Miller Magazine Issue: 149 May 2022

101 COUNTRY PROFILE MILLER / MAY 2022 WAR DISRUPTED GRAIN TRADE FLOWS A large amount of uncertainty prevails regarding Ukraine’s grain production levels and trading volumes for the MY2022/23 season. Ukraine accounts on average for over 40 percent of the EU to- tal grain import needs. The war in Ukraine has raised concerns over MY2022/23 spring corn plantings, as hostilities limit labor force and inputs delivery (diesel, certified seeds, or fertilizers). This situation, combined with damages in trade infrastructure, has the potential to negatively affect the country’s grain export capabilities in MY2022/23. As per the current season, the EU grain normal trade flows have been severely disrupted by the war in Ukraine. Consequently, de- spite Ukraine’s current sizeable grain crop, the invasion has limited export capabilities. In this scenario, with port loading operations in Ukraine halted since February 2022, EU grain importers have been forced to look for alternative suppliers of grains in North America (namely the United States and Canada) and South Amer- ica. Neighboring Serbia has put in place a ban on exports to third countries since March 10, 2022, which prevents the country from supplying grains to the EU. The currently tight EU grain balance is anticipated to improve once the Brazilian safrinha corn becomes available later in the summer. In MY2022/23, EU’s total grain exports are projected at 45.7 MMT, higher than in MY2020/21 but lower than MY2021/22, as the large export levels estimated for MY2021/22 are not expected to be repeated. The final amount of EU grain exports will depend on the size and quality of the crop. In MY2021/22, the EU’s total grain exports have been revised up to 48.3 MMT, as opportunities arise in formerly Ukraine and Russia-dependent export markets. EU wheat exports are foreseen to expand in MY2021/22 giv- en the ample domestic supply available and the fact that the war in Ukraine has negatively affected export competition by the Black Sea region supplies. The bulk of EU wheat exports goes to North Africa, the Middle East, and sub-Saharan Africa. Algeria is a steady customer for French milling wheat. While in the first half of MY2021/22, French wheat lost some tenders in Algeria to the ben- efit of Black Sea Region (BSR) origin wheat, until the geopolitical situation in Ukraine improves, the EU will have a de facto quasi-mo- nopoly in North Africa and theMiddle East, given its significant ship- ping cost advantage. Likewise, EUwheat exports to Egypt, original- ly anticipated to shrink in MY2021/22 due to the competition from BSR wheat, are now foreseen to increase, as French-origin wheat had the most competitive proposals in the latest tenders from the Egyptian GASC (General Authority for Supply Commodities) due to the conflict in Ukraine. EU wheat exports to South Korea (mainly coming from Romania, Bulgaria, and Baltic States) also surged in MY2021/22, but still lag below U.S. and Australian exports to this country. China is currently the second-largest customer for EU wheat. EU exports to China increased tenfold between MY2018/19 and MY2020/21 and, according to preliminary trade data, are pro- jected to continue expanding in MY2021/22. Given the smaller EU grain crop projected, EU wheat imports are forecast to increase by 6 percent in MY2022/23, as Italy may import more durum wheat. Italy is the EU’s largest wheat importing Member State, accounting for over 50 percent of the total imports, followed by Spain, to a much smaller extent. And EU corn imports are forecast to rise by 4 percent to 13.5 MMT in MY2022/23. However, in terms of suppliers, some adjust- ments are anticipated because of Russia’s invasion of Ukraine. The progressive adoption of agricultural biotechnology or differences in plant protection products tolerance has forced the EU corn im- porting Member States to rely heavily on Ukraine, and Brazil to a lesser extent. Over the past ten years, Ukraine has been the EU’s largest corn supplier, accounting for over 50 percent of imports. Under the expectation of a shorter EU crop, corn exports are forecast to plunge by 14 percent in MY2022/23. Romania is like- ly to remain the EU leading corn exporter, followed by Poland, the newest player on the export market, Bulgaria, and France. In terms of destinations, EU is anticipated to maintain its com- petitiveness in the Middle East and North African countries, and South Korea. STOCKS MY2022/23 ending stocks in the EU are projected to remain tight at 27.9 MMT. The final EU grain stocks figure may be a com- bination of a potential yield reduction, new alternative sources for feed grain imports, the amount of EU grain exports, and the pace at which the internal demand contracts in response to soaring feed and food prices. Overall, EU ending stocks in MY2021/22 are esti- mated at 28.3 MT. This figure is partially explained by the ample EU grain crop, which preempts stocks from falling to lower levels. The export limitations in the EU Member States such as Hungary and Bulgaria also contribute to building stocks. SOURCE: EU Grain and Feed Annual. United States Department of Agricul- ture (USDA), Foreign Agricultural Service, April 26, 2022.