Outgoing crop year was really shock for the grain market. Record yields in the countries of the Black Sea Region uncovered not only a row of infrastructural problems, related to actual countries’ unavailability to accept such volume of harvest but also compelled public bodies to join actively to the search of ways of producers’ losses minimization from a record decline of both world and domestic grain prices. It is significant that in the middle of last autumn agriculture markets of Ukraine. Russia and Kazakhstan started to react to the impact of global financial crisis which for sure will have long-term effect on agroindustrial complex activity of all countries.
Nevertheless, global agrarian market continues to function, sets itself new tasks and develops. In particular the most credible ways of the Ukrainian and world grain market development were the key question in a session hall and corridors of eighth international conference "Grain Forum & Grain Industry - 2009", which took place in hotel "Palmira Palace" (Yalta) on 20-22 May this year.
Mentioned event was organized by APK-Inform Agency and periodical "Storage and processing of grain " under support of the Ministry of Agricultural policy of Ukraine, the Ministry of Agriculture of the Autonomic Republic of Crimea, Ukrainian Agrarian Confederation and Ukrainian Grain Association. Food and Agriculture Organization of the United Nations and European Bank for Reconstruction and Development were partners of the conference. VALARS Group (General Sponsor), RIA-Bank (Financial Sponsor), SGS Ukraine and Asadov Capital gave sponsorship for the event.
221 representatives of 150 companies from 21 countries of the world took part in the conference. Segmentation of participants of the conference by kind of activity and geographical location is presented in the diagrams.
The current situation of Ukrainian grain market, its part and place in global grain trading, as well as overcoming methods of crisis phenomenon in domestic agroindustrial complex and particularly in grain sector became the key leitmotif in reports and discussions during the conference.
Most of presentations of both Ukrainian and foreign speakers were dedicated to this spectrum of questions.
The Deputy Minister of Agrarian Policy of Ukraine Sergey Melnik declared in his report that in spite of difficult economic situation in the country, inevitable budgetary financing reduction of agrarian sector and substantial outflow of investments, this year "seeding acreage indexes do not go down" and this one under grains will make about 15.7 mln ha. He said this fact follows from Ukrainian farmers’ sufficient seeds, fertilizers and crop protecting agent stocks providing during the period of favorable market conditions, which was observed up to the end of September last year. Thus, negative crisis influence on sowing campaign-2009, especially its autumn phase, was managed to soften substantially. These factors, Melnik thinks, allow to forecast that grain crop-2009 in Ukraine will at least match "average figure of the last 10 years". At the same time, according to the Deputy Minister, the Ministry of Agricultural policy is going to issue its forecast of grain crop in Ukraine in 2009 at the beginning of June as "now it is very hard to make a forecast because late grains haven’t sprout yet and as of spring crops sowing a situation is not finally clear".
Nevertheless, APK-Inform Agency decided not to wait for beginning of June and presented its own forecast of 2009 crop directly within the framework of the conference. Analyst of the agency Anastasia Ivasenko announced estimate of total grains and leguminous output in Ukraine in 2009 at about 40 mln tons, a decrease of 11 mln tons compared to the previous year harvest. Such croppage combined with ending stocks (about 4.6 mln tons) will provide total grain supply in 2009/10 CY at around 44.6 mln tons, 18.5% down compared to current season, but still up compared to the same figures of previous seasons.
The expert also forecasts the decrease of spring crops yield indices compared to the previous year. In 2009, the expected croppage of spring crops will decrease by 23.8% compared to the previous year - to 17.4 mln tons. According to A.Ivasenko, the general sowing areas of grains and leguminous plants for the crop-2009 in Ukraine will total 15.4 mln ha as opposed to 15.6 mln ha in 2008. The summary harvesting areas and the average yield of grains will total 14.5 mln ha and 27.4 c/ha respectively.
