The war between Russia and Ukraine has upended grain flows from the Black Sea region for months. Since the first days of fighting in late February, Ukraine’s export terminals in the southern part of the country have been closed. This from a nation that provides 10 percent of the world’s wheat exports and 12 percent of global corn exports.
As fighting continues, the threat to grain supplies extends beyond the export of old crop grain (2021/2022 marketing year) to the production of the 2022 crop. Russia, with its military control of the region, may still be able to provide wheat to its trading partners. The world wheat trade has other participants that may be able to increase their sales.
The impact of the conflict on the feed grain market may be harder to compensate for. Ukraine is the fourth largest corn exporter, 23 mmt in 2021/2022, 12 percent of the world total, and there are not many other major export providers of feed grain. After Ukraine, the next largest corn exporter is the EU at 4.9 mmt or 2.5 percent of total exports. Much uncertainty surrounds Ukrainian agriculture and market participation in the upcoming crop year in terms of productive capacity, foreign market access, and export controls due to domestic food security concerns. What will the implications be for 2022 world feed grain fundamentals—supply and demand—without the contribution of Ukrainian agriculture?
In this article, feed grain statistics are those reported for world coarse grains by USDA (corn, sorghum, barley, oats, rye, millet, and mixed grains) as well as wheat for feed. Since 1980, wheat for feed has constituted about 20 percent of total world domestic wheat use (Figure 1). The contribution of wheat as a feed grain for this analysis will be 20 percent of total wheat production, use, and stocks.
Without Ukraine, feed grain supplies in the 2022/2023 marketing year would decrease by about 60 mmt: 53 mmt for coarse grains and 7 mmt of wheat (USDA, WASDE, 2022). A simple linear regression model of the response in consumption to a supply change in feed grains yields a regression coefficient of +0.34, in that a 60 mmt decrease in supply would have an estimated 20 mmt decrease in use (Figure 2).
Using those estimates, without Ukraine, the feed grain days of use on hand at the end of the marketing year would fall to a 78-day supply in the 2022/2023 marketing year, down from an 85-day supply for 2021/2022. This extends the downward trend of the last six years, a time frame in which the marketing year average price of corn, which accounts for over 70 percent of all feed grains, has increased from $3.36 per bushel to a current estimate of $5.80 per bushel. This would be the lowest days of use on hand number since 2013/2014 (Table 1 and Figure 3). The years of tightest stocks to use in feed grains (lowest days on hand) since 1980 was from 2003/2004 to 2012/2013.
If, instead of a complete loss, the supply of feed grain in the upcoming marketing year from Ukraine were to decline by half, that would reduce world feed grain supplies by 30 mmt and use by about 10 mmt. The resulting days of use on hand at the end of the marketing year would be an 81.6-day supply. The impact of the Russia/Ukraine conflict is having severe and significant impacts on the world grain trade. In the short term, this impact is creating the tightest supply situation for feed grains that we have seen in the last ten years. The World Food Program’s emergency coordinator in Ukraine expects 20 percent of planted acres will not be harvested this July and that spring planted area will be down by about one third (Reuters, 4/21/2022). Even if this conflict were to be resolved relatively soon, damaged infrastructure will limit commodity shipments for an extended period of time. The longer drawn out the conflict, the greater the magnitude of fundamental adjustments that will be required
Figure 1. World wheat feed use as a percentage of total domestic use, 1980/1981-2021/2022
Figure 2. Response in feed grain use to a change in feed grain production
Table 1. World feed grain production, use, stocks, days on hand, and the corn marketing average farm price
|Beginning stocks, |
|Ending Stocks, |
|Days on |
|U.S. Corn |
Figure 3. World feed grain production, use, and days of use on hand at the end of the marketing year, 1980-2021, and 2022 estimate
Welch, J. Mark. “Outlook for Feed Grain Fundamentals in the 2022/2023 Marketing Year“. Southern Ag Today 2(21.1). May 16, 2022. Permalink