Grain Forum - good harvest has to be good news

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APK-Inform

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Odessa is glorious not only by its beauty, charm and coloration. Odessa is a sort of a symbol of Ukrainian grain market. To begin with, it is the export gates of the grain market — most of grain terminals are situated in the ports of Odessa where are shipped nearly 55% of the whole grain export volume. There is also a very symbolical hystorical fact which claims that the first number of GAFTA's contract on the shipping of wheat was tied up by the company of Lui Dreyfus from the port called Odessa.

APK-Inform Agency decided to enhance the significance of Odessa for grain market, conducting the international conference "Grain Forum-2013: production, trading, logistics" in Odessa which took place in May, 21-23 in hotel "Bristol". The event has a special significance for Ukrainian grain market and was organized for 12 times. As a reminder, the history of all events of APK-Inform Agency and industry conferences in Ukraine has started from Grain Forum — 2002. It was APK-Inform who became the first mover of conference trend!

It was very pleasant to see among the participants of "Grain Forum-2013" which take part in the events organized by the Agency not only in Ukraine but in other countries over a number of years. Among them there are: SGS Ukraine, Atlanta-Agro, Buhler AG, KMZ Industries, APK Corporation, Myronivsky Hliboproduct, Cotecna Ukraine Limited, Creative, Intertek Ukraine, Cargill A. T., VA Intertrading Ukraine, CHS Ukraine, etc. Certainly, it was great to greet companies which are new  for our conference and also people who, despite the changes in their lives, again took part in the conference, presenting their new firms.

As usual, Grain Forum is conducted at the end of the season in order to sum up the results of the expiring MY and define the prospects of grain market work in the new season. Due to the vast program, the event gathers the participants of almost all segments of the grain market — agriproducers, recyclers, traders, logistics specialists. This year the geography of participants was also wide and represented by 33 countries that shows the great world interest towards the situation on the Ukrainian grain market.

 

 

 

 

 

At first, the unusual framework of the conference should be mentioned. The Grain Forum became a sort of basis united several events – the conference “Grain industry-2013: processing, new markets, innovations”, organized in May, 24, in hotel “Bristol”, and Maritime Days in Odessa (May, 23-25).

The key topics for the Grain Forum became the prospects of the grain harvest in the new season, the peculiarities of trade and logistics of grain cargoes, and also legislative accommodation of the grain market functioning in Ukraine.

Thus, according to the forecasts of French analytical agency TALLAGE SAS/STRATEGIE GRAINS, the season-2013/14 will be tensional. This point of view was announced in the report by the Agency analyst  Véronique Fradin. "In the beginning of the season there could be relatively high prices at world market, but lower than the level of harvest-2007/08. There is a big question if the prices decrease because of the big harvest which we forecast for wheat and maize, or prices on the crops increases and reaches the critical level because the harvest won't be so good as we expect", told V Fradin. According to the analysts, it is a great problem, because, for example, on wheat market STRATEGIE GRAINS forecasts the growth of production at 15 mln tonnes up, but as of 20th May such a volume of production cannot be guaranteed as the harvest in Argentine and Australia has not been sowed. Climatic factor also plays a significant role in harvest formation. The fact that in US, Russia, and also Europe the climatic conditions may be difficult, it can decrease the harvest forecast in 2013/14 MY. So, STRATEGIE GRAINS forecasts that 2013/14 MY will be very tough. At first, it is reasoned by low carry-over stocks of maize, wheat, and barley. In particular, the stocks of wheat will decrease nearly 40 mln tonnes down — to 10 mln tonnes. "It means that the wheat balance will be very sensitive to every growing demand, which in reality should be covered by the maize. If maize harvest won't be high enough, then demand on the feed grain should influence the demand on wheat. Now we cannot satisfy the similar growing demand", reported V. Fradin. "The total strategy of company in 2013/14 MY is if maize harvest would be enough for US and satisfy world demand on the feed production", told expert.

Continuing the topic of the harvest of 2013/14-season, we should tell about the forecasts of production in Russia and Ukraine.

