Russian market of feed barley - results of the first half of 2016/17 MY

Source

APK-Inform

11684

 

Despite decline of the planted areas under barley to the lowest in 4 years in 2016 (8.4 mln ha), the grain production increased by 2.5% to 18 mln tonnes. Better yield (2.21 t/ha; +3.8% year on year) promoted higher crop volume. The article tells about development of Russian market of feed barley in 2016/17 MY.

 

Barley production in Russia

 

2014/15

2015/16

2016/17

Planted areas, `000 ha

9 391

8 885

8 358

Yield, t/ha

2,27

2,13

2,21

Production, `000 ha

20 444

17 546

17 988

Source hereinafter: APK-Inform Agency

 

Export market

Shipments of feed barley were rather slow during the first half of 2016/17 MY. Despite higher production, significant global supply and competition on the market limited demand for Russian barley. Russia exported 1.8 mln tonnes of the grain during July-December against 3.2 mln tonnes year ago.

Saudi Arabia and Iran were the main destination for Russian barley with the common share in total export at 64%. APK-Inform forecast Russia to ship 4.5 mln tonnes of the grain in 2016/17 MY, export will highly depend on competition on global market.

The most significant price declined was observed at the beginning of the season, since early June until the first decade of July. The offer prices declined by average 20 USD/t due to global market development and reached 148-152 USD/t FOB Black Sea and 135-140 USD/t FOB Azov Sea.

However, since the second decade of August the prices started to grow in the Black Sea ports and reached 153-155 USD/t FOB due to the global market development and limited supply of high quality barley on domestic market. At the same time, the processes were stable in the Azov Sea ports.

Since early November, after some stabilization, barley prices started to grow. Higher demand from importers was the main reason for price increase. By the end of the month, the offer prices increased by average 10 USD/t and totaled 160-165 USD/t in the Black Sea ports.

 

 

 

Currently limited supply and currency factor support prices on FOB terms. By the end of January, the offer prices for feed barley increase by average 10-15 USD/t to 164-171 and 151-160 USD/t in the Black Sea and Azov Sea ports correspondingly (February delivery).

Currency fluctuation and supply from farmers were the main determining factors for prices on CPT terms. In early July, the bid prices for barley declined seasonally by average 2000-2500 RUR/t to 8800-9100 and 8000-8500 RUR/t CPT-port in the Black Sea and Azov Sea ports correspondingly. The prices were rather stable during October-November and traders informed about low trade activity.

Despite stable FOB prices in December, the prices on CPT basis declined due to stronger ruble. By the end of January, the prices in the Azov Sea ports increased a bit and totaled 8500-8700 RUR/t CPT-port as traders needs to attract supply to fulfill signed contracts.

Comment from Alexander Fisenko, Commercial director at Agrocomplex-EXPO LLC:

“Russia harvested about 18 mln tonnes of barley last year. Taking to account carry-over stocks at 3 mln tonnes the given volume covers domestic needs and lets the country to export the grain. Majority of barley consumers informed about sufficient supply thus mainly they were able to form necessary volumes to work for long period. As a result, the bid prices for barley were rather low. Moreover, demand from exporters was not high too.

Thus, at the start of sowing campaign number of farmers informed about decision to reduce planted area under barley as they considered prices for the grain too low while production costs were high. Area was reduced by almost 2 mln ha to 7.2 mln ha. Moreover, many agrarians faced lack of funds and sufficient financing from the government to apply necessary fertilizes that reduced barley quality.

This year brought good crop in many countries thus the export potential increased while consumption is just a bit higher. Currency rate plays significant role too. Exporters directly depends on this factor influencing on competitiveness of companies, returns etc. Demand from main importers (Saudi Arabia, Iran, Indonesia) determines prices too.”

 

Market expectations

There are no reasons for price growth in the second half of the season due to following factors:

  • Sufficient stocks (according to Rosstat, barley stocks reached 1.9 mln tonnes as of December 1, up 9% year on year).
  • Low demand from livestock and processing enterprises as they have sufficient stocks for long period.
  • Low demand from exporters who pay more interest to feed wheat and corn.

 

Vera Sosna, Polina Kalayda, APK-Inform Agency

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