Maize market in Russia was never seriously considered by export-oriented companies. But time is getting on, and to date Russia is steadily increasing not only maize production volumes, but its exports, opening new selling markets for the grain. We decided to ask Vladimir Petrichenko, General Director of ProZerno LLC, what is the current situation on the Russian market of maize, and what should the market expect for during the year.
- Vladimir Viktorovich, according to official data, to date the general harvest of maize for grain in clean weight in Russia totaled 10.68 mln tonnes, an increase of almost 1/3 compared with the result of 2012. What, in your opinion, is reason of such increase of the grain production in the country?
I should mention that maize yield broke the record. For example, last year the index totaled nearly 4.37 t/ha, which exceeded the 2012 index by almost 9%, and the previous high-yield results in 2011 - by 7.7%. However, increasing of the planted areas at 18.8% compared with the previous year became the main factor in the growth of grain production volumes. To date we can confidently say that since 2011 Russia faces maize revolution. Usually, revolutions bring destruction and misery, but the present phenomenon is quite opposite. The technological component for agricultural producers for maize cultivation is going well: weather and climatic factors, wide range of proposals of seeds, agrochemicals, etc. The other important factor is that despite the explosive nature of production, the market conditions are still alive. Usually, in terms of the growth of crop production, in the new season the interest in the crop purchasing starts falling, as it often happens with rye. But to date maize remains as one of the most interesting grains, due to its active exports, development of animal husbandry and feed production. The profitability of maize is sometimes higher compared with traditional grain crops, and I should note that the production volumes of the grain continue growing in the northern regions of Black Earth zone and the Volga District, which used to be difficult to imagine.
- However, last year the harvesting campaign of maize was difficult, due to periodic worsening of weather conditions in different regions of the country. How did it affect the qualitative indicators of the harvested volumes?
I should say that unfavorable weather conditions during the harvesting campaign were associated primarily with excessive precipitations. It was the rainiest September period in the middle zone of the country and the Black Earth zone since 1885. Such weather just came in the beginning of the maize harvesting campaign, and then continued in October and November, as the grain did not have time to dry out. It should be noted that express-analysis of the qualitative characteristics of maize is realized in agricultural enterprises at cold grain, and it shows more or less normal humidity. But when the maize grain is delivered to the elevator, the detailed analysis shows quite different qualitative indices, real, higher levels of humidity content. According to the general expectations and tenuous estimations, we have quite good ratio of high-quality and poor maize, but in reality poor-quality maize volumes are higher. It is known that excessive humidity causes many problems: fungal diseases, need in additional drying with subsequent growth of broken kernels, etc. The greatest difficulties associated with maize quality, were observed in Rostov, Voronezh, Tambov, Kursk oblasts, Stavropol Krai. Ambrosia is the main problem in Krasnodar Krai.
- During recent weeks maize prices on both domestic and foreign markets began rising. Which trends do you think we should expect for in the nearest future, and how the situation will change until the end of MY?
I believe that in the nearest future increasing of maize prices will continue on the world market and, especially, on the Russian domestic market. According to the monitoring results of ProZerno, to date the grain price varies within the range of 215-220 USD/t FOB Black Sea. The bullish process on the global market will not be rapid, but will continue developing. As for the prices on the domestic market, they will contribute to growing of RUR devaluation, as the USD/RUR exchange rates reached 34.5-35 RUR per 1 USD, against 32.8 RUR in December 2013, or up 6%. Russia will live in a completely different currency corridor, higher than in 2013, and the domestic prices for maize will rise faster compared with the global ones. According to our data, in the European part of the Russian Federation the average price for maize totaled 5715 RUR/t (165 USD/t) EXW, at the export site in the south - 6100 RUR/t on the same terms, and the purchasing prices in the ports - 6900-7300 RUR/t CPT. I think that there is every reason to assume that the prices for feed maize will meet feed wheat prices (6765 RUR/t in Russia) in the corridor of 6500-6600 RUR/t EXW.
- How do you think what is possible maximum price for maize? What volumes of the grain may be shipped until the end of the current season?
As I have already noted, the markets of feed wheat and maize are related, therefore, I consider that the maximum level of prices for the grain totals 240 USD/t FOB Black Sea. However, it is not yet known when and how the maximum to be reached. As for volumes, I raised own forecast of the export potential of maize from 3.2 mln tonnes to 3.5 mln tonnes. As a reminder, in 2012/13 MY Russia shipped 1.93 mln tonnes of the grain, therefore in the current season the exports of maize will almost double. I can definitely say that maize is the grain export item #2 in Russia, because its shipment volumes already exceeded the exports of barley.
– How did the geography of countries-importers of Russian grains already change?
Last season Turkey was the leader of maize purchasing, and until December 2013 it kept its positions. However, as of January 31 South Korea occupied the first place in the rating. The Asian country purchased 545 thsd tonnes of maize, Turkey - 490 thsd tonnes, Iran - 205 thsd tonnes. Japan also made a breakthrough on the Japanese market, and purchased 50 thsd tonnes of Russian maize for the first time. I believe that the fact is a turning point in the history of our country's grain exports. Ukraine already mastered the market a little earlier. In principle, the same traders operate in both countries.
Also, Russian realized maize shipments on traditional markets: Spain, Italy, Lebanon, Israel... To date Egypt is not an active importer, but the trend can be considered in the future.
- According to various agencies, in the current MY the forecast of maize production in the world exceeds its consumption. Will the trend of increasing of maize production in Russia continue next season?
In my opinion, in 2014 growing of maize planted areas in the Russian Federation will not stop. What would be the increase, is too early to forecast, since it will be late planting campaign. If in 2013 the planted areas totaled 2.445 mln ha, while to date we can talk about the planted areas of maize at 2.5 mln ha. I believe that in the current year maize production will reach 10 mln tonnes, but it is not yet known whether Russia to break a new record of yield.
- What challenges may Russian producers of maize face, as well as its main customers?
To date there are no obvious problems and difficulties that can be forecasted beforehand. Neither economic or technological nor weather component. Maize should be established at the turn of 10 mln tonnes of production, it is a good export potential, and a sufficient level of supply for domestic processing and livestock industries. We should not forget that maize carry-over stocks in the next season will also be higher.
Interviewed by Evgenia Severina
