The market of soybeans and its by-products continues steadily developing in Russia for several years. In many ways the fact is caused by development of the livestock and poultry industries, which are the main consumers of the reporting commodity. At the same time, despite the increase of soybean production, Russian companies-producers of soybean oil and soybean meal, prefer importing soybeans from other countries. And the steady growth of livestock and poultry farming is the excellent motivation to increase soybean meal imports. Sergei Sokolovsky, Director of the sales department of the management company Sodrugestvo, told us how the season-2013/14 for the industry developed, what problems and difficulties the market faced, and what achievements the largest European soybean processors reached.
- Sergei Pavlovich, how can you estimate the last season for the world market of soybeans and soybean meal on the whole, and for your company in particular? What features of 2013/14 MY would you highlight?
Every year to the topic of high volatility remains quite actual - last year the range of prices for soybeans and soymeal on the Chicago Mercantile Exchange varied within nearly 150 USD/t. During the year the market remained in the inverted condition – the futures for remote months were traded with a discount to the nearest supply. Such situation was undesirable for us as oilseed processors, because we have significant expenses for the roll-over of hedging transactions. However, on the other hand, in terms of conclusion of futures contracts with customers for the supply of soymeal we have a competitive advantage, because can hedge at the lower level. Significant increasing of premiums is characteristic for the current South American harvest, due to reluctance of farmers to sell soybeans at low prices, even despite large-scale harvest volumes. The similar situation was observed during the previous harvesting campaign in the USA. The price imbalance between soybean meal and oil became the feature of the soybean complex price dynamics, observed last year. While previously they were moving unidirectionally, then in 2013/14 MY soybean oil significantly worsened its positions – the trend is clearly observed since March 2014.
As for our company, launching of the third line of the plant with the production capacity of 5`000 tonnes of soybeans per day in October 2013, and the sales growth of soybean meal of Russian origin to the Republic of Belarus, Poland, the Baltic countries and Northern European ones, became the important events.
- After joining the WTO the Russian Federation cancelled the import duty on soybean meal. Did the fact influence on the growth of the commodity imports last season?
The increase of soybean meal imports is not directly connected with cancellation of the import duty on the commodity, it is caused by growing of the consumption due to the increased production of poultry meat and pork. In 2013/14 MY enterprises of Cherkizovo Group, Miratorg, Belaya Ptica, Uralskiy broiler, Akashevo Poultry Farm and some others, launched new capacities for poultry meat and pork production.
In 2012/13 MY (August-July) the soybean meal imports totaled 0.59 mln tonnes, last season – 0.56 mln tonnes. We expect for a decline of soybean meal imports next year to 0.38-0.4 mln tonnes at the expense of increasing of soybean meal production in Russia (mainly at the Group of companies Sodrugestvo and EFKO). Traditionally, Argentina, Brazil and Germany are the main countries-importers. Last MY Ukraine joined the list, and supplied 24`882 tonnes of the commodity to Russia.
- In the season-2012/13 your company started exporting own-produced soybean meal. Did you manage to increase the reporting index in the season-2013/14?
In the season-2013/14 (August 2013 - July 2014) the exports of soybean meal, produced by the Group of companies Sodrugestvo, from Russia totaled more than 430 thsd tonnes, an increase of over 5 times compared with the previous season. The reporting growth was caused at the expense of rising of soymeal supplies to the Republic of Belarus, Poland, the Baltic, Central and Middle Asia countries. Last year we shipped soybean meal to 16 countries of the CIS, Europe and Asia only. Therefore, I would like to note that due to the Group of companies Sodrugestvo, for the first time Russia became the exporter of soybean meal of such significant volumes.
- How do you estimate the trends and structure of soybean meal consumption in Russia in the reporting period?
Reduction of soybean cakes and full-fat soybeans consumption became the feature of the last oilseed year. The situation was caused by poor harvest results for soybeans in the Far Eastern District in 2013, and as a consequence, lack of opportunity to purchase the required soybean volumes for small-scale local oilseed processors. In addition, since the beginning of 2014 calendar year the price for soybeans of Russian origin reached its maximum at 21`000-22`000 RUR/t (in terms of relatively low qualitative indices: 28-32% protein content), making soybean cakes and full-fat soybeans non-competitive with soybean meal at the price level. At the same time, the main Russian processors of soybeans using traditional technologies (extraction method) were provided with soybean stocks for the whole season.
Due to high prices for soybean meal in the beginning of the season and the first half of 2014, almost all consumers of soybean meal slightly lowered the share of soymeal consumption in mixed feed production. But due to the rise of prices for poultry and swine commodities, since April-May of 2014 the level of soybean meal consumption returned to the standard level, and since June-July of 2014 many enterprises increased the level of soymeal consumption for feeding.
- During the season the capacities for oilseed processing in Russia increased, but the potential of processing capacities in Russia exceeds the growth rates of oilseeds production. Did the fact influence the production structure of soybean by-products?
As for the processing capacities of soybeans, in the current marketing year a new plant in Alekseyevka just started working, EFKO owns the object. The processing capacities of the plant total 2000 tonnes/day. Since April 2014 the plant operates with the capacity of 1000 tonnes/day. To date the plant processes soybeans of Russian origin (the Southern District, the Central District) and small-scale volumes of soybeans from Brazil. The plant is provided with soybeans until the next harvest coming. After launching of the plant, the company decreased production of soybean cakes and full-fat soybeans (due to moving of soybean volumes to the plant). Also, the volume of soybean meal imports decreased. In the current season the company Solnechnye produkty will launch a new plant in Saratov oblast, with the capacity of 2000 tonnes/day. The plant will process all varieties of oil-content crops (sunflower seed, rapeseed, soybeans). But in our opinion, in the current season they will mainly focus on sunflower seed processing.
