Start of 2017/18 MY on the Russian market of feed corn

Source

APK-Inform

946

Russia continues to increase the production of feed corn, constantly expanding the planted areas. At the same time, 2017/18 MY won't show the new records in this segment due to the decrease of crop harvest. Besides, the information about low qualitative characteristics of 2017 corn harvest call into question the realization of the export potential.

Since 2010, the growth of planted areas under corn is annually fixed. The current year didn't become an exception: following the results of 2017 the planted areas reached 3.1 mln ha that is 6.9% higher than the indicator of 2016 and for 121% more than that of 2010.

However, despite the expansion of planted areas, the corn harvest of 2017 is estimated at 14.9 mln tonnes that is slightly lower than in 2016 (down 2.6%). Current situation is caused by the decrease of yield which last season reached 5.51 t/ha, and in the current MY is forecasted at the level of 5.01 t/ha. The general supply of corn (taking into account the carry-over stocks) is estimated by APK-Inform analysts at the level of 17.5 mln tonnes that does not only covers internal needs of the country (9.2 mln tonnes), but also keeps the export potential at high level.

 

Corn production in Russia

 

2015/16

2016/17

2017/18*

Planted areas, `000 ha

2 771

2 895

3 106

Yield, t/ha

4,94

5,51

5,01

Production, `000 tonnes

13 173

15 310

14 918

* Forecast

Hereinafter, source: APK-Inform Agency

 

Price situation

The high rate of feed corn production in 2016/17 MY caused a tendency of prices reduction on the domestic market in the first half of a season, however in the second half of the season the price situation stabilized, and there were no essential adjustments after.

At the start of 2017/18 MY the bid prices for 2016 feed corn harvest in the European part varied at the range of 7`000-9`400 RUR/t CPT, in the Ural Federal District – 10`500-11`500 RUR/t on the same conditions. At the same time, the first grain batches of new harvest were bought at the above-stated prices, without having an opportunity to reduce bid prices essentially in view of the limited number of offers. Let us note that maximum and approximate to them prices were announced for large-capacity consignments of grain with high quality indicators.

The main part of consumers was interested in acquisition of crops with ordinary qualitative characteristics and conducted purchasing operations at the prices closer to minimum.

2017/18 MY started with seasonal reduction of prices. Thus, the purchasing prices in the European part fell to 5`500-9`000 RUR/t CPT with the increase of offers. At the same time, many consumers of the Central Federal District considered it expedient not to change the bid prices in order to attract more offers. In the beginning of October, consumers of the Ural Federal District bought the first volumes of 2017 grain at 10`100-11`500 RUR/t CPT. As a result, the most active reduction of prices was fixed in the European part – down nearly 500-1500 RUR/t, and has been caused not only by essential increase of offers, but also poor quality of corn of the harvest-2017.

Thus, qualitative characteristics of the crop getting the market were quite often estimated as low by consumers of the Southern and Central Federal Districts that was caused by adverse weather conditions during the harvesting campaign. The high share of weed impurity and the increased humidity were the main problems market participants had faced on start of the current season.

"In 2017 corn was the main crop we made bets. Unfortunately, neither yield, nor quality of 2017 corn harvest pleased us well. It should be noted that the humidity of grain is 36-40%, while yield – 7-8 t/ha of crude grain (compared with 9 t/ha of dry corn last year). As a result, the corn yield in our household is 40% less in comparison with 2016, and it is the worst result for the last 7 years. Speaking about the market situation, now we sell small batches of corn at 6`500 RUR/t EXW to cover the current payments. We don't hurry up to sell, buyers probe the prices, and we don't observe high consumer’s activity", - one of agricultural producers of Kursk oblast comments on the situation.

The problems stated above are less peculiar to the Volga Federal District where, despite yield decreasing, the qualitative characteristics of corn are estimated as conforming to requirements of the state standard specifications.

At the same time, the majority of producers estimated demand rates for the grain as low that is unusual for the start of the season. Respectively, the competition between livestock and processing enterprises isn't observed, as well as significant price changes.

 

As for the situation on the export market, now the purchasing-trade activity in the sector of corn is also estimated as low. Many export-oriented companies informed that they are concentrated on wheat shipments under earlier concluded contracts due to deficit of rail cars and difficulties with logistics. Let us mark that the offer prices for corn with October-November delivery varied within 164-166 USD/t and 139-141 USD/t FOB in the deep-sea ports and Azov Sea ports, respectively.

 

Forecasts and prospects

In the short term we don’t expect on considerable price changes on the domestic market. To date, there are no premises for activization of demand both from buyers on the domestic market and exporters.

And one of the main reasons for this trend, certainly, is the quality of harvest which doesn't suit market operators. At the same time, many agrarians inform that they are not going to reduce the selling prices and, hoping for weather, expect to finish the harvesting works in time and without the bigger decline of quality.

Speaking about the prospects of 2017/18 MY on foreign market, one may say that according to APK-Inform figures, the exports of corn can total 6.5 mln tonnes. However, whether the export potential is implemented fully will depend on the competitiveness of Russian grain on the global market. At the same time, considering huge global stocks, and high prospects of global production, as well as tight competition on the global platforms, the export prices of corn will gradually fall.

 

Alina Timofeyeva, APK-Inform Agency

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