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Industry News

Global Grain Market: Stellar Prospects

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July 30, 2017

- Industry News

According to FAO and OECD forecasts, Ukraine will remain the top global grain supplier, but it will have to deal with infrastructure challenges and increase government support for farmers to keep its leading position.

Today, the key factor of agricultural market development is the increasing food consumption in developing countries.

So, according to FAO and OECD forecasts, the change in consumer preferences previously observed in developed countries will affect the rest of the world by 2021. In particular, the consumers will buy 0.4% less wheat, while the demand for rice, oil, meat and sugar will rise by up to 1%.

Prices of agricultural products are now closely related to energy markets.

So, for example, if global prices for oil fall by 25%, the prices for vegetable oils will decrease by 3%, wheat – by 4%, sugar – by 5%, oilseed meals – by 6%, ethanol – by 13%, fertilizers – by 14%.

This dependence is caused by the growing worldwide consumption of biofuels such as bioethanol and biodiesel, which are gradually replacing fossil fuels. The global production of cereals, vegetable oil and sugar cane for biofuel is expected to increase by 2%, 5%, and 10%, respectively. Consequently, the fraction of these crops produced for food will gradually decline.

Wheat and forage production in Ukraine will grow by 28% and 23%, respectively.

By 2021, OECD expects the global growth of wheat production at 11%, and forage production at 19%. Forage production will grow by about 20% faster, because of the greater consumption of meat in developing countries and the rising welfare of Asian nations.

Wheat importers will buy 65% more wheat from Ukraine…

The net annual export of wheat from Kazakhstan, Russia and Ukraine will exceed 50 million tons by 2021. These countries can also show the greatest increase in wheat exports.

The rapid growth of grain production in the Black Sea region and changes in export structure could shuffle the leaders in each of the product categories. In wheat exports, however, Ukraine is expected to keep its place in the global top 5, because of the stable demand.

…While forage crops production can increase by 40%

According to FAO forecasts, the US will remain the leading producer of forage crops, exporting over 60 million tons annually. Argentina will increase its exports by 51%, becoming the second-largest producer worldwide.

Ukraine will hold the third place, supplying about 17 million tons to foreign markets.

FAO and OECD forecasts for Ukrainian grain market look very promising. Though the accuracy of these forecasts will largely depend on government support for agribusiness.

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Industry News

Becoming an ‘Agricultural Monster’: Expert Guidelines

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July 30, 2017

- Industry News

According to the principal of the Hungarian Agricultural University, Jozsef Popp, Ukraine could become the world’s “agricultural monster”, if it would develop waterways instead of railroads. How is it achieved and why are waterways so important to Ukraine’s agricultural sector?

Prof. Popp elaborated his statement during the Ukrainian and Hungarian Agricultural Experience conference in Kiev. In his eight years as the agricultural attaché of Hungary in the United States, he said, he had concluded that the United States had managed to become the world leader in the agricultural development because of well-developed river navigation.

“From the Canadian border, grain suppliers ship their goods down the rivers to New Orleans, covering the distance of 3 thousand kilometers, spending only $5 per ton for the delivery of grain to the port, which is incredibly cheap compared to any other means of transportation” – he said.

According to Jozsef Popp, implementing a similar project in Europe would be impossible because Danube, Europe’s main waterway, is unsuitable for year-round navigation, and lacks locks on the territory of many countries. Also, the idea of such project was opposed by environmentalists.

Ukraine, however, could navigate its way from Kiev down the Dnieper River to the sea, said the expert.

“Today, no cargo ship can pass from the headwaters of Dnieper to the Black Sea”.

“THE NUMBER ONE TASK FOR THE UKRAINIAN GOVERNMENT IS TO DEVELOP SUCH WATERWAYS AND MAKE THEM AVAILABLE FOR FARMERS WHO WILL PAY FOR THEIR USE AND MAINTENANCE”

“Some 100-200 km away from these waterways, they should have wheat collection points. If this is done, Ukraine will become the largest European seller of grain, achieving greater success in agriculture than any country in the EU”, – said Mr. Popp.

The expert also emphasized that the use of waterways is another huge advantage of Ukraine as an agrarian country, in addition to its fertile land.

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Industry News

Ukraine Radically Improves the Quality of Grain

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July 30, 2017

- Industry News

Ukrainian grain suppliers learn quickly. Year after year market operators excel at handling grain in a quick and professional manner. The improvement is especially obvious in the quality of Ukrainian corn, says the head of UMG’s Agrotrading project, Valentin Selvesyuk.

“Let’s take corn, for example. Just a few years ago, there was an issue with Ukrainian corn at the handling stage because of the large number of damaged grains in a batch. Now the problem is solved: elevators and grain terminals acquire specialized equipment and invest additional funds in warehouses,” – says Mr. Selvesyuk.

THE EXPERT NOTES THAT THESE FACILITIES ARE DESIGNED SPECIFICALLY FOR CORN, WHICH GREATLY IMPROVES THE QUALITY OF THE PRODUCT

The current season, he adds, is not the best one for Ukrainian wheat in terms of quality. On the other hand, it may yield a larger proportion of the average quality crop, which is also appreciated by customers.

Valentin Selvesyuk also notes the positive effect of the permission to mix different classes of wheat at the elevator. This has allowed to level out quality in the formation of export batches.

“Previous quality regulations were very stringent – almost to the point of criminal liability. Each class of grain should have been stored grain separately. Ultimately, these rules did not have a positive impact on the image of Ukraine as a grain supplier. Now the terms are much better. There was only one case when the buyer was rather upset that the quality turned out better than expected, ” – says the expert.

Mr. Selvesyuk notes that there’s one feature that all millers share, and that is that they hate surprises. Buying grain from any one source, be it the US or Ukraine, the processors have a certain understanding of these products, certain expectations. And it’s very important that the actual product is consistent with these expectations, since it’s a matter of production planning, equipment settings, etc.

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Industry News

High Demand Maintains Wheat Prices

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July 30, 2017

- Industry News

Tenders were held last week in Egypt and Algeria, supporting the price of wheat on world exchanges. Egypt purchased 415 thousand tons of Russian, French, and Ukrainian wheat at the tender.

On Wednesday, the marketplace in Chicago began to win back its lost positions. American wheat, which fell in price significantly last week, became more competitive in world markets, which was confirmed by the latest Egyptian tender. Although wheat from the US did not win there, it showed a very attractive price on FOB terms.

The depreciation of the US dollar has also had the supporting effect on wheat prices.

The quotes of wheat in the US increased:

In Chicago, by $ 2.02 per ton to $160.20 per ton on soft winter wheat (SRW),

In Kansas City, by $ 1.75 per ton to $164.33 per ton on hard winter wheat (HRW),

In Minneapolis, by $2.94 per ton to $198.60 per ton on hard spring wheat (HRS).

On the French MATIF, quotes of milling wheat on Wednesday increased by €1.75 per ton to €172.50 per ton or $183.39 per ton. With the optimistic results of Algerian and Egyptian tenders, stockbrokers made speculative purchases.

In the last few days, the grain from France demonstrated good competitiveness, so traders were confident of winning the tender even before summing up the bids.

European exporters predicted a victory for the French grain at the Algerian tender, where 700 thousand tons of wheat were purchased.

In Ukraine, wheat prices continue to decline due to a reduction in export demand from India. Hopes are that the victory at the Egyptian tender will support prices.

The current wheat prices in Ukraine are as follows:

2 grade 169-170 USD or 5300-5350 UAH per ton,

3 grade 167-170 USD or 5200-5320 UAH per ton,

Feed 158-161 USD or 4900-5150 UAH per ton.
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