Some of Ukraine’s biggest corn growers are reluctant to expand production even though prices have recovered to an 18-month high.
Part of the problem is that export prices for the crop are still just half of a 2011 peak and shippers are facing fierce competition from Brazil. Ukrainian farmers have had a tough time with corn after unfavorable weather last year cut output by 14 percent, while other crops such as sunflowers remain more profitable.
Some firms are even cutting back, with Mriya Agro Holding Plc and Nibulon planning to reduce plantings by at least 17 percent for next season. Two other producers surveyed by Bloomberg don’t intend to increase sowings and just one is preparing to plant more.
“The price for corn remains unfavorable for producers, even after the latest rebound,” said Victor Spassky, head of the crop division at UkrLandFarming Plc, which owns more farmland in Ukraine than any other firm. It doesn’t plan to increase corn sowing this year, but may partially expand areas for sunflowers, as well as soybeans and rapeseed.
The reluctance to increase output could limit exports next season from the world’s fourth-biggest shipper. Overseas sales are already down 16 percent this season after a smaller harvest and as Brazil grabbed market share in the European Union, a traditional buyer of the Black Sea nation’s grain.
Mriya Agro will reduce its corn area due to be sowed from April by 38 percent from last year’s 24,000 hectares (59,000 acres), citing higher costs of drying harvested crops in western parts in recent years. Nibulon plans to cut plantings 17 percent as most growers will probably earn less than expected from this season’s crop, Deputy Chief Executive Officer Kostyantyn Khmelnytskyi said.
Among other producers, MHP SE said it doesn’t plan to expand corn sowing. Kernel Holding SA, one of the nation’s biggest corn producers, Industrial Milk Co. and Agroprosperis either declined or were unable to immediately comment on their output plans.
Even after climbing 10 percent since September — Chinese demand has aided the rally — export prices for Ukrainian corn are about $10.50 a metric ton below rates for wheat. That compares with an average discount of less than $4 over the past three years.
Not everyone is wary of planting more corn. Astarta Holding NV is set to expand its area by as much as 15 percent, meaning the firm’s output and exports should also increase, Marketing and Communication Director Mykola Kovalski said.
“Our specialists are analyzing markets and taking into account market conditions,” he said. “And exports to China will remain one of our priorities.”