Ukrainian maize – a queen of fields or elevators?

Source

APK-Inform

In the current season, the situation on the market of maize can truly be called as one of the main topics for Ukrainian grain market. Several facts present as confirmation of these words. First of all, in 2011 Ukraine is expected to produce large harvest of the grain. According to forecasts of analysts of APK-Inform Agency, the general production volumes of maize are expected to reach record levels - 19 mln tonnes (against 12 mln tonnes last year). Secondly, taking into account the situation on the grain market in 2011/12 MY, maize trading rates are more active compared to many other grains. It is worth noting that since beginning of the harvesting campaign, maize prices continued growing until the end of October 2011, despite large grain production volumes.

However, the increase of maize volumes on the market not only allows speaking about more active rates of selling, but also about a number of attendant problems and uncertainties.

Record good harvest

Weather conditions and agricultural technologies may affect the market in various ways – beginning from complete failure to record harvests. The year of 2011 for the maize market became the same. In the second half of last season, the intensified demand of importers for maize essentially raised its rating among other crops for agricultural producers. In particular, according to experts of APK-Inform Agency, the sowing areas under the crop increased from 2736 thsd ha last season to 3626 thsd ha in the current one.

It is worth noting that the average yield of the grain in the present season also increased (55 c/ha against 45 c/ha last season). First of all, the favorable weather conditions, dominating during the period of grain ripening in Ukraine, contributed to the situation development. At the same time, the large production volume gives rise to speak not only about the increased export potential, but also about whether there is enough storage capacities.

To date the market is actively discussing the issues of sufficiency of grain storage capacities, and whether they expect that the grain will remain in the fields. Experts of APK-Inform Agency asked directly these questions to participants of the market. According to the polling of large and medium-scale agricultural producers, the harvesting campaign of maize still continues, and many companies are set to harvest maize throughout 100% of the sowing areas. However, a number of market operators focuses on the fact that precisely the interest of domestic and export-oriented companies in purchasing of the grain is the main stimulus to continue the harvesting works.

In mid-October 2011 Sergei Kvasha, director of the department of agrarian market development of the Ministry of Agrarian Policy, marked that agrarians will not leave maize sowings in fields in mass character, and at the end of November 2011 agrarians will harvest maize throughout 80-90% of the planned areas.

While speaking about maize production volumes in 2011, we should note that qualitative indices of the grain were often estimated as quite high, but in several cases the high level of humidity became the problems indeed.

Elevators for maize

Preferences of agrarians in the sphere of maize storing also turned out to be the important issue. It should be noted that many agrarians use own storehouse for maize, noting that they are quite satisfied with such form of storage. However, the elevator form of storage is also quite popular in the present season. Typically, large industrial and trading companies, which have their own elevator complexes, do not have any problems with grain storing, although some companies reported about complete filling of own capacities. Market participants noted that elevators of eastern, central, western and southern oblasts (except of the Crimea) are overstocked by 70-100%. Market participants noted that such fullness of elevators is caused not only by large volumes of maize, but also by significant volumes of early grain and oilseed crops.

Despite the fact that Ukraine harvested large volumes of grains in the current year, and the rates of trading are relatively low, market participants do not believe that the limited volumes of storage capacity will lead to rejection of harvesting of late crops (including maize). The present situation increases the number of elevators under construction or compels agrarians to use alternative storage methods. For example, some agrarians already had experience of grain storage in plastic bags.

On shipments and exports

Availability of rail cars for transportation of grains is another issue for the market of maize in the terms of record high harvest. In particular, to date there are reports that the fleet of rail cars is understaffed, which causes some difficulties in grain shipment. Representative of one of the leading shipping companies said that "to date it is estimated that the number of rail cars for transportation of grains totals 8-9`000". According to him, the fleet decreased by nearly 1.5-2`000 units compared to last year, due to repairing of the old units. A number of trading companies inform that some part of the rail cars was given on lease to Kazakhstan for resolving the crisis situation with grain transportation in the country. A number of market operators inform about accumulation of rail cars with grain cargoes in the ports. According to experts, the present rates of grain exports are lower compared to the required ones basing on volumes of already harvested grains.

According to a number of market operators, Ukrainian companies prefer shipping Russian transit grains against giving the central role to exporting of Ukrainian grains. According to official data from Ukraine, in October the transit of Russian wheat totaled 18.1 thsd tonnes, while according to data from Russia, the index totaled 203.9 thsd tonnes.

Grain storage capacities are loaded, but agrarians are still able to provide storage services, or operative selling of the grain and exporters realize their shipment operations. But the market works under constant risk of problems, because the above estimations of the experts are relevant for early November 2011, and what will be at the end of the month, we can not say to date. Agrarians intend to harvest the maximum possible volumes of what they sowed, traders - to provide the maximum volume of exports.

Olga Pryadko,

head of the department of grain markets of APK-Inform Agency

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