OREANDA-NEWS. July 22, 2010. With harvesting of wheat, barley and rapeseed now in full swing in Ukraine, Kernel feels confident to confirm initial positive comments regarding the 2010 crop, as published in our 3rd quarter financial report. It should be noted that the very dry weather, which has adversely impacted agricultural production in some areas of Europe and Russia, has only moderately affected grain production in Ukraine. To date, the country has harvested in the range of 30% of the wheat, barley and rapeseed in the fields and, barring any sudden adverse weather conditions, company management expects the country to harvest in total in the range of 40 to 45 million tons of wheat and coarse grains, of which 18 to 20 million tons should be exported, including carry-over volumes from the 2009 harvest. As a positive side effect of such weather conditions, the price of wheat on the international market has increased by some 30% over the month of July, providing a welcome boost in revenue to the Ukraine farming sector.

Soybean, corn and sunflower are still in the growing period. All three crops will be harvested from mid-September and until end of October and, consequently, any forecast on the volumes, which Ukraine will produce, should be treated with caution. However, based on the present state of the crops, the overall outlook in terms of production volumes for soybean, corn and sunflower seems promising. In particular, the present state of the sunflower seed crop indicates the country could be producing an even larger crop than was initially expected: from a production estimate of 6 to 7 million tons, the general consensus has now moved to a production forecast in a range from 7 to 8 million tons of sunflower seed.

Overall, Ukraine looks set to achieve another year of reasonable agricultural production. Notwithstanding the lingering problems caused by the 2008 financial crisis and the still subdued prices for agriculture commodities, the farming sector in Ukraine is performing reasonably well and should provide Kernel with the expected volumes to export or process.