The production of alternate crops worldwide is annually increasing. However, some transformations in the market structure of this segment is observed from season to season caused by weather conditions, trade policy of the certain countries and even changes in the food culture of mankind. Thus, Egor Kobeletsky, the co-owner of SMACK group companies has told about the situation which develops in the Ukrainian market of alternate crops in recent years and also about the forecasts concerning the increased demand for their separate types.
- Egor, tell us, please, about the activity of Your company. How long have You been working on the Ukrainian market and with what crops?
I started working at SMACK Group more than 7 years ago. That’s how much time we are faced by the task to promote the goods of the Ukrainian origin to the world market. We were and are engaged in the finding new sales markets for domestic production and at the same time we acquaint the Ukrainian agricultural producers with global trends. Yet, from the beginning of our work, Ukraine was known as the powerful agrarian country with the high production and export potential. However, it was true generally to the traditional crops such as wheat, barley, corn, sunflower seed. As for alternate crops, the volumes of their production and export were much less firstly. It was necessary to acquaint the global market with the Ukrainian niche production gradually. Somewhere it was managed to be done quickly enough and somewhere it is difficult to break through until the present time.
The nomenclature of agricultural products we are exporting is rather wide. The global market dictates each own rules every season and the export positions can annually change. Apart from agro-climatic conditions which directly influence the yield and crop value, in recent years we have faced quite often such concepts as the import duties and quotas. For example, in November India has entered 50% import duty of peas that, of course, will influence the volumes of export from Ukraine. Practically all the countries have such mechanisms, directed to support the internal producer, on the one hand, and lobbying the trade interests of exporters in the import countries - with another.
- How do You estimate the demand on alternate crops on the global market today?
The global market demand for these crops has always been and will be, as well as on any other food product (feed&food). The question is just in that, how competitive the Ukrainian alternate crops are. While analyzing the situation for the last few years, then we may say that such traditional alternate crops as oats, sorghum, flaxseed, chickpeas, mustard were in great demand in 2015. It should also be noted the increasing interest to millet in the world market. As for peas, this crop "departed" at a very attractive prices reaching 360 USD/t CPT in spring of 2016.
Besides, there was a gold era of a coriander a little bit earlier. It was grown in a very small volumes and it was necessary to stand in a long line to buy it for 1500 USD/t CPT. By the way, now this position is almost inactive even for 350 USD/t CPT. Also, there were periodically offers on a safflower, vika, at the same time such positions as lentils, lupine, haricot were seldom met. It has been caused not only by the lack of demand, but the lack of the offers. Besides, from 2016 chickpeas is also actively trading. But if earlier it’s price was very close to peas cost, then today it is paid 1000 USD/t CPT against 200 USD/t CPT for peas. In addition, mustard is also in a great demand now, which cost is about 500 USD/t CPT depending on quality and color. Flaxseed is traded at 380 USD/t CPT. Next marketing year, there will be a market trade of lentils, haricot and, of course, chickpeas, in my opinion.
- Your company is presented in Ukraine and works with the Ukrainian agrarians. Are You always managed to find the necessary volumes of crops at Ukrainian agrarians to close the contract?
In 99% cases, we aren't contracted if we don’t have the ready volume at the warehouse. It should be noted that this year we have the sufficient volumes of peas only due to the record harvest. Therefore, we can be quiet concerning the existence of this crop, while it is impossible for the rest. The natural paradox is that as soon as the good harvest of some crops is got, the interest on the market is lost at once. Probably, for the first time in the history of Ukraine peas will be exported by large navigable party in 30 thousand tons.
- How would You estimate the quality of the major alternate grains and pulses in Ukraine in the current year?
Alternate crops are an individual or even exclusive goods. Each market dictates some special requirements to a certain product: for someone color is of great importance, for someone - the size. Someone needs a certain oil content in flaxseed, while others – nature in oats, and chromaticity, etc.
Besides, all large agro-holdings which are capable to control quality show the low interest in alternate crops. In 2017 the big peas crop has been reaped only because agronomists have convinced the heads that bean are good predecessors for receiving the big crop of the main crops (wheat, corn, sunflower seed) during next year. At the same time, small agrarians have no such a tools (finance) in order to monitor the quality of the grown-up production systemically. Therefore, except usual processes of cleaning and drying, we also calibrate the grain. In a close cooperation with our production partners we polish, prick and we grind some alternate crops. Thereby we try to bring to foreign markets not only raw materials per se, but also their by-products, which are the goods with value added.
- In what regions of Ukraine do You generally purchase alternate crops?
Our company is focused on shipping goods in containers by the marine transport. Generally speaking, we buy production in all regions of the country, however in the western areas – to a lesser extent. First of all, it is due to the logistic component to became more essential: the market is rather weak now, the prices are low and the cost of transportation has grown. The price of goods is commensurable with logistics cost. Secondly, it is more favorable to transport freights from western areas to Europe by motor cars that indeed is occurring. In particular, the delivery of alternate crops by motor transport through overland border of Ukraine to Europe has considerably increased.
