During recent seasons, the Russian feed barley sector is signalized by low rates of development in view of output reduction, declining feed consumption as well as export shipments. In 2016/17 MAY, the export volumes of the Russian grain totaled 2.9 million tonnes, which was lower by nearly 31% than in 2015/16 MAY.
Hereof, it will discuss about the situation on the domestic and export markets of feed barley in the beginning of 2017/18 MAY, and general prospects for the season.
During 3 recent seasons, there is a tendency in Russia to cut the planted areas under barley. According to many market operators, it is caused by reorientation of the producers to more profitable grain and oil-seed crops, such as corn and soybeans. Thus, in the current season the planted areas of barley is estimated at the level of 8 million, down 3% compared with the last year figures, and down 14% compared with the indicator of 2014/15 MAY. According to some surveys, due to crop areas reduction as well as adverse weather conditions in the European part of the country during the harvesting campaign, in the current year barley production can decrease to 17 million tonnes, against 18 million tonnes in 2016/17 MAY.
Market forecasts of domestic market
Following the results of 2016/17 MAY, the price situation on the market of feed barley can be signalized as low-volatile. At the same time, low demand from livestock and mixed feed enterprises became the key factor exerting impact on pricing development last season.
Many companies considered it expedient to replace barley with feed wheat in view of the bigger number of offers and lower selling prices for the grain. Thus, in the second half of 2016/17 MAY purchasing prices for feed barley often varied within 7`200-8`500 RUR/T CPT, and only in the end of the season (June 2017) they showed small decrease in the European part (down nearly 300-500 RUR/T – to 7`000-8`000 RUR/T CPT).
In the beginning of 2017/18 MAY, purchasing-trading activity was estimated as rather low due to adverse weather conditions reducing the rates of field works basically in the main producing regions of the European part. The start of the harvesting campaign dragged on more than two weeks.
Incessant rains in the Southern, Central and Volga Federal Districts didn’t allow to agrarians to start the field works in time. As a result, in July 2017 any essential changes in prices for barley weren’t fixed. Most market operators took a see-and-waiting attitude, expecting for the start of purchases during mass coming of new harvest offers to the market. In their turn, the agrarians preferred to constrain sales, finding it difficult to announce selling prices of the grain.
As a result, the adverse weather factor, reduction of the planted areas and the forecast of declining production, in general resulted that essential price decreasing in the start of the season wasn’t marked. As of the end of July, bid prices for the grain in the European parts of the Russian Federation totaled 6`800-7`800 RUR/T CPT, down nearly 200 RUR/T compared with June 2017. At the same time, to date the number of grain offers for new harvest remains minimum.
It should be noted that the quality of new barley harvest coming to the market is estimated as conforming to the requirements of state standard specification. Market operators often inform that the average natural weight of barley varies within 620 – 670 g/l, and the indicators of humidity and dirtiness don’t exceed admissible.
“Owing to plentiful rainfalls in Krasnodar Krai, we couldn’t start harvesting barley in time. In some fields the grain has begun showering, however, according to preliminary estimations, we haven’t experienced serious losses. The average yield in comparison with last year has increased by 0.2 T/ha – to 3.3 T/ha, and the quality of grain in most cases is estimated as satisfactory and good,” – an agricultural producer of Krasnodar Krai comments on the situation.
Decrease of trading volumes of export
During recent seasons considerable reduction of feed barley delivers from Russia on foreign markets is noticeable. Yet in 2014/15 MAY the grain exports made a record at 5.3 million tonnes, and in 2015/16 MY the shipments of Russian barley decreased to 4.2 million tonnes. In it’s turn, in 2016/17 MAY the grain shipments totaled 2.9 million tonnes only.The decrease in production deliveries is explained, first of all, by the reduction of purchases by Saudi Arabia which traditionally is the main consumer of Russian barley. Thus, in 2016/17 MAY Saudi Arabia purchased 1.2 million tonnes of the grain only, against 2.4 million tonnes in 2015/16 MAY. Iran became the second largest importer of Russian barley, while grain deliveries last season into this direction slightly increased to 493 thousand tonnes, against 484 thousand tonnes in 2015/16 MAY. Libya took the third position in purchasing of Russian barley with the volume at 284.5 thousand tonnes (against 160.7 thousand tonnes in 2015/16 MY), and displaced Jordan to the 4th position with the capacity of purchases at 206.9 thousand tonnes.
As for the price situation, the main impact on FOB pricing last season was exerted by high production of the crop in a pattern and, as a result, the high competition on the global platforms.
In it’s turn, pricing on CPT port often depended on the offers number for wheat from grain producers on the domestic market and also the situation on the foreign exchange market, at the same time low volatility of Russian ruble in relation to US dollar did not put any essential pressure upon operations of traders and allowed to build the long-term strategy of purchases.
It is remarkable that since the second half of 2016/17 MAY rather low purchasing activity is fixed on the market. At the same time, for May-June there were no essential price adjustments on FOB basis, while offer prices for the old harvest grain remained declarative in terms of the seasonal factor. According to export-oriented companies, shipments of grain in most cases carried out according to earlier concluded contracts. Along with it, insignificant increase in bid prices was fixed on CPT to 8`200-8`500 RUR/T in the deep-sea ports caused both by the situation in the foreign exchange market, as well as urgent necessity of traders to accumulate stocks of the grain.
The start of 2017/18 MAY was marked by increasing of the prices both on FOB and CPT basis promoted by the global market environment, and the activation of importers’ demand. It is worth marking that in the beginning of July the offer prices for feed barley in the ports of the Black Sea totaled 160-166 USD/T FOB with delivery in July, and by the end of the month they reached 168-180 USD/T FOB in the deep-sea ports with delivery in August-September. According to traders, such essential price increase was caused by the growing interest in large-capacity batches of Russian barley from the buyers. In it’s turn, the offer prices for 2017 grain harvest in the ports of the Azov Sea with delivery in July were announced within the range of 138-145 USD/T FOB, and were rather stable.
In addition, the upward price tendency was marked on CPT, and purchasing prices for feed barley grew by nearly 300-700 RUR/T, and by the end of July they varied within 9`400-9`700 RUR/T and 8`400-8`600 RUR/T CPT in the ports of Azov and Black Seas.