The worst drought in half a century is hitting corn and wheat harvests in the United States, the world’s largest food exporter. China, a major food importer, is turning to a new source of supply – Ukraine, a nation once known as the breadbasket of Europe.
The drought in the United States reinforces expert forecasts that world food supplies will steadily tighten this decade, and that prices will rise. When grain prices go up, so do the prices of bread, milk, eggs and meat. When that happened two years ago, riots broke out in Egypt and Mozambique.
By 2050, the world will have to produce 60 percent more food to meet demands from a world population that is expected to be bigger and richer.
In advance, China is reaching out to producers around the globe to guarantee future food supplies.
A century ago, rich corn and wheat harvests made Ukraine the breadbasket of Europe.
Now China wants to lock down a portion of the bounty flowing from the black soils of this farming nation the size of France.
Galyna Kovtok is CEO of UkrLand Farming, or ULF, Ukraine’s largest agri-business. With more than half-a-million hectares of farmland under cultivation, she negotiated a $4 billion Chinese credit this year for her company.
“This year, UkrLand Farming may become the first company in Ukraine to send agricultural products to China because at this moment, we are actively working to get certified to export to China,” she said. “The first step will be corn, and then we will work on sending other goods.”
When ULF exports corn to China, it will make Ukraine the first country outside the Americas to do so. And with China’s population becoming larger, and richer, China is on track to overtake Japan as the world’s largest corn importer.
In Lokhvitsa, a three-hour drive east of Kyiv, Chinese money is financing construction of six grain elevators. Building for the Chinese market, ULF will soon have almost two million tons of elevator storage capacity.
At the elevators, and in the fields, the equipment is largely American. In a wheat field, a fleet of four half-million-dollar John Deere combines is harvesting and threshing.
With investments like these, ULF grain yields per acre are now halfway between Ukrainian averages and the high yields of the American Midwest. But, just as in the United States, farming depends on the weather.
Across the Black Sea region – in Ukraine, Russia and Kazakhstan – drought this year is pushing harvests down by 15 to 20 percent. Yuri Scherbak, the ULF manager in Ukraine, predicts that his own corn and wheat crops will be down by about 15 percent.
“This year, unfortunately, we are expecting a bit of a drop in production,” he said. “And the main reason, while we are in a period of drought, is the decrease in quantity of precipitation.”
Traditionally, the Black Sea region is the main source of wheat for North Africa and the Middle East.
But this year, on the supply side, Russia may have to suspend exports. And on the demand side, Africa and the Middle East are now competing with China.