Concerning the grain harvest in Russia the pessimistic forecast of Vladimir Petrichenko, the managing director of company "Pro Zerno", announced in the report on the topic "The grain swing of Russian harvest". As of the middle of May, V. Petrichenko forecasts the production of grain in Russia in 2013/14 MY at the level of 97 mln tonnes. "From the reported volume wheat will total 57.3 mln tonnes, barley — 16.5 mln tonnes, and maize — 8.5 mln tonnes", he mentioned. The expert also put an emphasis on the fact that there is a record maize harvest expected. After the achievement of the indicators, in V. Petichenko's opinion, the export potential of Russian grain is estimated at the level of 23.4 mln tonnes, from which there are 17 mln tonnes of wheat, 2.4 mln tonnes of barley, and 2.7 mln tonnes of maize.

"Looking at the data, we can tell that we have two news — one is good, and the second is bad. A good news is that we will have a very good harvest, and it relates not only to Russia but also to Ukraine, summarized V. Petrichenko, - and bad news is that we will have a very good harvest because the prices at grain will be lower than in the last season", he said. As the analyst forecasted, the starting prices at milling wheat in Russia in the new season will total $260-270 per ton, that is $30-40 lower than the same indicator of 2012/13 MY. At the same time, V. Petrichenko added, expected decrease of prices at grain won't become disastrous for Russian agrarians. "Prices, I think, will be appropriate for agriproducers, they won't be ruinous", the expert considers.

Concerning the prospects of grain harvest in Ukraine we should mention that, according to USDA forecast, in 2013/14 MY the volume of production of Ukrainian grain may reach the level of 56.6 mln tonnes that allows to take the 7th place for the country among the world producers of the production. It was reported by the president of Ukrainian grain association Vladimir Klimenko. "As the average consumption in Ukraine today totals nearly 27 mln tonnes, the remain forecast will come to life, following the results of 2013/14 MY Ukraine may become the third country in the world at the volumes of grain export".

The analysts of APK-Inform Agency, in their turn, forecast the increase of grain production in 2013 up 15% compared with 2012 — to 53.3 mln tonnes. "The significant share of the volume (43%) will fall within maize, the production of which is expected at the level of 23.1 mln tonnes. There is also expected the increase of wheat at 38% up in the structure of the future harvest, the production of which may reach 20.5 mln tonnes. Barley production in the next season is forecasted at the level of 7.1 mln tonnes that totals nearly 14% of the total production of grain and pulses, and shows the growth at 3% compared with the last season. Thus, there is expected the increase of volumes of grain and pulses at Ukrainian market which requires for effective spreading", - such an opinion was announced by grain market analyst of APK-Inform Agency Andrei Kupchenko. In the report the analyst also payed attention on the prospects of grain exports in the new season. "So, the viable volume of grain exports is forecasted at the level of 29.2 mln tonnes that is the record indicator which can be achieved in the frames of effective foreign trade without limits and corresponding infrastructural prosperity. The forecast is conducted with due regard to the fact that the viable grain carry-overs for Ukraine are estimated at 6.1 mln tonnes that allow to supply food safety of the country".

Returning to the pronouncement of V. Petichenko that a very good harvest is not a very good news but is a bad one, for Ukraine it may be not only in the decrease of prices at grain, but also in the state of infrastructure of grain market which may seem as a weak part in the chain, which does not allow to use the export potential of the country. While the intensive adding of grain volumes in Ukraine in the definite moment the infrastructural collapse may occur. Such an opinion was announced by Head of business projects department of APK-Inform Agency Rodion Rybchinskiy. "The biggest problem is in the state and capacity of port railway station, the state of motor road, deficit of the grain car, unsufficient quantity of granaries", the expert told.

