Transcript PDF - Ukraine Business Insight

Commodity trends for the season
Volodymyr Konovalchuk,
Ph.D. Head of Consulting,
Co-founder, Bridges
Content
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Global trends and position of
Ukraine in international food
markets
Commodity trends for the season:
wheat, rye, corn, barley, soybeans,
sunflowers
Agricultural policy issues and ways
to improve
Global trends and position of
international food markets
Developments in world food markets
Food prices are likely to increase in the future: Demand
and supply are the major forces determining prices
•
Higher demand:
- Diet changes due to income growth – more meat, especially in
developing countries
- Population growth
- Expansion of biofuels production
•
Inadequate supply:
- Bad weather
- Exporter policies (export quotas and other trade restrictions)
- Competition for agricultural land
- Increasing input (energy) prices
- Agricultural land area is limited
Total world grain & oilseeds:
Future increase in food production can only be
achieved by increasing yields
Agribusiness: A Global Industry
•
•
•
North America, South America and Eastern Europe are key global
suppliers
Asia is expected to remain a major importer of agri-commodities
Africa and Middle East will continue to depend on grain imports
Regional Imports and Exports of Selected Agri-Commodities
(in millions metric tons)
Soybean
and Meal
Imports
(36)(38)
33 33
Soybean
and Meal
Exports
2011 2016
Soybean
Imports
(28)
(57)
Corn
Exports
Wheat
Imports
12 26
Soybean
and Meal
Exports
4
Corn
Exports
(3)
131
Exports
Imports
Wheat
Exports
54 57
75
2011 2016
16 24
Corn
Exports
(31)
(37)
Soybean
Meal
Imports
(8) (12)
Position of Ukraine:
Leading world wheat producers
Position of Ukraine:
Leading world barley producers
Position of Ukraine:
Leading world sunflower seed producers
Main Types of Farms/Ag
Producers in Ukraine
Agricultural Enterprises and agro-holdings,
 Some farm up to 500,000 ha
 Legal & organization status: joint-stock companies, limited
liability companies, private enterprises, etc.
Private family farms
 Average size 45 hectares (vary from 2 hectares to 4,000
hectares), employ on average 5 workers
 Legal status: a private family-run ag. business/enterprise
Small land plot holders
 Land shares received by former collective farm workers
 Average land share size is 4 hectares (varies from 1 to 8
hectares depending on region)
 Most of land plots are rented out to bigger agricultural
producers.
Present Environment in Ukraine
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Land of former collective farms was
distributed among its members. Each
member received “share” (or plot) of land
that varied in size depending on the region.
Average share size is 4 ha (or about 9-10
acres)
Currently there is a land sales ban
(moratorium), so owners of land plots can
not legally sell them.
The main method of agricultural land
distribution is rent. Farmers and agricultural
companies rent land from multiple plot
owners.
Rent payments range between $2060/hectare/year depending on the region
NUMBER OF PRIVATE FARMS BY OBLASTS
Odesa vs Ivano-Frankivsk oblast
Area of cultivated land is 4,1 times greater in Odesa
There are 13 time more private farmers in Odesa oblast.
Farm size is almost the same – about 40 ha
as of January, 2011
COMMODITY TRENDS FOR THE SEASON IN UKRAINE:
WHEAT, RYE, CORN, BARLEY, SOYBEANS,
SUNFLOWERS
AREA PLANTED UNDER GRAINS AND LEGUMES
IN UKRAINE FOR SUMMER 2012 CROP
Wheat supply and demand
Units: 1000 tons; yield: tons/ha
Source: USDA/FAS
Barley supply and demand
Marketing Year
2011/2012
(begins July 2011)
Area Harvested
Beginning Stocks
Production
TY Imports
Total Supply
TY Exports
Total Consumption
Ending Stocks
Yield
Units: 1000 tons; yield: tons/ha
Source: USDA/FAS
3,684
794
9,098
35
9,922
2,300
6,300
1,122
2.47
Marketing Year
2012/2013
(begins July 2012)
3,300
1,122
6,600
30
7,752
2,500
4,800
752
2
Corn supply and demand
Marketing Year
2011/2012
(begins Oct 2011)
Area Harvested
Beginning Stocks
Production
TY Imports
Total Supply
TY Exports
Total Consumption
Ending Stocks
Yield
Units: 1000 tons; yield: tons/ha
Source: USDA/FAS
3,544
1,121
22,500
45
23,666
15,000
7,800
866
6.35
Marketing Year
2012/2013
(begins Oct 2012)
4,720
866
21,000
50
21,916
14,000
7,300
616
4.45
Rye supply and demand
Marketing Year
2011/2012
(begins July 2011)
Area Harvested
Beginning Stocks
Production
TY Imports
Total Supply
TY Exports
Total Consumption
Ending Stocks
Yield
Units: 1000 tons; yield: tons/ha
Source: USDA/FAS
280
174
579
0
755
11
630
114
2.07
Marketing Year
2012/2013
(begins July 2012)
300
114
650
0
766
15
630
121
2.17
Production Highlights:
2011 MY VS 2012 MY
Production of major grain crops in Ukraine
(1000 tons)
22500
22324
21000
