Russian market of feed barley - results of 2015/16 MY

Source

APK-Inform

38718

 

During several recent seasons, the bullish trend became the key feature for the Russian market of feed barley. We should note that in the current MY, such factors as reduction of the grain production volumes, increasing of the production costs, activation of the domestic demand and high competition between grain processing and export-oriented companies, contributed to development of the reporting trend.

 

Domestic market: demand outpaces supply

Despite the record levels of grain exports and prices levels in 2014/15 MY, the production volumes of barley in 2015 significantly decreased. Thus, the grain harvest volumes fell to 17.1 mln tonnes (down 13.7% compared with 2014/15 MY). According to market operators, barley production lowered due to reduction of the planted areas to 8.7 mln ha (down 6.1% compared with 2014/15 MY), and reduction of the average yield in the country to 2.13 t/ha (down 0.15 t/ha compared with 2014/15 MY). Many market operators stressed the factor of the fall of grain production as the main reasons for rapid rising of prices for feed barley in the beginning of the season. At the same time, the qualitative indicators of the grain somewhat increased and mainly corresponded to the State Standard requirements (GOST). Barley kernel weight varied within the average range of 600-650 g/L, which was quite acceptable for both domestic market consumers and export-oriented companies.

 

Main indicators of barley production in Russia

 

2013/14

2014/15

2015/16

Planted areas, `000 ha

9019

9391

8885

Yeild, c/ha

19,2

22,7

21,3

Production, `000 tonnes

15389

20444

17546

Source: Federal State Statistics Service

 

The starting bid prices for barley varied within 7`600-8`000 RUR/t CPT in the European part and 7`000-7`500 RUR/t CPT in the Ural and West Siberian regions. The high price level was formed by RUR devaluation processes, which led to the growth of prices for all basic imported resources: seeds, fertilizers, crop protection products, etc. At the same time, in the same period of 2014/15 MY the purchasing prices for barley were significantly lower, and varied within 5`000-6`000 RUR/t CPT.

We should note that rather high demand for the grain with low-quality indicators became one of the major features of the current season. In the beginning of the marketing year, many customers of the domestic market purchased the grain with high moisture content due to its more acceptable selling prices (6`500-7`000 RUR/t CPT) and then provided additional treatment. At the same time, representatives of export-oriented companies actively purchased the grain with high-quality indicators at the maximum edge of purchasing price.

"In the beginning of the season, our company mainly purchased poor quality feed barley, and then we provided additional treatment of the grain. We follow such strategy for many years, because in the beginning of the season the average prices for barley with high moisture content are usually lower by 1`000-1`500 RUR/t compared with the grain meeting all GOST quality requirements. Improving of the technical base and equipment structure allows us to consume the grain without any troubles for both food and forage needs. At the same time, in the second half of the season we usually purchase small-scale volumes of the grain, focusing on the domestic market trends", - said a market participant from Voronezh oblast.

As for the customer strategy, we should note that representatives of livestock breeding complexes showed the most active interest in purchasing of the grain. Due to the lack of supply, they had to raise the prices for feed barley. Also, traders formed significant competition to domestic market buyers due to the high interest of importers in the Russian grain. Thus, there were all terms for supporting of the domestic prices for barley.

In turn, agricultural producers sold feed barley in rather slow rates. Many agrarians planned to restrain sales of large-scale grain lots, expecting for the highest level of prices. In February the market reached its peak of selling prices, due to significant devaluation of the national currency rates. In the period, the number of grain offers mainly reduced, but the price range significant increased.

By the end of April 2016, barley bid prices in the Ural and West Siberian regions significantly increased, due to the growth of demand, and reached 9`300-10`000 RUR/t CPT. To date, most buyers took wait-and-see positions and form their grain reserves on demand only. However, they expect that the starting prices for barley will be much higher than in the same period last season.

 

Export market: shipments reduced compared with the previous record

As a reminder, the first half of 2015/16 MY showed quite high rates of export shipments for the feed barley market. The peak of export rates happened in the first 3 months of the season (July-September), due to the similar global environment, acceptable prices for the Russian grain, and good quality indicators of the grain. But since January 2016, Russia significantly decreased barley export supplies due to some shortage of the grain stocks on the domestic market. So, during July-April Russia supplied 4.1 mln tonnes of barley on foreign markets, including 3.1 mln tonnes in the first half of the MY. According to APK-Inform data, in 2015/16 MY the general exports of barley will reach 4.5 mln tonnes, against 5.3 mln tonnes in the previous season. Traditionally, Saudi Arabia and Iran were the main buyers of Russian barley, and their common share in purchasing of barley from Russia reached nearly 70% of the export volumes. Generally, in the reporting MY nearly 20 countries were the importers of Russian barley.

As for the price situation, in the period from July to early September 2015 on FOB basis the offer prices for feed barley in the deep-sea and Azov Sea ports somewhat decreased to 172-175 USD/t and 150-155 USD/t FOB, due to moderate demand of importers, and lowering of price quotations on the global market. At the end of the season, the prices in the Black Sea ports varied within 170-172 USD/t FOB, and in the Azov Sea ports - 152-156 USD/t FOB.

  

Expectations of market operators

In the nearest future, the prices for feed barley both on the domestic and export markets will remain mainly declarative, due to the grain harvest deficit in 2015. At the same time, market operators do not exclude the possibility that the level of the starting prices for new crop barley will be high enough (8`500 -9`000 RUR/t CPT) at the expense of low carry-over stocks and active demand from grain processing and export-oriented companies.

 

Forecast of the harvest from APK-Inform

APK-Inform experts estimated barley production in Russia in 2016 at 17.5 mln tonnes, up 3% compared with the previous year. Taking into account the carry-over stocks, the total supply in 2016/17 MY may reach 18.2 mln tonnes (up 2% compared with 2015/16 MY), and the domestic consumption of barley - 13 mln tonnes. Thus, the export potential of barley in 2016/17 MY is estimated at 4.5 mln tonnes (up 5% compared with 2015/16 MY).

 

Vera Koptilaya, APK-Inform Agency

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