The outstanding problems of infrastructure were touched by Sergei Petrenko, deputy director of department of economic development and agrarian market of the Ministry of Agrarian Policy and Food of Ukraine. Talking about the estimation made by the Ministry of the current state of national grain industry, S. Petrenko agreed with the opinion of other reporters that total capacity of elevators, necessary for Ukraine, comprises nearly 70 mln tonnes. At the same time, he casted doubt on the calculation of capacity of Ukrainian ports at the range of 25-27 mln tonnes per a year made by experts. "We think that in reality the indicator totals nearly 40 mln tonnes. Thus, in the current season the maximum monthly grain shipment in Ukrainian ports totaled nearly 3.6 mln tonnes. That's why if we talk about the annual index, even taking into account the decrease of activity in the winter months, the Ministry sees the real number at the level of 40 mln tonnes per a year", reported S. Petrenko.

S. Petrenko called the approach road to the elevators, as the weakest element in Ukrainian grain logistic chain the state of which significantly decreases the possibility of increase of volume of grain transportation. "Thus, I have to state that ways and possibilities of solution of the problem are not even overviewed today. There is no understanding between the governance, the Ministry of infrastructure, and traders, how to increase the capacity of approach roads which led to the dock-side elevators. It is really a sort of "chokepoint" in the infrastructure of Ukrainian grain market", the public official told.

Rodion Rybchinsky talked about the issues concerning the production of agricultural crops in Ukraine and state of infrastructure. "To 2025 the total production of grains and oils in Ukraine may total 96 mln tonnes, from which nearly 80 mln tonnes comprise grains and 16 mln tonnes — oils. After the achievement of the index the potential volume of Ukrainian grain and oil exports will total 62.8 mln tonnes", reported expert. Because of that, as it was underlined by R. Rybchinskiy, there is required the development of infrastructure of the market segment — increase of capacity of elevators which are fit with the modern equipment, to 69 mln tonnes, and also creation of the fleet of grain cars at the level of 10.5 thsd points (taking into account the achievements to 2025 the period of turnover of cars to 5.1 days). "The total amount of investment, required for the realization of the needs, totals nearly $8 bln", the expert transcribed.

It is worth noting that in a quite deep way the topic of infrastructure was examined in the specialized session which took part in the second day of the conference work, "Maritime Days in Odessa in the framework of Grain Forum". The partner of the session's organization was International Law Offices "Interlegal".

Returning to the unusual framework of the Grain Forum program, we should mention that in the current year APK-Inform Agency together with the magazine "Storage and processing of the grain" payed much attention to the issues of market of grain byproducts and technological aspects of the industry. The issues of the segments of the cereal-processing industry were investigated in the frames of the conference "Grain Industry-2013: processing, new markets, innovations" which became the logical continuation of the topics of the conference "Grain Forum-2013". The event gathered nearly 100 participants presenting more than 70 companies from 12 countries, among which there were the leading producers of flour, grits and feed-stuff, large and small agriproducers, traders, suppliers, and producers of equipment.

During the conference, participants raised the the issues of production of the main grain crops in Ukraine in 2013/14 MY, the development ways of the market of flour, grit, animal feed and wheat middling, new market outlets of Ukrainian milling production, the issues of quality and safety of grains, and also questions connected with technological and technical equipment of the industry.

The analyst of APK-Inform Agency Andrei Kupchenko expressed interesting opinion concerning the growth of domestic grain market. He thinks that the share of domestic consumption of grain in Ukraine decreases gradually. It is caused by reduction of the volumes of domestic processing which following the results of 2013/14 MY may total 11% versus 12% in 2012/13 MY and 14% in 2010/11 MY. "Such a trend, on one hand, stimulates the adding of volumes of exports of Ukrainian grain as material, but, on the other hand, proves the presence of potential for adding of processing volumes and increase of exports of the production with value added", the expert noted.

The director of Novopokrovsy bakery products plant, Andrei Yakovenko gave the similar estimation of the trend at Ukrainian grain market. "The driving of Ukraine to the achievement of the leading positions of the grain export volumes does not seem to be optimistic — we sell material but not the ready production that would be more efficient. But this target is quite difficult, because the markets of many countries are open for the imports of grain, and flour supplies are shut by customs", he told.

