Ukraine: Continuing To Milk The Cash Cow, For Now
Dollar-hungry Ukraine continues to export grain like there's no tomorrow, and for them there possibly is no tomorrow. So far this marketing year (July 1-Sept 24) more than 6 MMT has left it's shores, matching last season's record pace. Of that total 3.27 MMT was wheat, 12% more than at the same time a year ago.
The good news is that with a grain harvest 15% lower than last season, and a wheat crop 19% down they surely can't keep on shipping at this rate.
It should come as no surprise that the majority of their exports will come at the front end of the marketing year, these boys are desperate for cash and price is almost secondary.
The Ukraine economy fell 18% in the second quarter of 2009, following a 20% drop in Q1 as industrial production and construction plummeted in the face of the global economic crisis. The only industry that expanded in Q2 was agriculture, up 2% thanks to last season's bumper harvest and subsequent aggressive exports.
The country was granted $11 billion in aid from the IMF last autumn, but there were some tough conditions to meet in order to keep the cash flowing. The next tranche is due this month, and it seems that the authorities will struggle to push through measures required by the IMF to release the money.
A stable hryvnia was one of the IMF's prerequisites, but that has fallen 15 percent against the dollar since the end of June.
The IMF also called upon Ukraine to stabilize the finances of Naftogaz, which is deep in debt due to subsidized gas prices. But with presidential elections fast approaching in January, the government see raising domestic gas prices as political suicide.
So the country remains stuck in political limbo, hemorrhaging money, with the IMF potentially about to pull the plug. You can see why farming enterprises are currently so eager to get some dollars, but all this comes at a cost.
Agrimoney.com recently reported that Ukrainian farming giant Landkom International are actively seeking a "substantial merger". They also reported that "Landkom's cash balance narrowed to $542,000 at the end of June from $34.5m a year before" after a "disappointing" first half of 2009.
If Landkom are struggling, what are the implications for smaller farming enterprises? Drought, the lack of financial resources and the current low prices for grains look set to see grain production next year lower again.
As recently as 2006/07 Ukraine imposed export restrictions after adverse weather conditions hit crop production hard. The 2009/10 season might be Ukraine's swansong before it "does an Argentina" and departs the international wheat export stage as rapidly as it stormed it.
The good news is that with a grain harvest 15% lower than last season, and a wheat crop 19% down they surely can't keep on shipping at this rate.
It should come as no surprise that the majority of their exports will come at the front end of the marketing year, these boys are desperate for cash and price is almost secondary.
The Ukraine economy fell 18% in the second quarter of 2009, following a 20% drop in Q1 as industrial production and construction plummeted in the face of the global economic crisis. The only industry that expanded in Q2 was agriculture, up 2% thanks to last season's bumper harvest and subsequent aggressive exports.
The country was granted $11 billion in aid from the IMF last autumn, but there were some tough conditions to meet in order to keep the cash flowing. The next tranche is due this month, and it seems that the authorities will struggle to push through measures required by the IMF to release the money.
A stable hryvnia was one of the IMF's prerequisites, but that has fallen 15 percent against the dollar since the end of June.
The IMF also called upon Ukraine to stabilize the finances of Naftogaz, which is deep in debt due to subsidized gas prices. But with presidential elections fast approaching in January, the government see raising domestic gas prices as political suicide.
So the country remains stuck in political limbo, hemorrhaging money, with the IMF potentially about to pull the plug. You can see why farming enterprises are currently so eager to get some dollars, but all this comes at a cost.
Agrimoney.com recently reported that Ukrainian farming giant Landkom International are actively seeking a "substantial merger". They also reported that "Landkom's cash balance narrowed to $542,000 at the end of June from $34.5m a year before" after a "disappointing" first half of 2009.
If Landkom are struggling, what are the implications for smaller farming enterprises? Drought, the lack of financial resources and the current low prices for grains look set to see grain production next year lower again.
As recently as 2006/07 Ukraine imposed export restrictions after adverse weather conditions hit crop production hard. The 2009/10 season might be Ukraine's swansong before it "does an Argentina" and departs the international wheat export stage as rapidly as it stormed it.
