he said.