- Do You use any stimulating tools for agrarians (forward, the commodity credit, etc.)?
Frankly speaking, no. Of course, it would be desirable to enter the long-term relations with someone, however, there are many objective factors today which aren't allowing to do it. First of all, we need stability (political, economic) but it is absent.
- Are there any problems or features in transportation the export consignments?
Let us to start with the fact that alternate crops are generally exported in small lots in containers. Therefore, the only one problem now is the increase of transportation costs (the railway rate since November increased, the freight is also growing). The advantage are that there are different options of load delivery to the port. Except the traditional method of railway coaches which are permanently not enough it is possible to bring the batch by auto transport. That is usually not a big difficulty because of small sizws of batches - up to 1000 tons on average. At the same time the motor transport can be in the form of grain carrier or the container carrier. It is also possible to bring the ready loaded container by the railway platform directly to the port. Many attempts have been made to bring river linear container service to competitive level. Thus, there is a choice, and it is good when it is possible to optimize transportation processes in the market conditions because the accurate logistics plays an essential role.
- To what countries do You usually supply alternate grain crops? What are the main consumers of bean crops?
We deliver bean crops to India, Pakistan, Bangladesh. The last two are also the main buyers of mustard and lentils. Flaxseed is generally exported to Vietnam and also to Egypt. The millet in times of it’s mass cultivation in Ukraine in large volumes was sent to Europe, South Africa and in small batches – to the Middle East. The brewing oat is usually loaded to Europe, while usual – to Pakistan. Gradually, we are expanding the geography of deliveries to Africa.
- What markets can be characterized as "risky" and why?
To start with let us say that Ukraine is also a risky market for many players. Many market operators complain on discrepancy of quality and quantity, skirted time delivery, and even frank cases of fraud from the Ukrainian traders. And here we should work on improvement of the image by itself, to unite in associations, to undergo certification and to drive the dishonorable companies out of the market. Besides, the associations should have an opportunity to characterize the buyer when the traders addressers to them for example, through creation of so-called "black list" and other tools allowing to estimate degree of risk and to choose the correct format of mutual settlements while contacting with the trade missions or through the world-wide surveyor companies.
Or in words of classics: «True reassurance would come only with the insurance policy.»(I. Ilf, E. Petrov). And risks are everywhere, when there is no an advance payment. The percent of an advance payment is less for more civilized markets such as Pakistan, India, while for African countries it is higher. There was a case when we were not paid under the contract by the company from Singapore. Nobody is insured from it but it is necessary to check carefully the buyer always, in any country whenever he would be. Naturally, the markets mentioned above can be ranked as the "risky", but I would rather place an emphasis on "riskiness" of the specific buyer and his reputation instead. Our position is to gain trust in the market in general and of the specific buyer in particular, and then it is possible to demand an advance payment, minimizing own risks.
- Tell us about the main requirements of the main importers to the quality of alternate crops. Were there any cases of discrepancy of the Ukrainian production to these requirements?
As for alternate grains, a high attention is paid to chromaticity: oats have to be white, white (yellow) millet –to be cream (desirable), and a red sorghum to be dark red, etc. While buying peas, especially green, its chromaticity and integrity are especially important. There are some markets, surely, where customers buy more beaten and chipped grain for processing with pleasure. Chickpeas has to be at identical caliber, and the more is the size the better it considered to be. Of course, the dirtiness and moisture have to be normal in export consignments. If it talks about oilseeds, naturally, the indicator of oil content is important. For example, concerning flaxseed many importers ready to pay an award for each percent exceeding the standard of 40%, however there are some markets, preferring more «golden» oilseeds whereas the oil content isn’t interested.
- How can You characterize the current season for Ukrainian and the global market of alternate crops?
The current marketing year hasn't passed the equator yet, therefore it is difficult to characterize it unambiguously in general. It is possible to note right now the significant growth of beans production, mainly peas and also lentils and haricot, judging by offers in domestic market. Unfortunately, the chickpeas is grown up in a small volumes due to low demand for it. As for alternate grains, the low activity in terms of the general production is observed approximately at the last year's level. A millet has already practically sold due to bad harvest and great demand. The trade of a sorghum is inactive, the oats is bargains, but not in those volumes as last year. The oilseeds are in a stable demand, however in not in those volumes and not at those prices as earlier.
Still it is also desirable to note an increase of container exports of alternate crops (and not only) of the Russian origin. Since the beginning of the current season it began to play an essential role in pricing of container parties transportations. Flaxseed, chickpeas, peas, mustard seed, lentils, millet are cheaper to buy from Russia now - neither surprising nor regrettable it would be. On the other hand, Moldova is dumping where the last offer of yellow peas has totaled 215 USD/t FAS Odessa. Whether still will be!
Interviewed by Julia Shevchenko, APK-Inform Agency