For indication, this year APK-Inform Agency bases its forecast not only on traditional prediction procedure, but as well on complex study "Ukraine: sowing campaign-2009. Forecast of harvests of main agricultural crops", which was conducted by the agency in March this year. Within the framework of the study 400 Ukrainian economies were questioned with total land bank from 300 ha. The sampling of questioned enterprises is representative as the structure of agricultural enterprises of the country was saved (in cut extent) during its forming - by regions and availability of farmland. This study is available for the customers of agency from May 20 (more detailed information is provided by Marketing Department of APK-Inform Agency).
Experts didn’t fail to take into account a question of unfavorable weather influence on crops. Nearly 238 thsd ha of winter crops sowings perished due to April frosts in Ukraine, declared Sergey Melnik. According to him, winter rapeseed sowings suffered damage more than any other crop, throughout the area of 200 thsd ha or 14% from the general sowing areas of the oilseed.
Tatyana Adamenko, the head of the department of agro meteorology of Ukrainian hydro meteorological centre, in her turn, has marked that draught in April 2009 lowered significantly "the potential of grain yields". Rains in May improved the situation. But the precipitations did not fell in Odessa, Kherson, Nikholaev and several eastern regions, and some regions of the Crimea, that is why, the situation there became worse, added T.Adamenko.
Speaking about the functioning of Ukrainian market, it’s impossible to pass global grain market by, as their interference became more and more notable year by year. As used here quite a number of reports were presented, which to provoked considerable interest of participants of the conference. The general estimate of forthcoming grain season was given by Keith Flury, F.O. Licht analyst. According to the analyst, 2009/10 season, the situation on the world market of wheat will generally become favorable for exporters from the Black Sea region (in particular due to the decrease of the export potential of the EU countries and especially the USA). The expert marked also, the next season Russian share in the structure of the world wheat exports will account 16% (as opposed to 14% in 2008/09 CY), Kazakhstan will make 6% (4% in 2008/09 CY), that of Ukraine 5% (10% in the current season). The forecasted decrease of global feed wheat consumption in 2009/10 MY will become the reason of double reduction of Ukrainian wheat exports, according to the analyst.
The report of Vladimir Petrichenko, director of WJ ProZerno company, was equally informative. Expert stressed on two main questions: Russian grain market and Russian export potential. In the new season, grains production in Russia will total 97.7-97.8 mln tons, declared V.Petrichenko. According to him, wheat will become the target grain in Russia in the following season. According to the forecast of V.Petrichenko, the country should expect for the decrease of winter wheat harvest to 39 mln tons. The expert also forecasts barley harvest will lower, and maize harvest will grow to the level of 6.6-6.7 mln tons.
Expert said Egypt will maintain the key consumer of Russian grain in the future season. At the same time Russian exporters also pay special attention to markets of Brazil and South-Eastern Asia (Indonesia, Philippines and Bangladesh).
V.Petrichenko also marked that potential grain exports from Russia in 2008/09 amounts at 22 mln tons. This year the expert predicts United Grain Company enter the Russian export market of grains with a volume of 2-2.5 mln tons of grain from an intervention fund, that will allow newly created company actually to burst in three of leading exporters of Russian grain.
In the context of co-operation of the Ukrainian and world market of grain, it is impossible to go round, on the one hand, the question of competition with European grain on the markets of North Africa and Middle East, on the other hand - active exports of Ukrainian grain directly to the European market. Besides, in the last 1-2 years active work of the proper structures is conducted on creation of free trade zone between EU and Ukraine within the framework of which the special place is taken to the agriculture products. An individual session of the conference was devoted to the discussion of the prospects of such area creation with its moderators of representatives from FAO. Within the framework of the session the reports of director of the company Zeleny Informacion Mercado S.L. Jesús Maria Fernández and FAO adviser Peter Talks were presented.
According to J.Fernández, for the last 3 years the share of countries of Black Sea region in total European imports volume of grains reached in average 26%. As of competition on the main markets, the expert marked that the countries of Black Sea region and EU most of all are competing for the market of North Africa and Middle East (mainly on a food wheat). Along with this, for the last three seasons total export volume of grains from Russia, Ukraine and Kazakhstan exceeded the same index of EU countries by 70%.