- The Far Eastern and Southern Federal Districts are the main soybean growing regions in Russia. What impact did difficult weather conditions (rains, frosts) in beginning of the harvesting campaign-2013/14 provide on the soybean market?
As I have previously mentioned, rather poor harvest of soybeans in the Far East due to the well-known situation with flooding, became the major feature of the season. The Far East lost nearly 0.3 mln tonnes of soybeans. The Southern Federal District produced the good harvest volumes of soybeans, the Central District – rather good harvest. However, soybeans from the Central Federal District showed very low protein content (28-30%).
- In 2013 the construction of a new oil-extraction plant allowed to your company to increase the processing volumes of raw materials (soybeans, rapeseed) to 8300 tonnes/day. Did you manage to maximally fill the capacities of all Sodrugestvo enterprises?
Last marketing year all three plants of the Group of companies Sodrugestvo worked at full capacity: the first and third ones (since October 2013) worked with soybeans, the second - with rapeseed. We did not experience any problems with provision of raw materials to all our production facilities.
- During several recent years Russia increased purchasing of Ukrainian soybeans, and your company also increased soybean imports from Ukraine. In your opinion, will the ban on the imports of Ukrainian soybeans to Russia influence the Russian market of soybeans?
Last marketing year we purchased nearly 150 thsd tonnes of soybeans from Ukraine, for processing at our enterprises. The ban on soybeans imports to the Russian Federation will not have any significant impact on the Russian market of soybeans, as in the current year Russia plans to increase the oilseed production to 2-2.2 mln tonnes. Generally, last year Ukrainian soybeans formed 5% only in the total structure of the oilseed processing at our enterprises, and they can be replaced by both Russian and US soybeans.
- Not so long ago you talked about investments in new storage capacities. Did you manage to reach any progress in the reporting direction in 2013/14 MY?
Last marketing year we launched additional storage capacities at our production and logistics complex in Kaliningrad. To date the general storage capacity of bulk agricultural commodities in various types of the company storehouses total nearly 530 thsd tonnes of simultaneous storage. Also, last year we launched three new berths, which process vessels with deadweight of 30 thsd tonnes. Last MY our new terminal exported almost 0.7 mln tonnes of various agricultural commodities, excluding own-produced commodities. Also, we put into operation new storage capacities for vegetable oils, to date the total storage capacity reaches 76`000 cubic meters, including 24`000 meters - for storage of taut-pressed oils.
- What progress did you achieve in the segment of rapeseed processing? According to the official data, you usually supply the major share of rapeseed oil and meal to Northern Europe. Did the sanctions applied against the Russian Federation, influence the geography of supplies?
As I have already mentioned, during the whole 2013/14 MY one of our plants processed rapeseed, and the processed volumes totaled over 0.33 mln tonnes. The rapeseed was mainly presented by Russian origin raw materials, the by-products were mainly exported to European countries, especially to Scandinavia. To date we have already started processing rapeseed of the new season, and have not changed the export geography of rapeseed by-products.
- Would you kindly share your vision on the situation on the market of soybeans and by-products in the new season-2014/15 (production, consumption, exports / imports)?
In the current year the Russian Federation expects for the record soybean production - more than 2 mln tonnes. The main growth will be provided at the expense of the Far East and partially from the Southern and Central Federal Districts (which will produce soybeans with low protein content). Soybeans will be provided to all traditional oilseed processors in the Far East, as well as producers of full-fat and extruded soybeans. In the Central and Southern Federal Districts the competition for soybeans between our company and the company EFCO will increase. In the current year decreasing of the export duties on soybeans to 6.5% will make a significant impact on the market. Rather significant share of soybeans from the Far Eastern District will be exported to China.
The consumption of soybean meal will increase to 10% due to good margins of poultry and pork producers, as well as reducing of prices for soybean meal compared with the previous MY. Of course, the expected harvest of soybeans in the USA will provide its impact on the market, prices and consumption in Russia.
As I have already said, the imports of soybean meal will reduce, and the meal exports will remain at the same level, and the exports of soybeans may reach 0.2-0.25 mln tonnes.
- Would you kindly inform on your company's plans for the future?
The Group of companies Sodrugestvo continues developing in accordance with its plan for 2013-2018 period. The main directions of development include production logistics and processing of oil-content crops.
Note. Sodrugestvo is a fast-growing Russian agro-industrial company with assets in different countries and business partners across the globe. The Company focuses on soybean and rapeseed processing, manufacturing of fishmeal and composite animal protein mix, importing of maize gluten and lysine, as well as distribution of products to the end consumer. The Group of companies Sodrugestvo is the single producer of soybean and rapeseed meals in the CIS with the qualitative indicators relevant to the global standards. The company exports 100% of produced rapeseed meal and almost all volume of soybean oil and rapeseed oil to the EU countries. Also, Sodrugestvo is a major port and rail operator, which allows providing the entire range of logistics services to the customers in Russia and other CIS countries. These factors allowed to the company to establish itself as the stable and reliable supplier of raw materials for production of forages for farm and domestic animals during recent 19 years.
Interviewed by Anna Platonova
