While resuming the last season-2010/11, there is the necessity to clear what influence on the world trade of grains did leaving of the main players of the Black Sea market – Ukraine and Russia – from the world scene really provide? Did the geography of grain exports of the stated countries change? And what estimations do the key importers of wheat from the Black Seas region have on the cooperation prospects in the new season? We will try to answer these questions in the current article.
Ukraine/ Russia: exports geography
Leaving of Russia and Ukraine from the world scene became the real shock for the key wheat importers. A lot of market players did not wish even to believe that they lose the possibility to purchase grains from so called "the Black Sea region basket". At the same time, the optimism returned to them after signing of the first contracts for purchasing of wheat of the American and European origin. However, by the end of 2010, the essential increase of prices and decrease of the number of countries-sellers at the expense of sudden lose of Russia as wheat suppliers, due to imposition of the grain export embargo, and Ukraine after the quotas imposition, and first of all, due to the unstable character of the export supplies (to date the export trading is opened, but grain volumes do not actively leave the country), just a little stopped agiotage of grain importers.
In the season-2010/11, the exports of Ukrainian wheat essentially decreased, and it was unavoidable due to imposition of the grain export quotas. Thus, during 11 months of the last marketing year, Ukraine exported 3.6 mln tonnes of wheat, down 2 times compared to results of 2009/10 MY – 9.16 mln tonnes.
In Russia, beginning from August 2010 the Government banned exports of all grains, including wheat, but the authorities continued realizing supplies of the grain through various programs of the state. In September 2010 the Russian Government partially canceled the ban on grain exports. The decree signed by Vladimir Putin, Prime Minister of the Russian Federation, declared that the embargo does not apply to agricultural products, exported from the territory of the Russian Federation as the food supplies in accordance with the customs legislation of the Customs Union within framework of international agreements of the Russian Federation towards Kaliningrad oblast, and exported from the territory of Kaliningrad oblast to the other part of the Russian Federation. In addition, it was possible to export agricultural products intended for the official usage by diplomatic missions, to ensure activities of the Russian military units stationed on the territories of foreign states, to ensure the organizations of the Russian Federation, located in the city of Baikonur (Kazakhstan) and in the complex "Baikonur" and other areas, to eliminate the consequences of accidents and catastrophes, natural disasters, including international humanitarian assistance. As a result, during 11 months of the current season, the country exported nearly 3.38 mln tonnes of wheat, which formed one fifth part only of the exports in 2009/10 MY (17.32 mln tonnes).
The priority setting of wheat supplies from the Black Sea region also faced changes. The TOP-5 importers of Ukrainian wheat changed in the current year, and Turkey took the first place, then Egypt followed, which a year ago took the 5th place only, but still figured among the key buyers of the grain by private companies.
As for the geography of exports of Russian wheat in 2010/11 MY, we should inform that even despite the ban on grain exports from the country, the TOP-5 importers, namely the first two positions, is still reserved for Egypt and Turkey. But Israel took the third place among the major buyers of both the Russian and Ukrainian wheat.
Expectations of wheat importers in the new season after the return of Russia and Ukraine on the world market
The end of the season became both a welcome gift and a cause for concern of countries-importers of the Black Sea wheat. So, after the announcement of the Government of the Russian Federation to cancel the embargo on grain exports from July 1, 2011, the market faced a lot of rumors about the possible imposition of the export duties for grains in the autumn, mainly because of the fear of the authorities regarding the growth of prices on the domestic market and the expected "surprises of weather." The ambiguity of the situation in the country forced importers to wary of future purchases of Russian grains, which did not have access to the international tenders for some period of time.
In turn, the actions of the Ukrainian authorities also made importers to worry. Entry into force of the export quotas in July 2011 had a chilling effect at foreign buyers, which also caused a lack of Ukrainian wheat in several recent tenders, Egypt in particular, for purchasing of the grain.
Even without polling of grain importers, which was held for preparation of the present material, it is quite obvious that the return of key players as Russia and Ukraine on the world stage will essentially undermine the position of the USA and EU, become the catalyst of reduction of grain prices, and return the confidence of importers to the reporting suppliers, especially from the Middle East and North Africa.
Thus, according to preliminary forecasts of experts of APK-Inform Agency, supplies of wheat from the Black Sea region on international markets in 2011/12 MY will total 14.5 mln tonnes from Russia, and 8.42 mln tonnes from Ukraine.
At the same time, while answering the question how grain importers took the news about Russia and Ukraine return on the grain markets of their country, almost all respondents noted that the news were taken with encouragement and hope. In particular, they expect that wheat prices will decrease, which adds optimism for Turkish and Egyptian buyers (mainly the companies from the stated countries were polled). Thus, according to the Egyptian millers, if in the current season they will be offered to purchase French, American and Russian wheat, they will certainly prefer purchasing the last one, as the most favorable grain for the Egyptian market. Here, apart from geographical proximity and lower cost of sea freight, fitness of the milling industry of Egypt to the grain of Russian origin will play the most important role.
As about Ukrainian wheat, it will also be able to account for the high demand on the Egyptian side (at least from the private companies). In the case of a lack of gluten in the flour, the Egyptian millers are ready to solve this problem by mixing the products with flour of higher quality.
While speaking about Turkish importers, they also have rather positive attitude towards the new season, and to date they are signing contracts for purchasing of wheat from the Black Sea region, and hope that the grain supply is nothing to prevent - neither the weather, nor the uncertainty of the export policy of the countries. And we hope that the season-2011/12 will become new round for development of relations between the exporter and importer, and the season of trust and confidence in the future.
head of the foreign economic department of АPК-Inform Agency