In terms of rather high competition rates on the global market, the growing influence of agro-climatic conditions and the political aspect, the trader is becoming more difficult to specify the major prospects of agricultural crops in the context of its export geography.
Therefore, APK-Inform Agency talked with the grain market expert, one of the first exporters of Ukrainian corn, Andrei Druzyaka about the reporting issues.
— Andrei Evgenevich, what are the major features of the beginning of the grain season-2018/19?
Actually, in the beginning of the season there was nothing unusual in comparison with the end of last season. The prices smoothly flowed from the old crop to new crop. At least, the country observed the same situation for 2 recent years. Then, we faced a slight price rally, due to a certain number of global reasons — droughts and floods in many grain-producing regions of the world, as well as trade wars. In addition, Ukraine has one more important reason for the rise of bid prices — the good supply of financial resources in most Ukrainian agricultural producers, which allows not to sell the products at low post-harvest prices, but take a wait-and-see position, expecting for the higher prices in the short or medium term.
— Will the export geography of Ukrainian agricultural products change in 2018/19 MY?
In the current season, the geography of Ukrainian grain exports will not significantly change. China almost regained its position in the imports of Ukrainian agricultural products. In terms of the global trade confrontation between the USA and China, Ukraine can strengthen its positions in the market segment. It mainly concerns protein-content products — soybeans, sunflower seed, etc. For several recent years, the neighbouring countries of the Asia-Pacific region — Indonesia, Thailand, India — became the largest buyers of Ukrainian wheat. We should try to export Ukrainian wheat to China.
The EU will keep the exports of agricultural products from Ukraine at the high level. And it's not just because of the association agreements with the EU, but due to the current trade difficulties of the USA and EU. Also, the current weather conditions in the EU will help to Ukrainian exporters, because they reduced the quality level and production volumes of European grains.
— In the current conditions, how do You estimate the prospects of cooperation with Turkey?
I hope that finally in the current season Ukraine will begin the mass exports of wheat to Turkey, surpassing Russia in the reporting market. The current significant decline of wheat production in Russia is one of the major reasons, as well as the permanent economic "misunderstanding" between Moscow and Ankara, and the plans of Turkey to diversify the supply chains.
— How would You comment on the fact that in the second half of 2017/18 MY and in the beginning of 2018/19 MY, feed barley prices exceeded the prices of 2-grade wheat, while the planted areas under barley in Ukraine continued declining?
The atypical price spread between feed barley and milling wheat started developing since August 2017. The tense supply and demand balances of barley in the major countries-producers became the main reason of such changes, and resulted in the dominance of demand over supply, which caused the growth of prices.
10-12 years ago, Ukraine exported large-scale barley volumes which significantly exceed the current production. And to date, the season of barley sales in Ukraine ends in November — traders manage to sell the grain from the country. Barley is gradually moving into the category of alternate crops and can repeat the case of rye.
I consider that it is a temporary phenomenon, although it dragged a little. In the current season, we will see the return of prices to their previous levels, when the prices of wheat are higher compared with feed barley.
— Thank You for the interesting talk, and please would You share Your expectations for the market development?
The most difficult is to forecast how the prices will move in the current season. In July 2018, the market already faced a tension that the prices of barley would exceed 250 USD/t FOB. Then it seemed unreal, but to date the prices almost reached the point.
The same applies to wheat. Experts do not exclude that the prices of milling wheat are able to reach the level of 300 USD/t.
-As a reminder, in 2013/14 MY we already had the prices of wheat and corn at above 300 USD/t. But then the prices declined. To date, we already moved the similar bottom position.
Interviewed by Anna Tanskaya, APK-Inform Agency
