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Industry News

According to FAO and OECD forecasts, Ukraine will remain the top global grain supplier, but it will have to deal with infrastructure challenges and increase government support for farmers to keep its leading position.

Today, the key factor of agricultural market development is the increasing food consumption in developing countries.

So, according to FAO and OECD forecasts, the change in consumer preferences previously observed in developed countries will affect the rest of the world by 2021. In particular, the consumers will buy 0.4% less wheat, while the demand for rice, oil, meat and sugar will rise by up to 1%.

Prices of agricultural products are now closely related to energy markets.

So, for example, if global prices for oil fall by 25%, the prices for vegetable oils will decrease by 3%, wheat – by 4%, sugar – by 5%, oilseed meals – by 6%, ethanol – by 13%, fertilizers – by 14%.

This dependence is caused by the growing worldwide consumption of biofuels such as bioethanol and biodiesel, which are gradually replacing fossil fuels. The global production of cereals, vegetable oil and sugar cane for biofuel is expected to increase by 2%, 5%, and 10%, respectively. Consequently, the fraction of these crops produced for food will gradually decline.

Wheat and forage production in Ukraine will grow by 28% and 23%, respectively.

By 2021, OECD expects the global growth of wheat production at 11%, and forage production at 19%. Forage production will grow by about 20% faster, because of the greater consumption of meat in developing countries and the rising welfare of Asian nations.

Wheat importers will buy 65% more wheat from Ukraine

The net annual export of wheat from Kazakhstan, Russia and Ukraine will exceed 50 million tons by 2021. These countries can also show the greatest increase in wheat exports.

The rapid growth of grain production in the Black Sea region and changes in export structure could shuffle the leaders in each of the product categories. In wheat exports, however, Ukraine is expected to keep its place in the global top 5, because of the stable demand.

…While forage crops production can increase by 40%

According to FAO forecasts, the US will remain the leading producer of forage crops, exporting over 60 million tons annually. Argentina will increase its exports by 51%, becoming the second-largest producer worldwide.

Ukraine will hold the third place, supplying about 17 million tons to foreign markets.

FAO and OECD forecasts for Ukrainian grain market look very promising. Though the accuracy of these forecasts will largely depend on government support for agribusiness.

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Industry News
Tenders were held last week in Egypt and Algeria, supporting the price of wheat on world exchanges. Egypt purchased 415 thousand tons of Russian, French, and Ukrainian wheat at the tender.

On Wednesday, the marketplace in Chicago began to win back its lost positions. American wheat, which fell in price significantly last week, became more competitive in world markets, which was confirmed by the latest Egyptian tender. Although wheat from the US did not win there, it showed a very attractive price on FOB terms.

The depreciation of the US dollar has also had the supporting effect on wheat prices.

The quotes of wheat in the US increased:

In Chicago, by $ 2.02 per ton to $160.20 per ton on soft winter wheat (SRW),

In Kansas City, by $ 1.75 per ton to $164.33 per ton on hard winter wheat (HRW),

In Minneapolis, by $2.94 per ton to $198.60 per ton on hard spring wheat (HRS).

On the French MATIF, quotes of milling wheat on Wednesday increased by €1.75 per ton to €172.50 per ton or $183.39 per ton. With the optimistic results of Algerian and Egyptian tenders, stockbrokers made speculative purchases.

In the last few days, the grain from France demonstrated good competitiveness, so traders were confident of winning the tender even before summing up the bids.

European exporters predicted a victory for the French grain at the Algerian tender, where 700 thousand tons of wheat were purchased.

In Ukraine, wheat prices continue to decline due to a reduction in export demand from India. Hopes are that the victory at the Egyptian tender will support prices.

The current wheat prices in Ukraine are as follows:

2 grade 169-170 USD or 5300-5350 UAH per ton,

3 grade 167-170 USD or 5200-5320 UAH per ton,

Feed 158-161 USD or 4900-5150 UAH per ton.
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