Beginning of the grain season in Russia - tendencies




The new grain season in Russia brought as many surprises as the previous one. In the spring a lot of operators of the market showed their concerns regarding the volume of grain of crop of 2011 and its qualitative parameters. A lot of market participants announced about the possibility of recurrence of the heat of 2010. However with the beginning of the harvesting campaign in the country the concerns of these operators were baseless. While the harvesting campaign is in the process, grain offers face an increase on the market, and qualitative parameters often come in accordance with the demand of GOST (all-Russian State Standard). Due to the above stated facts, experts of APK-Inform Agency decided to take up the detailed information about the current situation on the market of wheat and barley.

Wheat: prices decrease

While remembering the situation on the market of grains in 2010/11 MY, it is necessary to note that the main factors that had an impact on its development, were the low level of crop due to the droughts, and as a result the high prices on milling and feed wheat. So waiting for prices increase from the beginning of the season, processing and export-oriented enterprises hurried to purchase the necessary volumes of grain for further work. On their turn the agrarians while observing the grain growing demand, tried to hold the realization and to increase offer prices. Also it is necessary to remind that agiotage on the market was particularly based on the market talks about the qualitative parameters of wheat, which were not in accordance with GOST. Due to the stated fact, many market operators faced the concerns on the fact that there is no sufficient volume of grain with high-level of qualitative parameters by the beginning of the new harvesting campaign.

However, there was no shortage of wheat on the market because the level of harvest of grain in Russia was not so low as it was forecasted earlier. By the way, the Government had the essential influence in the stabilization of the situation on the market. First, they imposed grain ban for export of grain, which allowed preventing shortage of milling and feed wheat on the market. Second, they introduced the marketing interventions, owing to which the most of milling enterprises and combined-feed factories formed the necessary volumes of wheat for further work at more acceptable prices. As a result, the crop demand slowed down on the market, and caused the prices fall. It is necessary to note that the Government decreased the tariffs for the regional transportation of wheat by railway, which certainly had an effect on the price situation. By the beginning of the harvesting campaign of 2011 there was no shortage of offer of grain of old crop, and prices for consumers were acceptable, despite the cancellation of ban of export of grain from July 1.

Mass harvesting of winter wheat in the Southern region of Russia started well after due to the unfavorable weather conditions. Heavy rains and the absence of sunny weather in the most regions of the Southern regions essentially slowed down the temps of harvesting of grain and enhanced concern of the market operators about its qualitative parameters. The high-level level of moisture can cause the high content of impurity of grain of 2011 crop, stated one of the agrarians of Stavropol Krai. But after arrival of the first large-scale parties of milling and feed wheat, it was obvious that the concerns of the operators of market were too early in the most of cases. Qualitative parameters of wheat which was harvested in the first decade of July in most cases are in accordance with the demands of GOST. However it is difficult to estimate the final qualitative parameters of the crop at the current stage due to the harvesting campaign has just started and major part of the fields is not harvested yet.

With the beginning of the mass harvesting of grains of the crop 2011 and its arrival on the market the main problem about which all the market operators are concerned, was the formation of new prices, which the market participants announced later than usual. Thus, during the second half of July agricultural producers of the Southern region introduced the sales prices for 3-grade wheat within the level of 5.2-6 thsd RUR/t EXW, 4-grade wheat – 4.8-5.2 thsd RUR/t EXW. Grain processing enterprises were ready to purchase 3-grade wheat at 4.3-4.5 - thsd RUR/t CPT, purchasing prices for feed wheat were 4-4.3 thsd RUR/t. It is necessary to note that according to the market operators, the dynamics of price will further depend on the purchasing activity of traders and processing enterprises. Most of them state that the decrease tendency of prices will continue after arrival of more volumes of grain on the market.

Barley: prices increase

As about barley, during the last season this segment of the market saved the same tendencies. Most of the consumers of grain, announced the higher level of prices. In the most of the regions of Russia due to the low level of barley crop caused by droughts, many processors increased prices being concerned of the deficit of offer of grain on the market. As a result, barley prices level essentially exceeded milling and feed wheat prices. Taking into account the current situation and agiotage on the market, the Government distributed grain for consumers of processing and livestock industry and allowed the buyers to form volumes of grain for work, meanwhile prices of intervention grain were essentially lower compared to the market prices. During the sowing campaign a lot of agricultural producers started to offer rather active the grain on the market. Despite the small volumes of offered grain, barley prices continued to decrease.

