Kernel reports weakened winter wheat yield in 2015

Ukrainian farmer and the largest sunflower oil producer Kernel (KER PW) reported the completion of its early crop harvesting on August 7. Its average winter wheat yield declined 5% yoy to 5.1 t/ha, though the company’s management said this figure was above their expectations. The yield of winter rapeseed, which the company did not harvest last year, came in at 4.3 t/ha.

Kernel harvested winter wheat from an acreage of 72,567 ha and rapeseed from 9,565 ha, the company reported. Kernel’s aggregate sowing area for this season is 384,000 ha, which is a 3% yoy increase.

Roman Topolyuk: Despite the 5% yoy decline in yields of winter wheat, Kernel has increased wheat harvesting  2.2x yoy to 370 kt we estimate, due to more than twice a larger area for this crop, compared to the previous season. Kernel’s wheat harvest is discouraging, especially after Astarta’s (AST PW) recent report of a 10% yoy increase in its wheat yield. Though, this crop would not determine the result of any of these companies. For Kernel, the result of the corn harvest will be more important, as corn represents 41% of its total acreage. Thus far, our expectation of the strong financial performance of Kernel’s farming segment in FY2016 at 265/hectare remains unchanged.