Stringent balances of the global barley market hiked the prices in Ukraine by 40% — Atria Brokers

Source

APK-Inform

2116

The season 2017/18 of barley market is moving to its logical ending. Herewith, the tendencies of the market development of a new season started emerging in the first ten-day period of April, when the adverse weather conditions led to some delay of the spring crops planting campaign in Ukraine.

The most topical questions of the market development prospects in a new season were the issue of our interview with the partners of the brokerage company Atria Brokers, Yan Kozyrytskyi, Artem Rozhkov and Valery Liulchenko.

 

 

- Yan, what is Your opinion towards the start of the 2018/19 MY for the Ukrainian barley market? In particular, how would the Asian factor, i.g. the trade conflict between China and the USA influence the market?

2017/18 MY was favourable for the global agriproducers due to the upward price formation. The high global demand in terms of the low supply led to the increase of the reserved prices of the new crop of Ukrainian barley by minimum 30 USD/t year-on-year. By the mid May, the barley offer prices emerged at the level of 200 USD/t FOB Berdyansk with July delivery versus 145 USD/t at the same time last year, which means that the average gain hiked to 40% a year. Also, it should be noted that last year there was a slight price decline before the harvest, which is in contrast with the current year situation as there is the upward trend mostly. The May 2018 USDA report projects the prices in 2018/19 MY at the current level if not continue increasing.

 

 

 

For 2018/19 MY the USDA reported barley global stocks (one of the main indications) at the level of 17.25 mln tonnes – the lowest for the last 35 years! Thus, low opening stocks of barley and the growing world consumption in China primarily – by 1.3 mln tonnes to 9.5 mln tonnes in terms of the trade conflict with the USA – can compensate the projected growth of the global production by 4.6 mln tonnes y-o-y. I would note that usually the peak of barley export from Ukraine to China is recorded during July-September. Herewith, if the trade conflict between Beijing and Washington is to preserve, and the hot weather adversely affects the barley planted areas in Australia, there is a possibility for Ukraine to increase barley exports to China by 20% more than it was earlier projected, which is almost 1 mln tonnes. And, despite the fact that China has dropped the probe on imports of US sorghum at the rate of 178.6%, the demand on barley in China will stay high.

 

USDA: global supply and demand baalnces of barley, mln tonnes

 

May of 2017/18 MY

May of 2018/19 MY

Changes, 2018/19-2017/18 MYs

Production

142,97

147,57

4,6

Consumption

147,2

148,43

1,23

Ending stocks

18,11

17,25

-0,86

 

- Valery, how would You estimate the barley harvest in Ukraine in 2018/19 MY?

 It is obvious that the high grain prices have stimulated all of the key producing countries to increase the plantied areas under barley. However, the weather has already negatively affected the forecasted global barley production and could continue to do it. The bright example of such changes is Ukraine where the local analytics have been cutting the barley crop forecast from 9 mln tonnes in February to 7.7 mln tonnes in May. Herewith, the USDA experts were more pessimistic and forecasted the barley production in Ukraine in 2018 at the level of 7.5 mln tonnes, the lowest for the last 5-6 years.

 

 

Ukraine: forecast of barley production in 2018/19 MY

Source

mln tonnes

USDA

7,5

AtriaBrokers

7.5-7.9

Ukragroconsult

7,7-7,8 -max 8

APK-Inform

7.73

UGA

7.8

IGC

8

Such low forecast is expected because the cold March pushed the barley planting campaign to April. This led to the shortening of the campaign length to one month causing the insufficient planting of barley because farmers had to switch to planting of late spring crops – corn and sunflower seed. As the result, the planted areas could reach as low as 24 mln ha in 2018/19 MY and the stocks – less than 1 mln tonnes, the lowest for 10 years. But, this estimation can be quite optimistic, if we consider that the winter barley was planted at the 0.83 mln ha in comparison with 1.47 mln ha of spring grain as of May 10, which, taking into account the trends in recent years, can advance by only 30 thsd ha. This means, that the planted areas can decrease by 5-10% year-on-year. But, according to the National Weather Service, the drought have persisted during the most of April in Kherson, Mykolaiv, Zaporozhe oblasts which can adversely affect the winter crops. It should be noted, that there are 20% of spring and 30% of winter crops in those oblasts, which it total amount to 600 thsd ha.

 

- Artem, what should the Ukrainian market participants wait for in terms of competition?

If we speak about the alternative suppliers in Black Sea region, the competition could intensify on behalf of Australia and the EU, which together can increase the export of barley by 2 mln tonnes to 14 mln tonnes, according to the USDA. Nevertheless, the drought in Australia during the planting campaign might change the forecasts.

 

 

 

 

 

 

 

In Argentina, the barley production in 2018/19 MY can grow by 0.5 mln tonnes to 3.7 mln tonnes, but the USDA kept the preliminary estimates of the export at the last year level – 2.5 mln tonnes. In Russia by 10th of May the planting campaign of spring barley is lagging behind the schedule and is 45% completed. However, the improving of weather conditions can advance the planting works. Herewith, in Canada and the US the cold wave delays the planting works. Thus, taking into account all of the factors given the start of the season 2018/19 is expected to be fierce and ti brings to the thought that despite of the slight decline of the new barley crop prices this week, the further possible decrease is quite limited.

Interviewed by Anna Tanskaya, APK-Inform Agency

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