In late May 2018, the sea capital of Ukraine — Odessa — once again became the focus of attention of representatives of the grain and marine industries. On May 24-26, the largest international conference Grain & Maritime Days in Odessa took place there for the 17th time. Its slogan definitely proves itself — Connecting Industries. More than 500 professionals of the industries of international grain trade, transportation, shipping and other related market segments, which moved Ukraine to the TOP-10 of the global grain exporters, were participants of the event.
APK-Inform Agency and the International law firm Interlegal were organizers of the event.
In the current year, the conference agenda was divided into two units — Global and Ukrainian ones. The first day of the conference consecrated on the global market of grains, international trade and international grain sea carriages. On the second day, the key issues covered the Ukrainian grain market development trends and forecasts for a new season, agricultural logistics and grain sea carriages in the Black Sea region. The composition of speakers can be described as really "star" and unique. International and Ukrainian experts with high reputation and professionalism made their reports.
Hereafter, we will consider the most pressing issues of development of the grain market.
The Emeritus Professor of Agricultural & Applied Economics of the Food and Agricultural Policy Research Institute at the University of Missouri (FAPRI), William H. Meyers became one of the key speakers. In his report, he presented the FAPRI forecast of development of the global market of grains till 2026. The expert said that for 15 recent years, the global grain production per capita increased from 360 kg to 420 kg. Increasing of the global yield figures of agricultural crops and their production volumes contributes to price cutting. At the same time, it is important to note that Ukraine comes to the TOP-3 of countries-leaders (including Brazil and Argentina) with a fantastic export growth rate. Further development of the technologies for yield improvement will allow to Ukraine to increase the exports in 2025-2027 period to nearly 50 mln tonnes of grains, as well as the same trend in Argentina, added W.Meyers.
The Deputy General Director at the Center for International Agricultural Research of the Chinese Academy of Agricultural Sciences, Nie Fengying reported about the long-term forecasts in the industry. China continues significantly increasing the imports of grain raw materials and meat products. The rapid growth of demand rates, i.e. the population growth and urbanization, are the main reasons for the reporting increase in food purchases, explained the expert. According to him, to date the tillable lands in China cover one-third of the whole country`s territory, and each year the areas under cultivated crops continue decreasing. And green winter conditions make its significant impact on winter crops. According to the expert, by 2027 the population will total nearly 1.55 bln people. Therefore, the level of urbanization will increase. The imports of corn and soybeans will also increase. By 2027, the imports of soybeans will increase to 10 mln tonnes per year.
At the same time, the forecasts of the future grain harvest and market trends in the season-2018/19 traditionally became the key topic in the grain section of the conference.
The Senior trader at Alfagra, Natalya Skuratovich reported about the European grain market trends, results of the season-2017/18 and forecasts of production and trade in 2018/19 MY. According to the expert, in 2018/19 MY the production of barley and corn in the EU will increase, while the harvest of wheat will somewhat reduce compared with the season-2017/18. In particular, in 2018/19 MY the production of barley and corn will reach 62.2 mln tonnes and 60.9 mln tonnes respectively, against 58.4 mln tonnes and 59.4 mln tonnes in the current season. As for wheat, its harvest will decline to 140.8 mln tonnes, against 141.7 mln tonnes.
The analyst of trading department at Macquarie Group, Daryna Kovalskareported of development issues of the grain market in the Black Sea region. Increasing of wheat production volumes and the growth of grain crops supplying from the Russian Federation are the major drivers in development of the Black Sea region. As for the prospects of grain production in 2018/19 MY, the expert focused on the condition of winter crops in Russia and the weather impact. As of May 24, the condition of winter crops in Russia was good, however the discouraging weather forecasts, including the deficit of precipitations, can make some adjustments, and in terms of the pessimistic scenario the future harvest and export volumes can significantly reduce. D.Kovalska said that the situation in the current year is very similar to the conditions observed in 2012 and 2013. The average air temperature continues rising, and the weather forecast is pessimistic. Also, the similar situation takes place in Ukraine. Overwintering period of crops demonstrated great indices, however there is some risk of reducing of corn yield (down 10%), due to the precipitation deficit. As for wheat, the share of yield losses can become even higher.
