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Let me tell you a couple of words about harvest. In the beginning of spring, our agency made a forecast as for gross grain yields in 2007 at the level of 32 mln tonnes. Our forecast was called pessimistic as that time the forecasts of other agencies were at 37-38 mln tonnes. In fact, our forecast turned out to be very optimistic; now our forecast of gross grain yields for 2007 is 28 mln tonnes in clean weight. The reduction of the harvest as compared to the last year is expected in regards of almost all the crops except rye and maize. The biggest reduction of gross yields is expected in regards of barley (by about 46%) and peas (43%). Besides, in regards of groats crops - oats and millet - we also expect for the yields reduction by 12.7% and 19% accordingly.
According to the latest data of State Statistics Committee about the harvesting campaign, by August 31 the country harvested 14.5 mln tonnes of wheat. We disagree with such an estimate of this crop harvest. According to the forecast of APK-Inform, in 2007, the gross yields of wheat would total no more than 13 mln tonnes.
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It is quite difficult to estimate the share of milling wheat in the volume of received harvest. Besides it is quite conditioned in regards of consumption, as wheat indicated as feed according to some characteristics may be used in flour-milling, groats, spirit production, that is in fact for milling purposes. Here is the reverse side - the milling grain may be used for feeds for cattle.
Ukraine entered the new grain year with low carrying stocks of wheat. According to our estimates, they were at 1.8 mln tonnes. In combination with the forecasted gross yields we receive the total offers of wheat in 2007/08 MY at the level of 15.1 mln tonnes, down 11% as compared to 2006/07 MY.
The milling consumption of wheat as well as feed one should increase comparing to the last season. In regards of milling consumption, in regards of milling consumption, this offer in based on our forecast of increase of flour production in 2007/08 season. Besides, the limitations for grain export resulted in increase of the export volume of the derived products (in particular flour). So, according to the customs statistics official data, during the 2 months of 2007/08 season, Ukraine exported 13.900 tonnes of flour - or 94.5% of the record export volume in the whole 2006/07 MY.
In addition, we expect for the increase of feed consumption of wheat conditioned by estimated increase of some cattle livestock as well as by increase of wheat share in the total volume of feed consumption of grain.
So, according to our estimates, the total consumption of wheat taking into account the seeds fund and losses would be 11.9 mln tonnes against 11.8 mln tonnes in 2006/07 season. As we see, the received harvest of wheat covers the domestic needs and the export volume may be at about 1 mln tonnes of this grain.
If we say about price situation on the domestic market of wheat, the traditional reduction at the beginning of the season was insignificant and short-term. Many producers shift the terms of sales for later periods waiting for the improvement of market structure and expecting for cancellation of wheat export limitations. Under such conditions (lack of offer), the high demand of processors forming this period the main volumes of raw materials stocks conditions the positive price dynamics. Besides, the exporters' competition supports prices.
In fact, this year, producers refused to sell the grain to the State at the "exchange-traded" and confirmed by the Government prices as they considered to be too much reduced under condition of the increase of world grain prices and annual increase of prime cost of their production in the country.
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Rye is the second most important bread crop. The begun 2007/08 season would be unprofitable in regards of offers of this grain. The expected according to our forecasts gross yields of rye at 596.000 tonnes in combination with record low beginning stocks give us the total offers of rye at the level of 677.000 tonnes, down 21.5% as compared to 2006/07 season. This results in reduction of all branches of consumption. In regards of milling consumption, as we supposed, the lack of raw materials and current market situation force flour producers to work just like last season. There was no reduction of prices on rye market traditional for the beginning of season.
In our opinion, the deficient balance of offer and demand provides the positive price dynamics on the rye market during the whole current season. There is only one way out - to increase rye production.
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Barley is the second grain crop in Ukraine after wheat in regards of the volume of domestic market. Traditionally, barley is also the second in regards of gross yield volume. However, this year the situation would change somehow - it will become the second after maize. According to our forecasts, the gross yield of barley in 2007 would total 6.1 mln tonnes while yield of maize - 6.56 mln tonnes. The reduction of gross yield of barley is conditioned (besides reduction of sowing areas) by the fact that this crop was more damaged by negative weather conditions than other agricultural crops. Besides, the record low beginning stocks estimated at 180.000 tonnes conditioned the offer of barley in 2007/08 season at 6.3 mln tonnes, down 47% as compared to the beginning of 2006/07 season.
In the current season we forecast the reduction of domestic consumption of barley. So, the barley consumption for feed purposes would reduce by about 20% to 3.6 mln tonnes; in addition, we expect the reduction of its share in spirit production.
Such a low offer of barley in the current season resulted in the sharp increase of prices in this market segment. The grain holders did not speed up the sales expecting for further increase of prices. The prospects for strengthening of competition between domestic consumers and exporters in regards of renewing of grain export became the reason for this.
As you know, on October 2 the resolution of Cabinet of Ministers of Ukraine foreseeing the export of grain crops from November 1, 2007, till March 31, 2008, in the volume of 1.203 mln tonnes came into force.
This resolution permits the export of 200.000 tonnes of wheat and mixture of wheat and rye (meslin), emmer wheat, 400.000 tonnes of feed barley, 600.000 tonnes of feed maize and 3.000 tonnes of rye.
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Maize is one more important part of the grain balance of Ukraine. This crop has not yet been harvested, and we made our balance of offer and demand based on the forecast of gross yield at 6.56 mln tonnes. Good beginning stocks estimated at 1.08 mln tonnes and expected gross yield give us the total offers of maize for 2007/08 MY at 7.6 mln tonnes, up 4% ad compared to 2006/07 MY.
* Printed version of the report of analyst of IA "APK-Inform" Anastasia Ivasenko during the Sixth International Conference "Grain Industry 2007" (September 26-28, 2007, Kiev)
