Today, great hopes are laid on those Ukrainian agricultural companies that managed to survive, maintain their production and trade volumes. Every day, taking into account all the risks, they have to adapt to market changes regarding the availability of raw materials, transport, infrastructure, well-developed logistics, border crossing capabilities or port facilities. Oleg Domanov, commercial director of Falcon-Agro LLC, told APK-Inform how they cope with all these and other challenges.
Falcon-Agro is a successful Ukrainian company, whose main activity is the production and sale of hydrated soybean oil and granulated meal. The company operates in Kirovograd oblast and efficiently fulfills contracts for the supply of oil to transnational traders and end customers in Europe, Africa, the Middle East and Asia.
– After a rather difficult “covid” season, Ukrainian farmers had to work in military conditions. How do you assess the situation on the soybean market in 2022 (changes in acreage, export and processing opportunities, raw material prices)?
– I can say that the market is quite active. Despite the hostilities and unfavorable weather, the soybean harvesting campaign in Ukraine continues. There is an offer of soybeans from farmers, we buy the necessary volumes of raw materials to load the capacities of our plant.
It should be noted that this year many agricultural producers have switched to growing oilseeds and pulses, which are less voluminous and resource-intensive, but have the same marginality. Corn, barley, wheat are produced in huge volumes, they have their own characteristics and problems with export and storage. In turn, sunflower, soybean, peas are less voluminous. For example, the cost of 1 thsd tonnes of sunflower/soybean is equal to 2-3 thsd tonnes of wheat/corn, while it requires 2-3 times less space. Farmers, adequately assessing the situation, have switched to more profitable crops.
Therefore, we assume that the Ukrainian soybean market will be quite saturated. This will enable farmers to ship products for export (if only the ports were open!), and satisfy the needs of domestic processors. We hope that there will be no problems with the availability of raw materials to load our capacities.
In addition, the price of soybean products may stabilize. This, in turn, will affect the cost of livestock products in Ukraine, such as eggs, meat, and so on. Accordingly, there will be a positive impact on the domestic market, the country's economy as a whole.
“Now it’s impossible to predict anything, we are working to minimize risks”
– According to what scheme does the company currently work with Ukrainian farmers for the purchase of soybeans?
– We, as usually, try to support our farmers. This year we buy products mainly from the fields. We also signed forward contracts, but their number is small, given the current situation in the country. Now it is generally impossible to predict anything, we are working to minimize risks. The main task now is to take soybeans from the fields to the plant as quickly as possible, taking into account the curfew.
Our enterprise has its own elevator (50 thsd tonnes) and this season we have expanded the range of services and now we store not only our crop, but also provide storage services for various grain products to other market operators.
– What difficulties are you facing selling your products (logistics, availability of transport, demand)?
– We managed to quickly and in time to rebuild our logistics and slightly change the sales markets for shipments of finished products. There were difficulties at border crossings, there was a shortage of wagons. We managed to solve the problems by increasing transportation by road. We have increased the number of rented vehicles for transportation of products directly to clients. We are closely monitoring the rail situation so that in case of unforeseen situations we can quickly switch to road transportation without stopping production.
In addition, we were lucky that our company is located in central Ukraine, which was not so affected by the hostilities, we worked almost non-stop. We worked hard last season. This season, if the situation does not change for the worse, if there is not missile strike at the enterprise or the railway, we hope to get as good results as last year.
“The market situation and the situation in the country are changing, of course, it is necessary to transform, expand, and be flexible”
– Does the market situation make you to transform the products by offering new products?
– The market situation and the situation in the country are changing, of course, it is necessary to transform, expand, and be flexible. In the current year we offered the market our novelty – production of full-fat soybeans, which is an alternative to oil and meal in in compound feed. This product is a structured and briefly thermomechanically processed full fat soybean. Among the advantages of the product over the classical soybean meal and oil we would emphasize the fact that full-fat soybeans do not go through the extraction process, i.e. treatment with naphthenic solvents is excluded, as well as their presence in the product. In addition, it does not undergo multiple and long heat treatments, which make it possible to preserve the maximum of native protein. Also, full-fat soybeans, after texturing and brief thermomechanical processing, contain shorter carbohydrates and proteins, which significantly improves the digestibility index of the product when introduced into the animal's diet. Full-fat soy is completely devoid of antinutrients.
I should note that from an economical point of view, the use of full-fat soybeans is much more profitable for a number of reasons. First, a mixture of protein, carbohydrates and oil in the form of full-fat soybeans is much cheaper than oil and meal, which are purchased separately on the market of even produced at our own facilities. They already have at least the added cost of processing. Moreover, a feed mill does not need to have 2 storages and dosing points for raw materials (oil and meal), one is enough for soybeans. And, at last, the quality of a full-fat product is always stable and depends only on soybeans, which can be structured.
As always, we take into account the needs and wishes of the customer, so full-fat soybeans are produced in granulated or non-granulated form.
– What is the sales structure of Falcon Agro products? Has it changed because of the war in Ukraine? Has the geography of exports changed?
– There is a demand for our products both in Ukraine and abroad. We fulfill all obligations both on the foreign and domestic markets. Approximately half of the soybean meal we produce (about 4 thsd tonnes per month) goes to Ukrainian buyers, and the same amount is exported. Basically, we ship the meal to the nearest countries - Poland, Moldova, Romania, Hungary. If there are difficulties at the border crossing of one of the countries, we switch to another. Previously, we also worked with Belarus, but now, for obvious reasons, we have no desire to sell our products there.
Almost all of our soybean oil goes to the foreign market, both by rail and by road. The main importing countries are still those who import the meal, plus this year we managed to expand the geography - now we ship the oil to Greece, Albania and Bulgaria. We have a desire to continue our work in the Turkish market, but we are still in the process of developing the most efficient logistics in this direction.
“If the situation does not change and does not get worse, then the current season will be quite active for us and for other participants in the agricultural business”
– What, according to your estimates, will the 2022/23 season be for the Ukrainian soybean segment (oil, meal)?
– If the situation does not change further and does not get worse, then the current season will be quite active for us and for other participants in the agricultural business. We expect to work at least at the level of last season, and even better. In any case, we raised the bar for ourselves: if last season we processed about 10 thsd tonnes of soybeans every month, then we planned 12 thsd tonnes for the current season. The declared capacity of our plant is 18 thsd tonnes per month. And we could reach full capacity if not for the logistical risks that exist today.
Currently, we need to quickly monitor the situation, actively make decisions on changing logistics, replacing directions, markets, and customers. After all, even a slight hitch in making a decision affects the export of products, their storage and, accordingly, production: if shipments have stopped, large volumes of oil or meal have accumulated – thus production capacities stopped. I am pleased with our team, which works well and acts quickly, which, in fact, I wish all our Ukrainian companies.
Interviewed by Julia Shvchenko