During his report, the grain market analyst at APK-Inform Agency, Andrei Kupchenko told about the forecasts of development of the Ukrainian grain market in 2018/19 MY. According to A.Kupchenko, the export potential of the Ukrainian grain market will increase to 41.2 mln tonnes (up 2.7% compared with the estimations of exports in the current marketing year), mainly at the expense of the growth of corn supplies to 20 mln tonnes, against 18 mln tonnes (up 11.1%). At the same time, the global competition in the reporting market segment is expected to strengthen.
According to the USDA estimations, in 2018 the major countries-producers will increase corn production. So, China will increase corn production by 9.1 mln tonnes compared with the current MY, Brazil — up 8 mln tonnes, and Argentina — up 8 mln tonnes. Also, Russia will significantly raise its corn production volumes — up 5.8 mln tonnes. Thus, only Brazil, Argentina and Russia will jointly increase corn supplying on the global market by 5.7 mln tonnes compared with the current season. Such situation will somewhat tighten the global competition rates, in terms of the expected decline in corn production (down 14.3 mln tonnes) and exports (down 3.2 mln tonnes) in the USA, and can put pressure on the prices, concluded A.Kupchenko.
According to the Deputy of Ministry of Agrarian Policy and Food of Ukraine, Viktor Sheremeta, to date US and Ukrainian corn are the most competitive products on the Chinese and other markets, but the absence of GM content is the major advantage of the latter. According to the official, Ukraine produces corn hybrids, but not GM-corn. And to date, it is a huge advantage on the global market. It is possible that there are some exceptions, but the Ministry does not have any information about GM corn in households of Ukrainian agrarians.
In the current year, the Director at the inspection company Dr. Amin Controllers Pvt. Ltd., Siddharth R.Amin became the exclusive guest of the conference and speaker from the South Asian region. According to the speaker, to date there are four key factors for the agricultural development in India: the population, weather conditions, production and politics. In particular, the population growth in the country requires the further increasing of wheat production.
For several recent seasons, India managed to increase the planted areas under wheat, due to somewhat improved weather conditions, as well as the growth of irrigation fields. In turn, for 2 recent season the planted areas under wheat increased by 6.6%, to 31.8 mln ha. Also, in 2017/18 MY the yield increased to 2.87 t/ha, against 2.78 t/ha last season. In 2017/18 MY the harvest of wheat in India increased to 98.4 mln tonnes, up 13% compared with last season (87 mln tonnes), which became the highest level for 8 recent seasons. The record harvest contributed to significant decreasing of the grain purchases on the global market in the current season to 1.87 mln tonnes, as opposed to 5.47 mln tonnes in 2016/17 MY. In the reporting seasons, Ukraine was the main supplier of wheat to India, and its share of supplies totaled 53% in the import structure.
Also, the expert noted that India increased the imports from Russia — from 4% in 2016/17 MY, to 9% in the current season.
The Panel discussion "Grain trade – 2018: key trends" caused a special interest among the participants. The top managers of companies with more than 20-year experience in grain trading, and young traders working in major grain trading companies, became the key speakers. The President at the Ukrainian Grain Association (UGA), Mykola Gorbachev became the moderator of discussion. Also, he is the co-chairman of the Committee of grains and oilseeds at the European Business Association (EBA), and since 2005 – the Director at New World Grain Ukraine (Soufflet Group).
The list of speakers included the General Manager at COFCO Agri Resources Ukraine, Vladimir Osadchuk; the Trader at RisOil Ukraine, Timur Shishlov; the Head of the analytical department at Marcopolo Commodities SA, Olena Neroba; and the Co-founder and CEO at ceREALIA, Andrei Grigorov, who expressed their opinions on the current trends of the grain market, as well as prospects in the season-2018/19 and expected risks.
