Ukrainian flour market — results of 2017/18 MY. Record with no joy

Since 2011/12 MY, the average annual growth of flour exports from Ukraine started demonstrating very notable results. Every following year reached its new records. Also, the season-2017/18 no exception. But for the first time during six recent years, the market considered the record with a large share of pessimism and wariness. The chart explains the major reason of such reaction.

You can see that March 2018 was the last dynamic month of exports. The fourth quarter of 2017/18 MY did not provide any optimism in the future export volumes of flour, and the final result varied almost at the level of 2015. In some recent months of the season, the export volumes almost halved. And the beginning of 2018/19 MY still did not provide ane improvements.

So, in the season-2017/18 Ukraine exported 428.5 thsd tonnes of flour, which became a new record. If previously I wrote that the exports of wheat flour increased "...not only at the expense of North Korea, but also due to significant changes of the geography of supplies, and increasing of the commodity flows in the direction of African and Middle East countries", but to date I can say just the opposite. The decrease developed not only due to the reduction of flour shipments to North Korea through China, but also due to the fall of the commodity flows in the direction of African and Middle East countries.

At the same time, the share of exports to Southeast Asia somewhat increased, including the absolute figures. Ukraine mainly shipped flour to Singapore, including single shipments to Vietnam and Cambodia. North Korea still remained the leader of purchases. But a drastic decrease of flour shipments to the country in recent months affected the whole picture of the Ukrainian flour exports.

At the same time, the TOP-10 of Ukrainian companies-leaders almost did not face any significant changes. Last season, TH Novaagro became the leader in flour shipment volumes. It is a phenomenal event in the flour milling industry of Ukraine: the company does not have its own processing capacities, but shipped the largest volumes of flour — 17% of the general Ukrainian exports. In addition, the company is in the TOP-3 of the general production volumes. Previously, only the Agrarian Fund managed to realize such operations, and it also is in the TOP-10 of the largest companies-exporters. And it is indicative: selling skill is the most important thing. Everything else is secondary on the loose market of flour.

Such significant decline of exports caused even greater overstocking of the market of finished products. In turn, it contributed to development of the general downward trend in the production of flour. Last MY, Ukraine produced 1.88 mln tonnes of flour, against 1.97 mln tonnes in 2016/17 MY, and 1.99 mln tonnes in 2015/16 MY. In June 2018, Ukraine produced nearly 112.72 thsd tonnes of flour, against 151.30 thsd tonnes in the same month last year.

Such situation makes big problems with selling of the finished product on the domestic market, which also continues reducing its consumption of flour from year to year. And the Ukrainians did not really improve their lifestyle, and changed flour and bread with more healthy food. The real demographic situation does not inspire much optimism, and will provide even more problems in the future.

But even in such situation the companies-leaders of grain processing mainly increased their production rates. Also, most of the companies are the export leaders. For example, Kombinat Khliboproduktiv Talne exported more than 85% of the production volumes.

10 milling plants produced more than 45% of the whole Ukrainian flour production. Generally, more than 300 enterprises produced the commodity, taking into account those which produced more than 10`000 tonnes per month, and those which produced just 1-2 tonnes per year. The number of enterprises, which produced at least 1`000 tonnes of flour per month, totaled 36.

The troubles with selling of the product intensified the plans of the Ukrainian companies to upgrade the technical equipment and build new facilities. So, the leader of flour production from the table modernized its mill and doubled the processing capacities, No. 5, 7 and 9 of the rating have new mills with Turkish technical equipment. A new mill of Agrodar LLC has Bühler machinery.

You can meet with the large delegation from Turkey within frames of "Grain Processors Forum - 2018", to be held in Odessa on September 28-29. Also, the delegation includes the manufacturers of techncial equipment. Market participants plan to take advantage and contact with the Turkish representatives.

Sergei Sakirkin, Director of Production operations department at Agrarian Fund PJSC