20000
1000 tons
15000
15000
10000
9,098
6,600
5000
650
579.0
0
MY 2011/2012
Corn
MY 2012/2013
Wheat
Barley
Rye
Notes:
 Total grain crop this marketing year is expected to be about
45-46 million tons (vs 56.7 million tons last year);
 The average total grain crop during 2002-2011 was 39.8 million tons
GRAIN CROP PRICE TRENDS IN UKRAINE, USD/ton
OIL CROP PRICE TRENDS IN UKRAINE, USD/ton
World markets
Wheat and Barley price trends
Chicago Board of trade, USD/ton
COMMODITY TRENDS FOR THE SEASON:
SOME KEY POINTS
• The total grain crop in Ukraine is above average but lower than
last year’s record crop
• High world market prices
• Ukraine has accumulated significant ending stocks of major
crops that should allow the country to fully satisfy its domestic
consumption needs and to have some exportable surplus
• Wheat and barley production in MY 2012/13 is projected to
decline compared to last year, mainly due to winter kill and
anticipated lower yields than last year
• Marketing Year 2012/13 may well be called the year of corn in
Ukraine, which was gaining popularity in the country in the last
several years
• Increase in corn production is mostly attributed to the need to
replant large areas of lost or damaged wheat and barley and
some favorable market conditions for corn.
• Large supplies of corn may result in lower corn prices later in
the season
CORN PRODUCTION, YIELD, DOMESTIC
CONSUMPTION AND EXPORT TRENDS
While Ukraine is important world agricultural
player, productivity of agriculture in Ukraine
remains low
Yield comparisons across countries
USA
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EU-25
China
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Argentina
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Romania
Canada
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Ukraine
Russia
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1.8
Kazakhstan
Source: UNDP reports
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4.6
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3.2
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1.5
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3.0
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2.5
2.0
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4.9
2.9
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4.4
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Brazil
India
Oil crop yields, t/ha
Grain yields, t/ha
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6.4
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0.9
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1.2
1.4
1.9
2.8
2.6
2.1
2.8
2.6
Agricultural policy issues and ways
to improve Ukraine’s agriculture
SOME POLICY DEVELOPMENTS DURING THE LAST YEAR
• The Ministry of Agriculture agreed with the traders that
they will export no more than 19.4 million tons of grain,
which includes only about 4 million tons of wheat.
• Because the export limit for wheat has almost been
reached, the government announced wheat export ban
beginning in mid November.
• There is lack of grain transporting railroad cars in Ukraine.
Possible restrictions for wheat exports worsened the
situation.
• Another policy change affected planting seeds market.
Beginning in the fall 2011 State Customs Service started
requiring GMO test results for every single shipment of
planting seed.
• In MY 2011/12, the government introduced grain export tariffs
starting July 2011 that were later lifted.
• In spring 2012, the government revived the idea of bioethanol production from agricultural crops. Draft legislation is
considered for adoption.
Agricultural land sales ban (or moratorium)
may be lifted in the future
What is going to happen?
What will be the agricultural land price in Ukraine?
FORECASTED VALUE OF AGRICULTURAL LAND AFTER
LIFTING THE LAND SALES BAN, UAH/HECTARE ($1=8 UAH)
After lifting the agricultural
land sales ban expected value of
agricultural land in Ukraine
will range $190-690/hectare
Challenges to achieve full potential for
Ukrainian agriculture
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Lack of working capital in agribusiness
Lack of new technologies, inefficient land
use and input use, thus a lower productivity
Poor supply chain logistics and
infrastructure
Undeveloped farm credit system
How to exactly resolve these challenges?
Some of the most important measures include:
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Lift agricultural land sales moratorium
(currently the major way of land redistribution is lease).
Improve agricultural education
Reduce government bureaucracy and
intervention (obey WTO rules, remove
export quotas forever, reduce tariffs and
other non-tariff barriers)
Enforce property rights and protect
investors
Thank you!