Also, the conference discussed the problematic issues of agricultural logistics. Within frames of Grain & Maritime Days, the Panel discussion "Logistics — Achilles heel of the Ukrainian agricultural exports" focused on the issue. The Agribusiness Program Manager at IFC/World Bank Group, Heinz Strubenhoff became the moderator of discussion. Speakers of the discussion: the Director at the Branch Transport Logistics Center at PJSC Ukrzaliznytsia (Ukrainian Railways), Sergei Podgorodetsky; the President at the UGA, Mykola Gorbachev; the Agricultural policy adviser at World Bank Group, Oleg Nivievskyi; the Owner of a transport and logistics company Alex Rail, Yuriy Shuklin; and the Head of the project management department at the Ukrainian Sea Ports Authority (USPA), Vyacheslav Voronoy. They discussed future projects for improvement of the agricultural logistics in Ukraine, "pain points" in the sphere, and possible solutions.
Of course, the work of Ukrzaliznytsia (Ukrainian Railways) in transportation of grain cargoes became one of the major subjects under discussion.
M.Gorbachev reported that by 2022, Ukraine can increase the general grain exports to 70 mln tonnes. Therefore, PJSC Ukrzaliznytsia (Ukrainian Railways) has to provide possibilities to ship nearly 5 mln tonnes of grains per month by rail. In the period from 2001 to 2018, the production of grain crops in Ukraine, as well as the export volumes, continued steadily growing. It is expected that in 4-5 years the shipment volumes of Ukrainian grain on foreign markets will reach 70 mln tonnes. In order to ensure 70% of products shipment by railway, Ukrzaliznytsia needs to increase its efficiency of performance by 50%. It will enable providing nearly 76.9 thsd car supply per month, and thereby transporting 5 mln tonnes of grains, he explained. Also, N.Gorbachev said that to date Ukrainian elevators are able to ship 715 thsd tonnes of grains per day, while the Ukrainian railways can ship 117 thsd tonnes per day.
The session "International grain sea carriages", moderated by the Partner, lawyer at Interlegal, International law offices, Arthur Nitsevych, provided the leading experts in the sphere of maritime business — the President at WISTA Despina Panayiotou Theodosiou; the Chief Shipping Analyst at BIMCO, Peter Sand; the Deputy Secretary General at BIMCO, S?ren Larsen; and the Honorary Secretary at LMAA, Daniella Horton. The participants discussed the global future of maritime transport and the position of Ukraine in the process.
The session "Grain sea carriages in the Black Sea region", moderated by the Partner at Interlegal, Nikolay Melnykov, focused on the situation on the Panamax market in the Black Sea region, recommendations upon vessel chartering, as well as logistics of sea and river transport.
Also, in the current year the agenda included several optional round tables for conference delegates. Lawyers of Interlegal briefed the participants about the recent trends in ship arrest and release in the Mediterranean and Black Seas region. Representatives of insurance companies Marine Insurance Services and Inter Hannover reported about cargo insurance issues and liability of the sea terminals. Also, conference participants were interested in the round tables "Non-resident companies in the global trade: challenges-2018" and "How to purchase a new yacht for 10.990 USD and pay less in taxes" from representatives of the corporate and yacht issues of Interlegal. Participants of the agrarian market received the round tables "Pricing mechanisms and price risk management in the Black Sea region" (organizers — CME GROUP and ЕМЕА S&P Global Platts) and "Evolution of agribusiness in Ukraine: from raw materials to product logic" (organizer — Kyiv-Mohyla Business School).
We should note that the number of participants and the status of speakers continue annually growing, which means that next year the conference Grain & Maritime Days in Odessa will become the key platform for meeting of professionals from not only the Black Sea region, but also from the whole Eastern Europe. See you next time!
Agricultural Trading Desk
Ukrainian Grain Association
World Bank Group
The Bleyzer Foundation
Dr. Amin Controllers
S&P Global Platts