Talking about the problems of the domestic milling market of Ukraine, A. Yakovenko calls the absence of state support of the industry. "The absence of the engine of processing industry support is the serious interference for the development of milling market. Today Ukrainian flour millers almost get rid of the funding. The agriproducers receive good gain, cook-bakers are state-funded, and millers are deprived of any credit and allowance", he added.

As the head of grain processing department of holding "Urozhay", Sergei Sakirkin noted, one of the variants of solution of the reported problems is the development of export supplies of Ukrainian flour. On his opinion, the prospective markets for Ukrainian flour may become Northern America and Middle East." Nowadays the market of Southern America is "shut" by Argentine flour and particularly by production from US, the eastern direction is monopolized by Kazakhstan and Turkey. At the same time, annually Northern America and Middle East together import nearly 1.5 mln tonnes of the production, that is why there is a sense for Ukraine to define itself at these markets", emphasized S. Sakirkin.

But to establish positions at the flour world market, Ukrainian exporters have better to implement the signed contracts unconditionally and accurately, expressed expert.

Thus, it is seen that there are strong prospects of development of grain and milling markets, and they are not bad, but everything depends on the weather, in a direct sense as well as in a figurative one.

The zest of grain days in Odessa became the sightseeing program, offered for the participants of Grain Forum and Grain industry, at the Grain shipment terminal "Borivage", stevedoring terminal Brookling-Kiev, and Plant of elevator equipment.

The trip to the GT "Borivage" became a sort of start of the grain days in Odessa and was organized in May, 21, expecting the official opening sitting of the Grain Forum. At that day more than 70 participants of the event attended Grain terminal of the "Borivage" company, which is one of the most modern enterprises of the grain sector of Ukraine. During the trip its participants got familiar with the organization at the terminal of the processes of receiving, decontamination, storage, and shipment of grains, and also could receive answers at the questions they were interested in from the representatives of the "Borivage" company. The excursion conducted over the area of the terminal, in the observing station and the master control centre by the director of the company Vitaliy Fedorov and commercial director Sergei Frolov, no participant left unfazed. APK-Inform Agency will present more detailed information about the "Borivage" company and the plans of its development in one of the next volumes of the magazine.

It is worth noting that the company-partner of Borivage "Adept Group" implements projection, engineering, building and mechanical works, and also presents the wide choice of the equipment for agro-industrial complex. The result of the work of "Adept Group" team is the modern enterprise which supports the high quality of the processes of storage and processing of different grains and oils, is characterized by high indicators of the productivity, mechanization of the industrial-processes, effective staff, cost effectiveness of the consumption of energy sources, ecological and industrial safety. Grain terminal "Borivage" is the result of the work of "Adept Group" team. It also should be mentioned that at the eight-year term the specialists of "Adept Group" realized more than 30 projects for the enterprises of grain sector of the different difficulty and size.

Summarizing the results of the conference, we can announce that in the framework of the Grain Forum the meeting united not only the market insiders, but the professionals and like-minded people who wanted to have a meaningful dialogue, were ready for new meetings and open for communication.

We want to end the article with the words of one of the Grain Forum participants, the manager of development of Portinvest Logistics LLC Vitaliy Poteruha: "In the highly competitive industry there is a possibility to receive the relevant information about the market state at a long-term is the significant preference. That is why the organization of informative sectors, similar with Grain Forum, every time is the landmark event in the industry. It is a possibility not only to exchange the current information with the market colleagues but also to receive expert analysis of the tendencies and processes taken place in Ukraine and world market. This year, as usual, the conference was held in the pleasant and constructive atmosphere, which supports the fence-mending".

APK-Inform Agency as the organizer of the event gratefy all the sponsors, reporters, and company representatives for the attendance of the conference "Grain Forum-2013". Without you we wouldn't have had a possibility to make the event such interesting and significant for grain industry. We hope that all who couldn't come to Odessa this year, will mark May of 2014 in the working calendar and will urgently follow the messages of our Agency about the arrangement of the Grain Forum in 2014!

 

 

 

 

 

 

 

 

 

 

 

 

 

Elena Cherednichenko,

Head of the organizing committee of Grain Forum

 

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