ROSTOK-HOLDING: proved trade practices – access to successful work in the new season
On the current stage the agro-industrial complex of Ukraine faced the chain of difficulties, not only seasonal ones. On the one hand, unstable political situation at the Eastern part of the country, on the other hand – harvesting expectation and prices formation. Also, there is a question on the demand of Ukrainian grains and oilseeds on the foreign markets in the current season. So, it is hard to choose some strategies against grain purchasing and realization in the stated situation, but it is necessary to choose. Viktor Kupavtsev, Chairman of the Board of Directors of ROSTOK-HOLDING group told about company's sales strategies and expectations from the stated season.
About the company
ROSTOK-HOLDING is a vertically integrated agro industrial group specializing in the cultivation and sale of crops, production, processing and sale of dairy products.
The group has been developing dairy farming since 1993 and crops farming - since 2003.
The Group realizes grains and oilseeds on the domestic market and foreign markets as well, especially in countries of Middle East, South Africa, Asia, Europe and CIS.
- To date, the agrarian sector is under the risk envelope. What trade strategies does the company plan to realize for more coordinated and efficient work?
The company plans to apply well tested trade practices, being used during few years.
First of all, the holding made an effort and fixed prices, sold the harvest in advance on forward, so the company fixed its profit. Thus, last year the company made forward transactions on 60% of total sales volume. This year, the situation on the grain domestic market of Ukraine is different due to the events at the Eastern and Southern parts of the country. But, along with the stated issues the season of trading continues.
Secondly, the company will hedge its risks through exchange. Indeed, during the season the group has spent significant funds and the level of profit depends on the price conjuncture on the global market. This year there will be grain prices significant decrease, and in the current situation it is necessary to have security in future and maximum insurance from losses. That is why hedging is the actual and practical tool for the company.
- Does the company plan to extend the sales markets of crop products this year? Or, you suppose that on the current stage it is better to strengthen trade relations with current foreign partners?
To date the trade companies of the group realize their own and purchased grains on Middle West, South Africa, Asia and Europe markets. And, first of all, the company will use the current contacts. But, we always search for new partners and ready to explore new markets.
- Planting campaign is practically over and there will be harvesting campaign soon. What are the forecasts for the future harvest? What prices will be in the new season?
In the sector of winter crops — wheat, barley and rapeseed — to date it is possible to say, that there will be good harvest. Ukrainian wheat has got necessary amount of precipitations during the Autumn and Spring periods. As for sunflower, maize and soybean, this year the planting campaign started two weeks earlier, so the harvest will be good as well. Further, the weather factor during the whole vegetation period (July-August) will depend on the stated issues.
This year, general production of the group to reach nearly 300 thsd tonnes.
According to the forecasts, the prices for new crop will be middle owing the bearish trend on the global markets. The stated tendency based on the favorable weather conditions, high carryforwards and big plans on the grain production in the new season. Totally, the prices will reach the level of the previous season.
- What is your opinion on the grain certification cancellation? How the stated situation can influence on the company's work in the country?
The certification cancellation has positive and negative sides.
The positive ones are certification cancellation of the grain warehouses, double fee for grain export certification, while the commodities are exported from line elevators. Because earlier, it was been necessary to analyze commodities on GMO and security rates while shipment, and it took nearly 3 days, so it caused the ship demurrage and additional costs.
The negative factors is whole certification cancellation of State Grain Inspection's quality. In such case, there is no mechanism of analysis results contestation.
- In future the company plans to increase the land bank. What oblasts are interesting for you?
The company interesting in central and Northern oblasts of Ukraine: Cherkassy, Vinnytsia, Kirovograd, Chernihiv, Sumy, Poltava and Zhytomyr oblasts. The issue on land bank is based on the list of factors: costs, land measure, concentration, presence of infrastructure, elevators, future development, etc.
- Is it possible to increase the grains/oilseeds exports in the current season? What directions are still advanced for Ukraine on the foreign markets?
Definitely it is possible. The Crimean conflict and its further escalation at the South-East part of the country to influence on the Ukrainian commodities' exports through the ports.
Totally, the year will be interesting for grain trading and may lead to new export decisions. For example, increase grain/oilseeds shipments by mean of exports to Baltics, Belarus and Poland markets. This year there were realized nearly 20% of plan under DAF to Belarus and Baltics region first of all. Earlier, the group companies worked under FOB and CIF.
- What is the major difficult for agri-inductrial complex of Ukraine? What are the ways of solutions in the current situation?
Last year was rather complicated for agricultural producer. The record harvest caused the prices decrease and, as the result, companies had to increase their income.
This year the situation is similar and there is the prices decrease for all crop commodities. At the same time, the market players do not gave government support. It was planed, that the Agrarian Fund will function as the state regulator of price policy in agro-industrial sector, but there is no government support on the stated issue.
Macro-economic situation in Ukraine is still unstable. Financial support from the Ukrainian banks for agrarian companies is limited. At the same time, in 2014 the IFC in cooperation with banks prepare new projects on the provision of short-term liquid funds, in order to allow banks to provide companies with the fluid capital.
Interviewed by Irina Grytsai
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