The appearance of P.Talks was devoted to the features of negotiations between Ukraine and EU about creation of free trade zone and to the most significant moments for European commission at a decision-making concerning this question.
After basic reports the lively discussion took place within the framework of the conference, in which took part: Director of the Department of external economic cooperation of the Ministry of Agrarian Policy of Ukraine, Michael Rudenko, President of Ukrainian Grain Assiciation, Vladimir Klimenko, General Director of Ukrainian Agrarian Confederation, Sergey Stoyanov, Director of Institute of Development of Agrarian Markets, Victor Andrievskiy, Economist of Investment Center of FAO, Dmitriy Prikhodko and number of participants of the conference. Most of participants of the discussion marked that Ukraine undoubtedly has a great grain potential. But success of co-operation of Ukraine with EU depends a lot from the quality of carrying on the negotiation process at state level, which is only possible in the case of close collaboration of the state with the representatives of agrarian market. Therefore opinions exchange over this issue between the officials from Ministry, leaders of non-governmental organizations and direct market participants within the framework of the conference is extremely important in creation of the consolidated opinion over this question.
As this year organizers decided to conduct traditional conferences "Grain Forum" and "Grain Industry" within the framework of one event, it was quite natural to include to the program the session devoted to the questions of market of by-products of grain processing development. In the framework of individual session the report about the situation on the Ukrainian market of flour and groats was presented (speaker - Rodion Rybchinskiy, editor-in-chief of the periodical "Storage and processing of grain") magazine version of which is given in this publication; and also the report of Anna Burka, analyst of АPК-Inform Agency, concerning the main tendencies of Ukrainian market of mixed fodder (magazine version of the report will be given in one of the nearest weekly publications). According to A.Burka, this year Ukraine expects for the growth of mixed fodder production for poultry and swine. At the same time, expert forecasts the decrease of cattle livestock and reduction of mixed fodder output for them. Also within the framework of this session a number of specialized reports, touching the technical and technological aspects of storage and processing of grain was presented. (We would like to mark that all reports of the specialized session will be published in the June issue of the magazine "Storage and processing of grain". Those who wish to purchase it can contact to Marketing Department of APK-Inform Agency.)
Another specific topic of the conference which caused an intensive discussion became a theme of functioning of grain market in the conditions of economic crisis and its possible consequences for companies of agroindustrial complex. According to the information of the agency "Credit-Rating", eight technical defaults of Ukrainian agricultural companies were fixed over the last six months - five on bonds and three defaults of borrower. Moreover, one total default occurred. In opinion of Ekaterina Vasina, the head of the sector of rating of the agroindustrial complex enterprises of the agency "Credit-Rating", so depressing result is a consequence of previous aggressive strategy of development of enterprises of agrarian sector, their unstable indexes of financial and economic activity, seasonality, and also dependence on the productivity and climatic and weather conditions, sensitiveness to state support of the agroindustrial complex enterprises, high promissory loading and considerable part’s of property stay in the mortgage.
Concerning the prospects of development of enterprises of the Ukrainian grain complex, expert marked, that basic efforts of market participants this year would be directed on reaching accommodation with investors about restructuring of existent debt on financial obligations. E.Vasina considers, that as compared to previous years, the volume of loan resources, attracted by the enterprises of grain sector of agroindustrial complex of Ukraine will go down substantially, and also profitability of enterprises’ activity will reduce due to diminishing volumes of state support of agroindustrial complex.
Throughout the question of functioning of enterprises in the conditions of financial crisis, the report of the Head of International Department of company INTEGRIFES Catherine Kardash became extremely actual (about credit insurance of export-import activity), as well as the report about European experience of hedging of agricultural risks, presented by Helen Pastarnak (Offre&Demande Agricole), and appearance of the President of Ukrainian club of agrarian business, Alex Lissitsa (about limiting factors and risks of effective grain production in Ukraine). These reports generated true interest of participants of the conference and were widely discussed directly after speeches and in between sessions.
