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FORT COLLINS — Ukraine has moved up the grain export ladder considerably over the past decade, aiming for No. 3 for wheat and No. 4 for corn this year, although the latest dispute with Russia has scared markets about whether Ukraine’s export efforts can succeed.

The timing of this potential export disruption is ill-timed as the world is still trying to recover from last season’s historic tight supply and multi-year high prices for all grains and oilseeds.

Traders clearly expressed their nervousness. As of Tuesday’s close, Chicago wheat futures were up 5% so far this week, hitting two-month highs, and Paris-based Euronext wheat is up more than 6%. % to reach one-month highs.

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Russia has amassed 100,000 troops on Ukraine’s borders, but Moscow denies planning an invasion. NATO said on Monday it was putting its forces on hold and major energy-producing nations were discussing protecting energy supplies, but Ukraine’s leader appealed for calm in a televised address on Tuesday.

It is unclear how exports might be affected, if at all, if the conflict escalates. Although not a direct comparison, the Russian occupation of Ukrainian territory eight years ago did not necessarily hamper grain exports, although the destabilization of the Ukrainian currency has raised concerns about crops.

Global food security is a major concern if Ukraine’s exports are disrupted, as much of its grain is destined for countries in the Middle East and Africa that rely heavily on imports. Recently, more than 40% of Ukraine’s annual corn and wheat shipments have gone to the Middle East or Africa.

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In comparison, the proximity disadvantage of the United States means that less than 10% of its corn and wheat exports go to these regions. Historic droughts in the Middle East and North Africa last year exacerbated cereal needs with rising domestic food prices and lingering fears of shortages.

Grain exports are the backbone of Ukraine’s economy. This year, the country is expected to export more than three-quarters of its national maize and wheat harvest. That compares to one-fifth for the United States.

Ukraine is increasingly important for oilseeds as it accounts for half of the world’s sunflower oil exports and is the third largest rapeseed exporter. Many global oilseeds, especially vegetable oils, have reached record prices over the past year.

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This year, Ukraine is expected to represent 12% of world wheat exports, 16% of corn, 18% of barley and 19% of rapeseed.

INTERRUPTION OF EXPORTS?

As of Friday, Ukraine’s grain exports since July 1 were up 28% from a year ago and 6% from two years ago after a record harvest in 2021. Shipments of The country’s wheat typically peaks in August or September, but more than half of Ukraine’s expected corn volume is to be shipped in the next five months.

Much of this maize is destined for China, as Ukraine was its main supplier before the United States took over last year. It’s unclear whether China is confident in the execution, but there have been no major purchases of US corn by China since May, indicating that it is not yet looking for alternatives.

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Ukraine’s Agriculture Ministry forecast 2021-22 corn exports at 30.9 million tonnes, and 17.2 million (677 million bushels) remained Friday for shipment before June. For comparison, US corn exports are pegged at 61.6 million tonnes for its September-August 2021-22 marketing year.

Ukraine and the United States are currently the world’s only corn suppliers, as Argentina’s crop is months away from market and Brazil’s is several months away. There is already a lot of uncertainty about the South American export potential given the harsh weather conditions, but the maize crop exported by Brazil has only just been planted.

China does not buy South American corn, so the US market would be the recipient if the Asian country developed concerns over the situation in Ukraine.

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IMPACT ON PRODUCTION?

Ukraine’s currency, the hryvnia, began to decline against the dollar in early 2014 during the revolution and Russian occupation of Crimea and the conflict in eastern Ukraine. This devaluation quickly peaked in early 2015, and hryvnia weakness has since remained at more than triple pre-2014 levels.

While the weak currency generally favors exports, it has also increased the costs of agricultural inputs, many of which are imported. Growers for 2015 would have reduced their purchases of quality inputs and used fewer chemical applications to save on expenses.

Yield declines were expected, but the results were mostly positive. Ukraine’s primary grain exports hit new records every year from 2013-2014 to 2016-2017.

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Ukraine’s growing role in the global agricultural market has attracted a lot of foreign investment to the country, increasing crop yields and reliability. However, farmers have already raised concerns ahead of the 2022 maize season about the potential negative impact of high fuel prices.

The hryvnia has weakened more than 5% so far this year due to recent geopolitical instability and Tuesday’s parity of more than 28:1 against the dollar is among the highest on record. Karen Braun is a market analyst for Reuters. The opinions expressed above are his own.

(Reporting by Karen Braun editing by Matthew Lewis)