2015/16 MY – life-changing and key for Ukrainian soybean market – Sungrant Plus

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APK-Inform

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According to Alexander Losychenko, Director General of Sungrant Plus, 2015/16 MY is rather complex for Ukrainian grain market and life-changing for soybean and by-products market. Ukrainian realias significantly influenced on agribusiness development.

 

Reference

The company operates on Ukrainian market over 10 years and is a reliable partner for both Ukrainian and foreign companies. It key activity presents purchasing of grains, oilseeds and by-products (oils: sunflower, soybean, refined, bleached, deodorized, bottled) on terminals of Odessa, Nikolaev, Kherson and Azov Sea ports. The company ships grain by bulkers (3-50 tonnes), oilseeds and oils in containers and flexitanks. Mediterranean and Far East countries are the key destinations.

The company took 5th place in the list of Ukrainian soybean buyers. Sungrant Plus is always ready for cooperation.

 

- Sungrant Plus is one of the largest suppliers of Ukrainian agricultural products to the global market. It was aimed to enter TOP-5 of Ukrainian grains and oilseeds exporters in 2015. Did You manage to do it?

Last season we entered TOP-5 exporters of soybean. We shipped the product from Kherson, volumes of lots varied between 3-11 thsd tonnes. Our main goals now are to ship cargoes exceeding 25 thsd tonnes from deep-water ports and to strengthen our position in grain export.

 

- What products are the key for export in 2015/16 MY? Which volumes have You already shipped and where?

This season together with wheat, corn and soybean we started to export soybean meal produced by Pology Oil Extraction Plant (our main company), and sunflower and soybean meal of other producers through terminals in Odessa, Kherson and Mariupol. We took part in shipment of the biggest lot of Ukrainian sunflower meal (23 thsd tonnes) to France in February 2016.

 

- How can You preliminary estimate current grain export season?

The season is very difficult. The margin for exporters and processors is much lower than year ago due to very strong competition, currency rate risks and instable pace of farmers selling. Political uncertainty and changes in tax policy influence on trade. However, lower margin is global trend.

 

- What features of soybean market can You point out for the first half of the current season?

Production is growing, quality is getting better, harvesting, treatment and storage technologies are improving. We shipped several cargoes with the quality matching the 1st grade according to USDA standards. This season is life-changing and key in the context of Ukraine entering market of soybean by-products. Ukrainian soybean meal is considered to be rather competitive due to new technologies and better soybean quality, and current geopolitical situation that forced Ukraine to look for new market outlets.

 

 

- How can You estimate soybean supply on domestic market? How strong is competition while forming feedstock?

Key players who buy soybean for export and processing are well known. Surely, there is competition however it stimulates trade. Due to high logistic costs, each player has its own purchase area. There are 3 regions – Western Ukraine (where soybean is gaining popularity, and planted area and production can be compared with leaders), central part and Southern Ukraine. Each region has large export-oriented processing companies located in there.

 

- What price trend do You expect on soybean market in the second half of the current season due to lower production in Argentina and dry weather in Brazil?

The global market has already faced higher prices and growing demand. However, I prefer to avoid upward price trend for long-term perspective. China has the record carryover stocks that can pressure bullish trend caused by lower production in Argentina and Brazil. At the same time we see high dependence of oilseed market on crude oil prices.

 

- Did the ban on export of Ukrainian soybean and meal to Russia change the export geography?

Russia could be an excellent direction for soybean and by-products and Ukraine could be a reliable supplier. Until 2014, Ukraine cooperated with companies from Russia and courtiers exporting goods in transit through Russia, the cooperation was stable and Ukrainian products were shipped up to Ural and Far East. However, due to the current situation many companies changed export geography. Demand from Belarus is growing due to different embargoes and bans regarding Russia. Belarus was ready to buy our meal on premium price. However, there are some problems with payments from Belarusian companies.

 

- What destinations for Ukrainian grains and oilseeds are the most perspective? Are there any obstacles to wider export geography?

Export potential for far abroad countries can be fulfilled through accumulation and shipments of large cargoes. Ukrainian agricultural products are supplied in containers all over the world. In such way, we can compete with Argentina and USA on markets of China, Malaysia and Arab countries. Now we are not competitive in transshipment cost (disbursement including port charges), this figures are two or even three-four times higher in comparison to neighboring countries (Romania, Turkey, France that are our competitors). Turkey is an example of how transparent policy and willingness let to create logistics hub, attracted millions of dollars to port infrastructure and processing sector development. We are far behind due to bad management, bureaucracy and corruption.

 

- Currently Ukraine is developing cooperation with Caspian region considered to be perspective. Taking to account your experience in cooperation with this region how Ukraine can increase trade volumes with Caspian countries and which one are the most promising – Azerbaijan, Iran, Kazakhstan or Turkmenistan?

Today, we trade with Georgia, Armenia and Azerbaijan. After ban on transit of Ukrainian products through Russia, we managed to maintain trade with the region and enter new market through enlargement of trade cargoes delivered by water transport and searching for end user. The market is not big but perspective. I suppose that by-products will find more demand in the region rather than feedstock product.

 

- Logistics is the key element of exports. How severe was influence of ban on transit of Ukrainian products through Russia on trade with Azerbaijan?

Surely, the volumes decreased. We keep trade relations with those companies who can work with large volumes and use water transport to minimize logistics costs. Today we have two methods: 1) Ukrainian port, vessel – Georgian port – railroad car or 2) car on ferry in Illichivsk – Georgian port. However, it is very expensive. We used to ship volume by railroad car from Ukrainian elevator and railroad tariff was much lower than Ukrainian analogue due to interstate agreement regarding tariff regulation in CIS countries. Interest of Ukrainian companies is still high, however, under minimum expenses logistics to Azerbaijan costs more than 45 USD for 1 tonn excluding delivery to Ukrainian port. It is expensive. To deliver 60 tonnes of soybean from Argentina to Turkey costs 16 USD.

 

- What are the prospects of delivering agricultural products from Black Sea to Caspian region through Transcaspian way? Do Ukrainian traders consider delivering by container train?

This matter needs study, body or organization that will promote it. Unfortunately, nowadays the project can die, however, access to this market with cheap logistics can create additional demand for Ukrainian products and widen our export geography. Under good infrastructure results will not long in coming and hundreds of companies will struggle to get this market.

- Currently, Ukraine is increasing trade volumes with Iran. Is Your company interested in Iran?

The market is rather attractive, however, until now we did not supply our products to Iranian ports due to payment risks and absence of insurance mechanism against these risks. Payment delays and long demurrage of vessel on the berth still prevent higher exports. Moreover, after sanction elimination the market is not premium more.

 

- Taking to account global trends on grains and oilseeds market and forecasts of Ukrainian crop what export perspectives You see for 2016/17 MY?

Our potential is very high. Global demand for grains, soybean and by-products is growing year on year that can let us to get strong economic footing. However, we need to do our best to gain the market of by-products. Turkey is an example, it feeds the neighboring region with flour and is the leading exporter of the product being net-importer in general. The country managed to do it through right and strong governmental policy, large investments into processing and transport sectors. We should learn by example and the country will get for wheat not 180 USD but 200-250 USD due to added value, creation of new jobs, implementation of modern technologies and investments.

 

Interview by Elena Cherednichenko

 

 

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