After the sowing campaign started, the situation on barley market essentially changed. Milling and feed prices continued to decrease, due to the buyers who expected the large-scale volume of grain arrival on the market, at the same time barley prices started to rise, The situation was caused by the active demand of export-oriented enterprises, which had to purchase grain for its further export. Some pf the buyers were concerned about the qualitative parameters of grain. The range of the buyers stated that rather often barley offered on the market was not in accordance with the demand of GOST (the low clean weight) which also caused the prices increase. Processors, who required purchasing of grains announced about willingness to purchase grain with qualitative parameters, which will be in accordance with their demands at the higher prices. Thus, if barley start prices in the Southern region in the beginning of the harvesting campaign were 4-4.3 thsd RUR/t EXW, then as of the end of July they totaled 5-5.5 RUR/t EXW.

Agrarians of the Central-Black Earth and Volga regions started the harvesting campaign. However, prices of barley of new crop are almost at the same level. The situation is caused by the fact that grain prices crop 2010 are rather low in the stated regions, and the purchasing activity is not high. As a result, many agricultural producers are waiting the further development of the situation on the market.

Resuming it is possible to say that the current season will be not less interesting than the previous one. The cancellation of ban of exports of grain from Russia will allow working not only the domestic market but also the export-oriented companies. This year level of crop of grain will essentially exceed the last year. Most of the market participants are not concerned about qualitative parameters. The certain market operators state that this year milling and feed grain ratio will be in favor of the feed grain. However, the last year agiotage is still possible. According to the market participants, the rise of prices will take place.

As about barley, despite the fact it is too early to make any conclusion, the major part of the market participant forecast that grain prices level will keep the further increase. Taking into account the low level of the last year crop, and also the active demand for the grain, experts of APK-Inform Agency are agree with the market operators.

Alexandra Ovdienko, Irina Gritsay,

experts of the grain market department of APK-Inform Agency

Harvesting campaign in Ukraine - ready, steady, rain!

With the summer coming the market participants started to talk about the harvesting campaign-2011. First, they talked about the favorable weather during winter and spring period. The first estimates were at the high level also. Thus, according to the forecast of analysts of APK-Inform Agency barley production should total 8.65 mln tonnes, wheat – 19.27 mln tonnes. However, the weather conditions, which were changed during the last time, decreased the forecasts of the general production of barley, meanwhile wheat harvest rate was not changed.

Qualitative parameters of grains also cause the certain questions. In the current topic, specialists of APK-Inform will try to examine what will be early grain production volumes in 2011.

Barley: good, but wet

The prospects, dictated by the beginning of the season on the market of feed barley, were pleasant for few market participants. Despite the fact that winter barley harvesting campaign started on time, the weather factor almost immediately corrected the paces of the harvesting campaign. In all over Ukraine on the start of the season heavy rainfalls were the main reason of the essential slow down of the paces of early grain harvesting campaign. At the same time, the current situation also provided the essential base for agricultural producers to concern about what crop and what quality they should expect after the rainy weather.

In 2010/11 MY there was the essential deficit of the grain on the market and rather high grain prices. It is necessary to note that the limited offers were the reason for the active trade-purchasing activity in the stated segment of the market. Due to the fact, the part of the domestic consumers was not able to restore grain before new crop barley would come on the market.

However, the unfavorable weather conditions essentially corrected the paces of the harvesting campaign. Besides absence of the preliminary prices for grain 2011 on the market cause many talks and complicated planning of the further activity. Due to the stated fact, many domestic consumers were going to resume purchasing activity after there would be enough offers of grains, and the price situation would be more stable.

Despite the weather conditions, the range of agrarians harvested the certain part of barley sowing areas (the southern regions, range of oblasts of the central region). Though the rains were local the qualitative parameters of the harvested grain were at the high level. Thus, natural weight of barley of the harvest-2011 totaled not less than 600 g/litre, and yield totaled 28 c/ha. However, it is appropriate to estimate barley crop parameters after the most of the field will be harvested.

