Export geography of Ukrainian wheat in trading terms

Source

APK-Inform

10133

 

 

 

 

      Anna Tanskaya

Wheat for Ukraine is the main agricultural crop supplied on foreign markets, with the exception of 2018/19 MY. Despite the fact that the key sales markets of the grain were specified long ago, and remained unchanged on a large scale, year on year the market still demonstrates some changes in the supply volumes and redistribution of positions among the TOP-importers of both Black Sea wheat in general and Ukrainian wheat in particular.

But what is the real price of the changes? What are the relationships between the key Ukrainian exporters and importers from the main countries of sale? How did the positions of the TOP importers develop in the current season? What is the role of the MENA region for Ukrainian wheat? Of course, what should the market expect in the new season-2019/20?

 

Positions of Ukraine on the global market

For five recent seasons, Ukraine steadily took the 5-6 position in the rating of the global wheat exporters, which taking into account the trend of gradual increasing of the global production figures, as well as the export volumes of grains exports, gives evidence of the growing significance of the country on the global market. So, in the reporting period the share of Ukrainian wheat in the global export structure increased from 7% to 9%, or from 11.3 mln tonnes to 16.5 mln tonnes in absolute terms.

The figures became even more significant, taking into the fact that Ukraine is in the direct neighbourhood to such major player as Russia, which in the reporting period managed to strengthen its positions due to a series of record wheat harvests and favourable price levels, and moved from the 4th to 2nd position, and then even to the first position in the rating of countries-exporters. Due to the same geographical location, Ukraine is forced to compete with Russia on the key sales markets.

 

Export geography of Ukrainian wheat

In 2018, the list of TOP-5 major importers of Ukrainian wheat included Indonesia, which purchased 2.6 mln tonnes, or 16% of the general export structure of the grain in the reporting calendar year, as well as the Philippines (1.8 mln tonnes, or 10.8%), Morocco (1.4 mln tonnes, or 8.6%), Egypt (1.3 mln tonnes, or 8.3%), and Tunisia (more than 1 mln tonnes, or 6.2%).

As for the supply of wheat from Ukraine in July-March of 2018/19 MY, the TOP-3 of the major markets included Indonesia with the imports at 2.34 mln tonnes, against 1.85 mln tonnes and 1.4 mln tonnes in 2017/18 MY and 2016/17 MY respectively, the Philippines — 1.55 mln tonnes, against 1.03 mln tonnes and 0.68 mln tonnes respectively, as well as Egypt, which for 3 recent seasons demonstrated rather original policy in the sphere of purchases and continued gradually reducing the import volumes — 1.19 mln tonnes, against 1.44 mln tonnes and 1.62 mln tonnes respectively.

 

Dynamics of supplies to the TOP-5 of countries-importers of Ukrainian wheat, mln tonnes*

 

2016/17

2017/18

2018/19

Indonesia

1.40

1.85

2.34

Philippines

0.68

1.03

1.55

Egypt

1.62

1.44

1.19

Morocco

0.75

0.75

1.04

Bangladesh

1.30

1.45

1.00

* July-March

Note: the rating of countries by 2018/19 MY

 

It is worth noting that two countries from the TOP-5 of importers of Ukrainian wheat also come to the MENA region, which in July-March of 2018/19 MY purchased almost 5 mln tonnes of the Ukrainian grain.

To date, the MENA region remains one of the most receptive and perspective sales markets for grain crops, due to the considerable domination of the consumption volumes over the production ones, in terms of rather limited capacities for cultivation of agricultural products. In particular, annually the MENA countries purchase more than 25% of the global wheat supplies, which certainly makes them very attractive in terms of trading for both Ukrainian and Russian export-oriented companies.

At the same time, it became more difficult to make trade relations with the region, due to revision of the quality requirements for imported products in some countries, the presence/periodic introduction/increasing of the import duties, as well as the difficult economic and political situation of certain countries.

 

Supplies of Ukrainian wheat to the MENA countries, `000 tonnes*

 

2016/17

2017/18

2018/19

Egypt

1617.5

1439.6

1194.7

Morocco

752.8

753.7

1038.0

Israel

478.6

458.9

453.1

Tunisia

432.8

651.4

708.7

Lebanon

276.8

330.1

258.1

Libya

199.9

236.3

561.8

Algeria

157.3

79.2

12.6

Turkey

73.4

463.6

326.1

Saudi Arabia

60.0

0.0

0.0

Jordan

53.1

107.5

61.6

Oman

16.2

0.0

0.0

United Arab Emirates

5.4

0.0

0.1

Iran

2.7

0.0

0.0

Yemen

0.4

212.0

214.2

Kuwait

0.1

0.3

0.2

Bahrain

0.1

0.1

0.0

Qatar

0.0

0.0

20.7

TOTAL for MENA

4127.0

4732.6

4849.9

* July-March

 

It all goes that Ukrainian traders had to work hard to keep their positions on foreign markets, not to mention to expand the sales markets. In order to understand what features and pitfalls exporters have to face to achieve their results, APK-Inform Agency addressed to the key market players working in the main directions of Ukrainian wheat sales.

