We should start from description of the present realities. Rather often news lists of the major mass media announce that there is the sharp decrease of wheat flour offers in Ukraine. It is necessary to note that the first announcement appeared in the first decade of February 2011. As of that period, the problem scales regarding the total flour deficit in the country were overstated. However to date, taking into account the market situation development, flour supply volumes face a decline, its production volumes and realization face the essential decrease. At the same time, according to the Government opinion, there is no flour deficit in Ukraine, there is just small decrease of the supply volumes, and the prices did not actually face an increase, they will not face the further growth. So what is the situation on the Ukrainian market of wheat flour?
It is rather difficult to understand what the problem is. Nevertheless, we should start with the fact that during the season the milling wheat market used to face the confident prices increase. Besides, the growth of prices for energy products caused the wheat flour prices increase. It is necessary to note that the most active prices increase was marked since the beginning of February 2011. Meanwhile, during recent time the price for all grades of flour increased by 200-300 UAH/t (and continue growing), a lot of flour-milling enterprises announce about the non-sufficient offer prices for the end products. According to the range of market operators, wheat prices level should be even higher by additional 200 UAH/t, because grain prices face the more active increase.
|Average level of wheat flour prices, UAH/t EXW||Month||Top-grade flour||1-grade flour|
|Average level of bid prices for wheat, UAH/t EXW||Month||2-grade wheat||3-grade wheat|
Producers of flour-milling commodities used to note that they faced difficulties with the declarations receiving, which allow realizing the products at higher prices. The market operators stated that it is rather difficult to correlate grain prices increase, which does not need any documentary fixing, with the flour commodities prices increase, and the permission for such increase, which is necessary to wait during few weeks. According to the flour millers, there is another problem of the prices regulation. It is that for declaration issue it is necessary to declare the expenses for grain purchasing. The range of market operators noted that the stated column of the declaration cannot be fulfilled due to the fact it was not real to purchase grains due to the fact that agrarians preferred to avoid selling wheat at the bid prices. Therefore, there is the endless circle on the market of wheat commodities: it is necessary to increase flour prices in order to purchase the necessary volumes of grains, but they are not able to provide it due to the absence of the opportunity to purchase grains.
It is necessary to note that most of the grain processors did not consider the option of grain purchasing at the offer prices, because they were not sure if they are able to get the necessary declaration. The current apprehensions were connected to the continuation of the prices holding for bakery products of mass consumption.
Agrarian Fund flour: is it myth or reality?
It is necessary to state that the Government did not stay aside from the market problems and really accepted the additional measures for provision of the price stabilization for bakery products in... 2010. According to the opinion of market operators, till the end of February 2011 the Agrarian Fund did not provide grains for processing. At the same time, the flour consumers became aware of what the absence of the state flour means, due to almost all of them have undertaken obligations not to increase offer prices for social bread.
But there is another point of view of the situation. The official version. Recently the Minister of Agrarian Policy and Food of Ukraine stated that monthly the Agrarian Fund provides about 100 thsd tonnes of flour for bakeries. Later, Sergey Trigubenko, Deputy Minister of the Agrarian Policy and Food, stated that in order to provide Ukraine with bread till the end of the current MY, by the new crop harvesting, it is necessary to produce 1.377 mln tonnes of flour of all grades in the country. But the Agrarian Fund of Ukraine stocks 1 mln tonnes only. And it is without taking into account grains which the commercial structures store for further processing. The Deputy Minister also noted that Ukraine consumes the cheapest flour in the world: the high-grade flour price on the commercial market – 356 USD/t, Russia – 404 USD/t, Italy – 461 USD/t, the Czech Republic – 631 USD/t.
Nikolay Prysiazhnyuk noted that there is no base for flour prices increase. While talking about grain prices growth the Minister noted that the fact that the state company Khleb Ukrainy increased the inner grain purchasing prices, and grain traders should accept it as the signal, what is the rate of real price for agricultural producers. At the same time, N.Prysiazhnyuk stated that the purchasing prices increase is not the base for flour prices growth.
<>The paradox is that according to the Agrarian Fund, the structure has grain volumes, but according to representatives of the range of companies, they did not get the state grains for processing during the first months of 2011.
<>About the future, probably not dark
<>It is rather difficult to talk about the further development of the situation on the market of wheat flour in Ukraine. At the same time, the market operators announce their opinion about the future of flour market. Thus, according to the range of flour millers, commodities prices increase will slow down during the nearest time due to the limited purchasing power. At the same time, it is difficult to define the limit, due to the fact that there is still the demand for high-grade flour at the price of 3.1-3.2 thsd UAH/t EXW.
The market participants also suppose that the Agrarian FUND flour entering the market will forward the stabilization. At the same time, the producers do not talk about offer prices decrease. According to the market participants, unevenly distribution of grain stocks of the Agrarian Fund throughout the territory of the country may cause the transportation costs increase, and as a result the cost of the end product will be at the level of non-exchange market products. But if grain logistics has no the efficient expenses, then the range of bakers will get the opportunity to purchase state flour at the lower prices.
But still one of the main problems is grain purchasing difficulties. Meanwhile, the bid prices increase continue to force Ukrainian agrarians to increase offer prices. The logic is rather simple: if there is the bid prices increase then the potential is not over yet, and probably flour millers are able to pay more. But in the conditions of the free market there is one detail – the list of the products, which prices are under the state regulation, and wheat flour is in the list.
Flour producers note that all the factors cause that the offer products volumes face a decrease due to the fact that while solving problems as "where to buy" and "how to sell", it is impossible to work in accordance with the old regime. And moreover, while increasing flour prices following more expensive grain purchasing, flour-millers expect for the reaction of the officials who continue avoiding the formulations in their announcement that "flour prices really face the essential growth". They know there is no any base for prices increase, it means the growth can not exist. The flour millers are now interested in the answer of what to do next.
Resuming all above stated, there is the feeling that there are more questions and suppositions in work of the grain market, and there are no any efficient answers and clear prospects.
Head of grain market department of