Agrarians also expect prices for grain of new crop. It is necessary to note that this season the main trend-makers on the market of barley are the exporters. At the same time probably the main role in the formation of prices this year was played by the regulation of the activity of agrarian sector by the governmental authorities.

Despite the above stated facts the certain grain traders paid the interest to the purchasing of barley of new crop, by announcing the first demand prices on grains. Thus, after grain entered the market (third decade of June) the export prices totaled 1.55-1.6 thsd UAH/ t CPT-port. By the end of June, the range of traders with the hope for the sufficient grain offers based on the paces of the harvesting campaign decreased the prices level to 1.45-1.5 thsd UAH/t CPT-port. However, the slow-down of the harvesting campaign due to heavy-rains changed the situation. Non-sufficient offers of barley on the market and the terms of delivery based on the contracts caused the prices rise. Thus, in the first decade of July purchasing prices of traders totaled 1.55 thsd UAH/t CPT-port. At the same time, a lot of agricultural producers stated they did not hurry to sell grain due to unacceptable prices level due to the high prime-cost of grains. According to the market participants, the agrarians who had no the sufficient capacities for grain store, sold it.

Wheat: available, but worse

During last two months of the passed MY, wheat purchasing was the main problem for participants. Agrarians tried to hold down realization, planning to sell it only at the acceptable prices. Due to the fact, the buyers paid their attention on grains of the new crop.

It is necessary to say that at first the condition of the sowings was at the high level, agricultural producers stated about small losses of wheat in winter and spring, and also about the normal weather conditions during the maturing of grain. Such optimistic mood was till the beginning of the harvesting campaign. During the stated period  the agrarians changed their opinion due to the weather conditions.

Thus, rainy weather cause delay of the beginning of the harvesting campaign. In the beginning of July the agrarians stated that the condition of the sowings essentially worsened. First of all, due to the high level of moisture there is threat of grain germination in the ear, gluten content faced a decrease, and infection rate of fungous decease.

The Autonomous Republic of Crimea was the first region, which announced about the essential decrease of milling grain volume in the structure of the harvest-2011. During the first stage, the agrarians harvested about 80% of feed wheat, meanwhile in the beginning of June they planned to harvest at least 50% of milling wheat.

However agricultural producers do not hurry to state that this season the country will face milling wheat deficit. Though the country will certainly harvest the larger volumes of feed wheat then it was expected.

This caused the fact that in the beginning of July there was no a form range of prices of trade deals. Thus, agrarians were ready to realize 2-grade wheat at 1.9-2 thsd UAH/t, 3-grade wheat – at 1.7-1.8 thsd UAH/t, feed wheat- at 1.5-1.7 thsd UAH/t EXW.

At the same time, the domestic consumers stated they would be ready to purchase milling wheat at 1.5-1.7 thsd UAH/t, feed wheat – at 1.3-1.6 thsd UAH/t taking into account the cost of delivery.

In the second decade of July the market faced the offer prices decrease, milling wheat offer prices totaled the level of 1.75-1.85  thsd UAH/t without the cost of delivery, feed wheat – at 1.4  thsd UAH/t under the same conditions. At the same time, offered volumes were small, and the temps of trade-purchasing activity – not high.

During the stated period, the sellers and buyers could not find any compromise. Sometimes the processors stated about purchasing of small volumes at the offer prices. It is necessary to note that during the current period the purchasing prices of traders on the domestic elevators were lower: 2-grade wheat – 1.3-1.55 thsd UAH/t, 3-grade wheat – 1.25-1.45 thsd UAH/t EXW.

A lot of market participants do not hurry to make the radical conclusion on the fact what will be the situation on the market of feed barley in the new MY. Nevertheless, some of the operators state that harvested volumes level will be lower of the expected and grain prices will reach the maximum high level in the nearest prospect.

The situation is uncertain because the agrarians do not know the qualitative parameters of future crop, so it will be hard to find the compromise for the prices range of sellers and buyers.

However it is possible to say that there is grain on the fields, its harvesting campaign already started, and it means that the new season, probably difficult, starts.

Olga Pryadko, Svetlana Protsyv,

the grain market department of APK-Inform Agency