Ukrainian market of feed barley: start of 2015/16 MY

Source

APK-Inform

6693

 

Year on year the price situation on Ukrainian market of feed barley is rather stable, but 2014/15 MY was an exception. Barley exports increased significantly by December 2014 that led to price growth. The article covers prospects of export dynamic, production and price trends for 2015/16 MY.

Domestic market

Ukrainian market of feed barley was rather stable and predictable last 4 seasons. Prices depended mostly on seasonal factors while exports and planted areas remained overall unchanged. However, 2014/15 MY became an exception. Against all the odds, barley crop exceeded 9 mln tonnes last season, 20% up on year. Favorable weather contributed on good yield that reached about 3 t/ha. APK-Inform analysts recorded reallocation of barley. Its domestic consumption decreased 5% due to lower population and decline of livestock number. At the same time, barley exports increased almost 82% that led to eliminate grain surplus maintaining stocks at adequate level.

However, the experts expect that barley distribution will resume its natural course new season. Planted areas declined 11% on average due to difficult economic situation and material and technical resources appreciation. Moreover, unfavorable weather that slowed down planting campaign would have negative impact on barley yield and quality.

 

Ukraine: barley production and destribution, mln. Tonnes

 

2014/15*

2015/16*

Production

9,0

7,1

Domestic consumption

4,8

4,5

Exports

4,4

2,9

* APK-Inform forecast

   

 

At the same time, price situation on feed barley market was stable ahead of new season. Mostly processors fixed their prices at 2850-3200 UAH/t CPT. Most of them contracted small volumes of barley waiting for new crop to enter the market at lower price. However, processors expectations was not satisfied. Starting from the second week of July, first grain lots were bought at 2950-3350 UAH/t CPT. Despite hot weather that let to speed up the harvesting campaign farmers are not going to reduce their prices, instead they are raising prices step by step. Volatile rate of national currency is considered to be the main reason for barley appreciation. At the same time, buyers are waiting for price decline in the nearest future. Moreover, it is difficult for processors to compete with exporters, especially taking to account currency market. If demand exceeds barley supply, price increase is to be the key trend of 2015/16 MY.

 

 

Export market

2014/15 MY was rather positive for barley exporters. According to APK-Inform, Ukraine exported 4.461 mln tonnes of feed barley in 2014/15 MY, 81% up on year. Solid demand from importers and national currency devaluation were the main reasons of exports increase. Exports was active during whole season and declined only ahead of new MY. There were no shipments of barley in June 2015 due to low import demand. FOB prices were rather stable. 2015/16 MY brought price increase. Offer prices increased 4-5 USD/t on average and reached 180-185 USD/t FOB due to some demand growth and upward trend on world market.

“Feed barley prices are going to increase starting from the begging of 2015/16 MY due to disappointing forecasts of barley crop in Ukraine and other producing countries. Therefore, the demand for quality barley should go up, while its supply will be low. Rains during harvesting campaign negatively affected barley humidity, natural weight, impurity content etc. So, prices for quality feed barley can increase significantly”, - said a representative of export-oriented company from Kiev oblast.

Starting from June 2015 barley purchase prices on CPT-port basis have been increasing and reached 3280-3350 CPT-port by the early 2015/16 MY. Traders told that volatile rate of national currency, late start of harvesting campaign and unwillingness of farmers to decrease the prices made them to raise the prices. World market trend will pour oil on flames.

Alexandrina Ovdienko,

Julia Shatravka

 

Comment

 

Andrey Kupchenko, APK-Inform analyst

 

Downward trend of barley production is observed not only in Ukraine but also in other key producing countries. This UDSA forecast barley crop to decline 3% in EU and 18% in Russia. Exports from these countries could decline 17% and 34% respectively. Global barley exports could reach 23.2 mln tonnes, down 19% on year. Prospective decrease of barley consumption in China and Saudi Arabia and overall decline of the grain supply are the key reasons of this trend. Therefore, the trend will support the prices.

According to our forecasts, harvested area under barley in Ukraine will total 2.6 mln ha in 2015 (-12% on year). Yield could reached 2.67 t/ha (-11%). Thus, the crop could a bit exceed 7 mln tonnes (-22%). Taking to account carry-over stocks total supply of Ukrainian barley is forecasted at 8.3 mln tonnes (-21%).

Domestic consumption of barley is forecasted at 4.5 mln tonnes in 2015/16 MY (-6% on year) due to lower population and decline of livestock number. However, even taking to account domestic consumption decline, barley exports potential makes up 2.9 mln tonnes in 2015/16 MY that is 35% lower than year ago.

Difficult agro-climatic conditions observed before harvesting campaign and appreciation of plant protection products will lead to lower quality of Ukrainian barley in 2015/16 MY. This factor will support prices for high-quality grain while farmers will keep barley volumes waiting for better market conditions.

We do not expect traditional price decline during inter-season period when new crop enters the market due to significant appreciation of manufacturing resources that forced the market to have the price minimum that provides covering of production expenses. It does not make economic sense for farmers to reduce prices.

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