 

Wheat exports to the TOP-3 of importers: opinion of traders

INDONESIA AND PHILIPPINES

 

 

 

Roman Rusakov,

Trader at OLAM INTERNATIONAL

— Roman, in 2018 your company took the 6th position in the rating of wheat exporters to Indonesia and the Philippines. How long has the company been working in the direction? Why did you make such choice?

The market of Indonesia and the Philippines is certainly interesting for Ukrainian wheat, and every year the export volumes of the grain justify the fact. In terms of the strong representative position in Southeast Asia, our company is one of the most active suppliers of wheat on the markets of Indonesia, the Philippines, Thailand, and South Korea. For 5 recent years, the volumes traded by our company increased only, which proved the potential of the market, as well as our expectations for the further progressive growth of wheat imports by the reporting countries.

In addition to the strong trade relations that the company developed for 5-10 recent years on the Asian market, the market is also liquid for many other wheat exporters, because the region purchases more than 26 mln tonnes of wheat of different grades, thereby demonstrating the high demand for Black Sea wheat.

At the same time, the Asian market is the fastest growing region both in terms of economic indicators (GDP growth, per capita income) and in quantitative relations (population growth).

Of course, Indonesia and the Philippines are young developing countries with the more attractive commercial factor than many importers of the Middle East. Also, it is worth noting that the market forms the certain type of premium, due to a more time-taking process of the contract execution.

 

— How would you estimate the prospects for further cooperation? What products, especially value added ones, would interesting for buyers from the countries?

We believe that the import potential of the Indonesian market will continue growing, taking into account the upward dynamics of imports. For example, 6 years ago the imports of wheat by Indonesia totaled 7 mln tonnes, but in 2019/20 MY we expect for 12 mln tonnes, which shows the highest growth rates among all importers of the grain. We highly appreciate the prospects of working on the market and expect to strengthen its position in the following years.

As for the main suppliers of Indonesia and the Philippines, we see the multi-path deliveries from Australia, the USA, Canada, Argentina, Russia and Ukraine. In the period of July-November, wheat of Ukrainian and Russian origin is the most competitive grain in the region, so we hope for a very large demand in the reporting period. Generally, the Black Sea grain asserts itself as more significant every year and gives confidence in the final consumer, who will prefer increasing the purchases of wheat of the Black Sea origin, as opposed to the more expensive North American and Australian grain.

Also, it is necessary to stress the buying activity of Indonesia on the flour market. Annually, Ukraine supplies more than 20 thsd tonnes of the products to the country.

 

EGYPT

 

 

 

 

Marina Kryvonos,

Trader at Ambar Export BKW

 

 

 

— Marina, in 2018 your company took the 7th position in the rating of wheat exporters to Egypt. How long has the company been working in the direction? What are the key features of cooperation?

Our company has rather long history of business relations with countries of the Arab world, and it was necessary to take fundamental risks in the sphere of timely payments and contracts execution in terms of market volatility, but trading is always a risk management.

For more than six marketing seasons, Ambar Export supplies milling wheat to Egypt. It should be noted that Arab millers have certain preferences for the quality of wheat, and it is considered that Russian wheat has the premium quality, but we are actively debunking the stereotype. Unfortunately, Ukrainian wheat has the deficit of marketing in the countries-consumers, and that is our company is actively working on.

The main difficulties of doing business in Egypt include political and social instability, excessive bureaucratization, rather limited access to foreign currency, high level of corruption, lack of legal awareness of the corporate world, etc. At the same time, the market with more than 90 mln population is quite interesting for Ukrainian exporters. It should be noted that Egypt remains the largest consumer market and the most diversified economy in the Arab world, with the young and rapidly growing population.

 

In order to prepare for all possible changes in the macroeconomics and formation of the key trading trends, the geopolitics and construction of international relations, the purchasing policy of the major regions of grain sales, and the features of functioning of the Ukrainian grain market, you should become a participant of the XVIII international conference Grain & Maritime Days in Odessa (May 30 – June 1, 2019, Maristella Marine Residence), which will cover all key issues of the grain market in the current and new seasons.

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