We would like to point to the reports of experts, that opened a question of quality of grain, as well as those factors which lead, unfortunately, to its permanent decline, that have extremely negative effect both on financial results of the work of Ukrainian agricultural enterprises and on the image of country on the whole. In this context it should be reminded, that K.Flury in his above-mentioned report indicated unambiguously, that Ukraine was determined by a world association exactly as a supplier of feed grain that affects prices on this production, and also on geography of Ukrainian grain supplying.
Estimating the prospects of quality of 2009 grain crop, the expert of "SGS Ukraine" Edward Ershov operated with the data, which were collected and analysed by his company over the last 2 years within the framework of the project "Map of quality". According to the expert the received results allow to estimate the level of influence each of fundamental parameters (weather, fertility of soil, sort, hybrid, quality of seed, technological aspects) on quality of the harvest of wheat, barley and rapeseed. E.Ershov marked in his appearance that information, got on results of research, testified that in most regions of Ukraine the basic influence on quality of grain is rendered by parameters, related to the subjective group, namely is a sort, hybrid, quality of sowing material and technological aspects of production. As a result, Ukraine from year to year has worse badly indexes of wheat, like protein content and flour strength.
The special place in the list of reasons of grain quality worsening, in opinion of expert, should be taken by corn-bug or rather by absence of its effective combating. Mainly exactly on this account quality of wheat in south regions of the country is far away from its potential, and, as a result, food wheat (with protein content over 11%) in 2007 harvest accounted for 72%, and in 2008 - only 36%.
E.Ershov marked also, that weather conditions in winter 2008/09 in Ukraine generally were unfavorable for bug wintering, but not critical, therefore this year efficiency of combating this pest will play the key role again.
Appearance of Vasiliy Melnik, the head of the State Inspectorate of Ukraine of quality of agricultural products and monitoring of its markets, became the continuation of theme of the quality, who presented to the participants of the conference the last version of new State Standart of Ukraine on grain of wheat, be signed (as he said) from a day to the day and which will be followed by enterprises at formal acceptance of grain of 2009 crop. According to V.Melnik, the changed standard is "a pilot project", which term of activity is meant for one year. According to a new standard, soft wheat will be divided by 2 groups and 6 classes. During the discussion V.Melnik also answered numerous questions and estimated influence of new standard on forming of map of quality of grain of 2009 crop.
Round table discussions "Ukrainian maize on the markets of the North Africa: problems and solutions" became a logical conclusion of the session, devoted to the questions of quality. In the discussion of this theme took part: the vice-president of the largest Egyptian importer of the Ukrainian maize, Wadi Holdings company, Ramzi Nasrallakh, the head of the State Inspectorate of Ukraine of quality of agricultural products and monitoring of its markets, Vasiliy Melnik, the head of agricultural production department of the company "SGS Ukraine", Igor Levenets, and the head of analytical department of APK-Inform Agency, Rodion Rybchinskiy. R.Nasrallakh said over the last 3 months the quality of the Ukrainian maize, supplied to the Egyptian market, became worse significantly due to the increase of broken seeds stake (from 3% to 5%-8%). This fact, according to him, "very distresses the Egyptian importers, because Egypt is extremely interested in supplies of the Ukrainian maize exactly, mainly due to possibility of very operatively supplying (up to 10 days), and also possibility to work with small vessels (3, 5, 10 thsd tones). After sharp debates the Ukrainian participants of round table came to single opinion and notarized the representative of the Egyptian company in the will to find a compromise decision, able to satisfy sellers and buyers of grain. The share of broken seeds indication in the contract of purchase/sale while formal acceptance of grain in port of loading, as well as the share of broken seeds while unloading, taking into account the average increase of this index in the process of loading/transporting/unloading, can become such compromise, in opinion of sides.
The round table completed at this positive note, and the organizers of the conference thanked all participants and guests of the event for fruitful work and declared about the end of the work of eighth International Conference "Grain Forum & Grain Industry-2009" with hope to meet again at a similar event in 2010.
Olga Pryadko, Stanislav Zatsarinnyy
