Russian market of buckwheat and millet — fall of production

Source

APK-Inform

In 2018/19 MY, in Russia the production volumes of buckwheat and millet decreased by more than 30%. However, if season earlier the planted areas under buckwheat and its production volumes reached a record, the same for millet were the lowest in history of the country. How large was the influence of the previous season on the prices for buckwheat and millet this season, and also the estimations of APK-Inform analysts of these crops production in the new season you can read in our article.

 

Buckwheat grain

In 2018/19 MY, the planted areas under buckwheat in Russia decreased compared to previous season by 38.2% to 10.5 mln ha. After the record crop production last year and the price decline to their 4-year minimum the decrease of the areas was expected. Partially the reason also included the unfavorable weather conditions during the planting campaign in the Siberian region (main production region). Thus, the production volumes declined from 1.5 mln tonnes in 2017/18 MY to 932 thsd tonnes in the current season, but based on the high ending stocks of the crop (594 thsd tonnes) the total supply lowered by only 16.3% to 1.5 mln tonnes. The consumption of the grain in the current season also decreased by 6% year-on-year — to 1.1 mln tonnes, including 930 thsd tonnes for food consumption.

 

 

On one hand, the buckwheat production decline in 2018/19 MY outweighed the price decline tendency, but on the other hand this led to the pace and volumes of export decrease. Moreover, this season we can see the change in the export geography. If last season from August to February Russia exported 13.6 and 7.5 thsd tonnes of the crop to Lithuania and Ukraine respectively, during the same period in the current season these figures totaled 765 and 395 thsd tonnes respectively. Also, we should mention that last season Poland and Moldova were in the TOP-5 of the importers of the Russian buckwheat, that in August-February bought 3.6 and 2 thsd tonnes respectively. Herewith, in the current season, Poland imported nearly 370 thsd tonnes and Moldova did not import.

At the same time, there is a growth of the export to Asian countries. If during the same period in 2017/18 MY Russia exported 1 thsd tonnes to China and 4 thsd tonnes to Japan, this season these figures increased to 15.7 and 7.7 thsd tonnes, respectively.

 

 

Price trends

In the beginning of the season, after the arrival of the new crop on the market there was a traditional price decline both in the Central and Siberian regions. During this period, many market operators were hoping for the high ending stocks to be a factor to pressure the prices and to prevent their climbing.

As the season went, there was information about the low quality specifications of the 2017 crop, that supposedly was caused by the inappropriate conditions of storing. Thus, the agrarians decided to restrain the selling of the new crop opting for the price increase and planning to sell it later at higher prices. As a result, in October-November the prices started to increase. Herewith, the producers often supposed that in February-March the bid prices for buckwheat to exceed 20`000 RUR/t CPT.

The upward bid price trend preserved until the end of February reaching 15`200-17`500 RUR/t CPT in the Central region and 13`000-15`500 RUR/t CPT in the Siberian region. However, since March the prices began decreasing.

In the Central region, this situation was logical and was explained by the increase of the offers needed to increase the working capital of the agriproducers before the spring campaign. Also, the prices were under pressure of the low demand of the processors.

In the Siberian region, the price tendency formed based on the supply deficit and the prices were severely under the pressure of the price decline and the low buying activity in terms of the buckwheat groat. Starting second half of April-May, the purchasing activity on the market of buckwheat is forecasted to increase, due to the necessity of the groat producers to replenish the raw material base.

There is an interesting fact that the opinion of the market participants over the reasons for the forming of the supply deficit in the Siberian region differ. According to one point of view, this situation was caused by the grain stock decline at the agriproducers thus the supply increase is to be awaited after the harvesting of the new crop. At the same time, other market participants supposed that agrarians had enough of the stocks and restrained the selling that led to the artificially made supply deficit in order to increase the prices.

In 2017/18 MY, there was a price declined for buckwheat, that totaled 5`500-6`000 RUR/t EXW. Herewith, in the autumn of 2018 we could see a sharp increase of prices that in some farms grew by 2`000 RUR/t. There was an upward price trend. The increase was rather slow and was constantly supported by the deficit of the supplies in the Altai region. By the end of February, the prices reached its maximum for the season. By since March the prices of the real selling declined by 1`000 RUR/t. The bid prices in foreign exchange rate did not represented the real situation and usually the prices declared at the elevators including cost of freight during the negotiations were becoming the prices at plant. In my opinion, in this moment the upward price trend was not broken and now we can see a temporary respite. Is there an increase of stocks at farms? Is there going to be another “spring buckwheat”? Everybody knows that the answers for these questions are no, no and no. I deliver that by the end of April the agriproducers will sell off, in order to provide the spring planting campaign, and then the prices will go up again”, — believed one of market participants in the Altai region.

