Russian market of millet and oats - tendencies and prospects

In 2016/17 MY, the production of Russian millet and oats increased despite the fact that the planted areas continued reducing. During the whole season, the market of millet showed declining of prices that was caused by low demand for the product and overstocking of offers. Contrary, the price growth was fixed in the market segment of oats.

Millet market

Increasing of crop volumes became one of key features of the millet market in the current season. The production volumes in 2016/17 MY reached 630 thsd tonnes, that is 10% more than the previous season. However, the important factor to mention is that the planted areas under millet decreased to its lowest for 10 years level – 436 thsd ha. The main reasons for such a tendency, in it’s tern, was inactive demand for grain both by consumers in the domestic market, and exporters in the previous season that resulted in development of low prices for the specified grain. Thus, increase in production was provided mainly by the growth of crop yield which totaled record over the past few years - 1.54 t/ha that is also 0.25 t/ha higher than the last year.

The beginning of 2016/17 MY marked with the reduction of prices. Thus, according to APK-Inform Agency, bid prices for the grain reached 7`200-8`500 RUR/t CPT in the European part of the Russian Federation and 7`700-9`000 RUR/t CPT in the Siberian Federal District in advance of the revenues to the market the harvest of 2016 crop. Along with it, millet of the new harvest in the European part began to come to the market in the middle of July at the prices of 6`800-8`200 RUR/t CPT. The current situation was caused by the significant increase of grain offers while qualitative indexes of new harvest millet often confirmed to the requirements of state standard specification by market operators.

The most actively purchasing prices in the European part fell during the period of August-September – to 5`500-7`800 RUR/t CPT; in the Siberian Federal District – during the period from the middle of September until the beginning of October – to 6`500-7`500 RUR/t CPT. During the period since the start of October till the beginning of December 2016 the purchasing prices were primarily declarative since many processors have already formed raw material stockpiles for the work in the long term. At the same time, during the first decade of December the millet prices in the European part began to fall caused by low demand from the consumers in terms of enough offers. Thus, by January the purchasing prices in the European part were fixed within 5`000-7`200 RUR/t CPT, and varied in the specified range till present. In the Siberian District the price situation remained rather stable to the middle of March 2017.

“The 2016/17 MY is unique by that fact that purchasing prices for millet in the start of the season were higher, than now. Right often, after harvesting the minimum price is established on the market, and then it is stabilized with slight tendency for growing. However, it turned out the contrary situation this year. I consider it is caused by market overstocking with the finished product. The processor simply has no space to sell millet. And as for the quality, following the results of the season it can be estimated as average "working" quality. One that was often to be violated however, was excess of humidity", - a representative of grain processing enterprise in Saratov oblast commented on the situation.

Let us note that during the period since the end of March till the middle of April, insignificant prices increase was fixed in the Siberian District caused by the limited number of grain offers with the indices of high quality. Thus, by the end of April 2017 bid prices for millet in the Siberian District totaled 7`000-8`000 RUR/t CPT. At the moment, the price situation in this sector isn't adjusted significantly. The number of offers remains sufficient. At the same time, most actively landowners realize small batches of the grain. Most consumers buy millet in small amounts at earlier established prices.

Oat market

By analogy, the tendency of reducing areas is fixed on the market of oats in the recent years. Thus, in 2016/17 MY the indicator totaled 2.9 mln ha that is 6.2% lower than in 2015/16 MY. At the same time, in the current season oats production grew by 5% and reached 4.8 mln tonnes that is caused by yield increase up to 1.73 t/ha, against 1.6 t/ha in the previous year.

Owing to production increase the beginning of the current MY for the market of oats was marked by seasonal reduction of prices. Purchasing prices on the grain in the European part since the end of June till the beginning of August 2016 fell by nearly 1`500-2`000 RUR/t – to 6`000-8`000 RUR/t on CPT. The price situation in the Siberian District developed similarly. Reduction of prices during the period since end of July - the end of September totaled nearly 2`500-3`000 RUR/t – to 6`200-7`800 RUR/t CPT was fixed. However, low quality of grain caused by adverse weather conditions established in main productive regions during the harvesting campaign, became the key factor that exerted further development of the pricing policy.

Since the beginning of October, many market participants informed that some batches of oats with low nature weight and high humidity indicator came on the market. As a result, the price situation in the majority of Federal Districts began to develop in an upward trend. Thus, purchasing prices for the grain in the European part during October-December grew by nearly 500-700 RUR/t and were fixed within 6`200-9`000 RUR/t CPT. In the Siberian District the prices increased by 600-800 RUR/t to 6`500-8`600 RUR/t CPT. Now bid/offer prices on oats in the majority of Districts vary in earlier established ranges. It should be noted, however that landowners prefer to constrain sales of their crop, announcing the selling prices closer to maximum. According to market operators, such a tendency is caused by the fact that most of the producers expect for the price rising in the short term. There are practically no offers with high qualitative indexes and processors’ necessity for creating new raw material stocks remains high.

Market expectations

According to APK-Inform Agency, millet production in 2017/18 MY will continue reducing, due to the decrease of the average yield. The total crop is projected to be at the level of 561 thsd tonnes that is 11% less than that of 2016.

In it’s turn, the oats production can reach 4.7 mln tonnes that practically corresponds to the year ago level. The planted areas under the grain will probably increase by 4% followed by high selling prices for the grain this year.

As for the pricing in the above-mentioned segments of agriculture, most market operators have a consensus that there won’t be essential price reduction.

The demand/offer ratio, as well as quality characteristics of the new harvest grain, will exert the dominant impact on the price situation.

Vera Sosna, APK-Inform Agency