Burning issue of the price and quality of soybean cake – KSK-Agro

Source

APK-Inform

1950

 

The soybean complex in Ukraine is rapidly developing, as evidenced by the statistical data on increasing of soybean harvest volumes in the country, as well as its by-products, in particular soybean oil and meal/cake. In the current season, there is a situation when soybean cake is cheaper than soybeans, and the price spread between meal and oilseed continues narrowing more than ever. Production of soybean oil provides more sales revenue, but its average yield from 1 tonne of soybeans totals 12-18% only. The co-owner of the company KSK-Agro, former top-manager of the largest Ukrainian oil-pressing plant PromTechAgroTorg, PhD in Technical Sciences, Vitaly Kurushkin agreed to talk about problems of the domestic and export markets of soybean cake.

 

About the company

The company KSK-Agro started its business activity in 2015. The company focuses on the supply of oilseed crops and their by-products. Employees of the company have worked successfully and received experience in the leading processing, agricultural and commercial enterprises of Ukraine. The company is a regular exporter of oilseed cakes, meals and vegetable oils. Despite its "young age", the company has a wide and ever-growing list of business partners. The company's office is located in Kiev, but the production capacities and vehicle fleet enterprise - in Kanev.

The main principles of the company are responsibility, spotless business reputation and systematic approach to solution problems.

 

- Vitaly, Your company specializes in the sale of oilseed by-products both on the domestic and export markets. What trading positions do You prefer working with? What products are in high demand as of today?

We give much attention to soybean and sunflower cakes on the domestic market. The most popular services for the reporting trading positions, which our company provides to its customers, include the daily market research, conducting of negotiations, commodity lending, transport management, accepting of financial and qualitative risks.

Due to our well-established contacts and long-term experience, we provide easy access of commodities for a wide range of customers, which also stimulates the further sales. The customer-consumer saves his time and money, and receives raw materials at the effective market price from one source. Also, we guarantee the promptness of delivery and quality control. Our financial participation is an important factor in many transactions - credit arrangement to the producer or consumers.

As for the export direction, we have top priority in soybean and sunflower oils, which are in stable demand among foreign buyers.

Sunflower meal and cake are the most popular positions among the producers of mixed fodder. The attractive price per protein unit and the constant availability of large-scale volumes of raw materials on the market, make the reporting result as quite logical.

 

- Would Yell us about the main buyers of oilseed meals/cakes (sunflower, soybean, rapeseed) in the season-2016/17 on the Ukrainian market? Are there any complaints to the qualitative parameters of such by-product?

Poultry factories of the broiler industry are the main buyers of the reporting product. It should be noted that rapeseed by-products are not widely used on the domestic market – the country mainly exports rapeseed at rather high rates, and provide the oilseed on the market for several months only after ending of the harvesting campaign.

The quality issue is very topical, because in terms of improvement of competition, oilseed processors are trying to reduce the cost of their products by fair means or foul. Unfortunately, it happens mainly at the expense of qualitative parameters. The plans of separate producers to get additional price "best cards" compared with their competitors make them to realize various falsifications. What is their meaning? They mostly focus in addition of cheaper components to the product, excessive moistening, adjustment of quality indicators by inorganic impurities.

As for our company, we have developed our reputation on the market for a long time, and we appreciate it very much, therefore careful quality control of products is a very important part of our business. It is the quality of products that is the main top-priority criterion for selection by our customers. I am glad that we managed to prove ourselves as a faithful supplier.

 

- In the current season, most Ukrainian producers reported about difficulties with selling of soybean cake in terms of its surplus in supply. Would You propose any successful ways to solve the issue taking into account Your significant experience in the soybean segment?

I am not surprised with the current situation at all. We live in a post-industrial society, when the industry quickly covers all needs of customers, and then there is a competition for further survival and dumping.

Rather small financial barrier of entry into this business, technological simplicity of production, and availability of ready-made comprehensive solutions from Ukrainian producers of technical equipment, contributed to appearance of a large number of oil-pressing workshops (more than 100 operating units). It often happens without any analysis of the market, supply and demand rates, etc. Therefore, to date the supply of soybean cake exceeds requirements of the domestic mixed fodder industry. And consumers from foreign markets prefer purchasing soybean meal as a well-known, constantly available and universal product.

Nevertheless, investors still keep their interest in the industry. Last year, there were opened nearly ten new oil-pressing workshops. Many oil producers increased their production capacities. However, entrant companies will have a tough time. First of all, success requires a favourable geographical location of the enterprise, well-established processing technologies, and efficient commercial work.

 

- Throughout the world, soybean meal is a key product in feed mill production, as opposed to soybean cake. In Your opinion, what conditions would soybean cake require to the same popularity on foreign markets?

Despite the higher versatility of soybean meal, soybean cake is more favorable alternative, because in terms of a slightly smaller level of crude protein, it contains 5-7 times more crude fat. In addition, it is cheaper. These advantages of soybean cake are very appreciated. So, poultry farmers and cattle breeders in Ukraine prefer using the product. However, foreign buyer keeps back from using of soybean cake due to several reasons: there is no tradition of its application, there is no diversification of supplies from different countries, there are no exchange and financial instruments, unstable quality of the product, etc.

In addition, if we talk about marine supplies of soybean cake to a foreign buyer, most Ukrainian producers consider formation of an economically efficient shipload lot (at least 3-5 thsd tonnes) as impossible task both in terms of financial and production capabilities. Therefore, the exports mainly go through the land border and in small batches only. And Ukraine makes soybean cake exports to the west only, transits to Russia and other eastern countries are closed. Only the leaders of the market made some exception. For example, in December 2015 Company Systema became a pioneer of shipboard exports of oilcake, and shipped the first vessel. It's nice to note that we took direct involvement in the operation.

There is a prospect in container shipments - the market segment works with small volumes, and the price gap is much wider.

 

- How do You consider the prospects of Ukrainian soybean processing complex in the following years? Can the number of oil pressing enterprises reduce, or can they refocus on processing of other oilseeds?

My forecast: the share of soybean meal production will grow, and soybean cake - to decrease. At the same time, the competition rates for oilseed raw materials will be quite significant not only in the second half of the season, but also before beginning of the harvesting campaign. Of course, not all companies will survive. One can reorient to work with other crops, but the technological processes of production and processing have significant differences, so it will require additional investments.

 

- In Your opinion, how will the situation on the export market of veg oils and meals develop in the second half of 2016/17 MY? Which trend will be top-priority for the exports of oilseed by-products in a new season and why?

I think that traditionally in the second half of the year, we will face a bullish trend and some decrease in the number of supply, which is already observed to date, in terms various difficulties with the purchase of oilseed raw materials - both sunflower seeds and soybeans.

 

- What are the major tasks for the company, and what results do You plan to reach in 2017?

We plan to continue developing: to increase the volume of commodity turnover by 30% year-to-year, place greater focus on the export direction and development of new logistics solutions. Also, we will expand the range of commodity positions, and start working with alternate crops.

 

Interviewed by Viktoria Zelenaya

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