 

Millet

In 2018/19 MY, the planted areas under millet renewed the historical minimum, however the downward rates slowed down, due to the increase of the production profitability of the crop. This, in the current season the planted areas totaled 260 thsd ha, chichis compared to the previous season is only 1.9% lower, but comparing to 2016/17 MY — down 40.2%. However, the production volumes declined to 217 thsd tonnes due to the yield decline because of the draught, chichis 31.3% lower compared to last season and 65.5% lower compared to 2016/17 MY. It should be noted that the production decrease was observed in the European part of the country, whereas in the Siberian region the production almost doubled year-on-year and totaled 17.7 thsd tonnes, which is similar to 2016/17 MY result. However, across the country this change is insignificant.

The production decline has contributed the preservation of the supply deficit on the market of millet and thus led to the upward price trend. All these factors caused the decline of the crop consumption to 313 thsd tonnes, including 150 thsd tonnes for food and 120 thsd tonnes for feed.

 

 

In terms of the supply deficit of millet and the increase of its cost, the significant decline of its export was predictable. The main importers of the crop still were Turkey, Iran and Pakistan. At the same time, if in the FH of the last season (September-February) these countries imported 25.2 thsd tonnes of millet, in the current season they imported 3.5 thsd tonnes. Also, there was a decline of the importers’ demand from the EU countries, in particular from Belgium and Germany, that last year were 3rd and 5th largest importers of Russian millet and in the current season their ranking declined to 10th and 20th, respectively.

 

 

Price trends

The prices for millet began to increase since the beginning of the last year. And even the new crop millet entering the European part of the market in August - beginning of September in 2018 did not pressed the price trend and the prices continued increasing. Up to now, the upward price tendency was dominating in the European part of Russia. However, in March in the Southern region many processing and feed plants declined the purchasing prices for the crop thus forming the necessary volumes of millet for work.

Due to the increase of the planted areas in the Siberian region and the constantly low demand on the crop in the region the significant price rise was observed only before the new crop entering the market. In October-January, after the new crop entered the market the prices were rather stable. Only in February-March, there was a slight price increase, due to the growth of the demand on millet. However, only some single companies showed interest for the purchase of millet.

We should note that there are 4 months left before the new season and some consumers informed about the suspension of purchases before the arrival of the new crop millet and the majority of the agrarians have sold out their crop. Some single agriproducers wait for the prices to reach their highest point and only after that, they plan to sell the stocks.

After the previous season and the price rise for millet many agrarians were afraid to increase of the planted areas under millet supposing that everyone will start planting it. As a result, in the current season we again faced the deficit of the supply. We were buying millet during the last half of the season increasing the price for the crop by 1`500-2`000 RUR/t every month. Despite the price increase for millet, the demand for the crop was rather stable. When the price increase the buyers buy the crop more active trying to cover their needs before the bigger price rise.

Now many agrarians are at a loos weather to increase the planted areas under millet. On one side. The profitability of the crop this season is very high and of course, there is a temptation to plant the crop for the new season. On the other side the quality seeds will cost the agrarians not less than 40`000 RUR/t EXW. Thus, not every agrarians will risk to invest into millet. Moreover, there is a possibility that next season the production will increase and the prices will declined to 6`000 RUR/t”, — said one of representative of the plant in the Volga Federal District.

 

By Alina Timofeeva, APK-Inform Agency

 

Commentary by Julia Krekhovich, analyst at APK-Inform Agency:

According to the Ministry of Agriculture of Russia forecasts, the planted areas under millet in 2019 can total 265 thsd tonnes, which is only 2% more compared to 2018 and in general is same to 2017. Despite the high profitability of production of millet, the agriproducers are not ready to increase its production significant because of the narrow market for its distribution. The production volumes of the grain in 2019/20 MY according to APK-Inform Agency data may total 307 thsd tonnes compared to 217 thsd tonnes in the curresnt season. The total supply of the crop next season including the ending stocks totals 426 thsd tonnes. There are no preconditions for domestic consumption increase and the production of millet groats is rather declining.

The planted areas under buckwheat in 2019 are estimated at 1.1 mln ha (+7.1% year-on-year), and the production can total 1 mln tonnes (+7.7%). The total supply of the crop in 2019/20 MY including the ending stocks can total 1.4 mln tonnes. The domestic consumption of the crop is estimated at 1.1 mln tonnes (same to 2018/19 MY).

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