Volga Baikal AGRO NEWS Update on the Forecast for the Grain Market !!!
Farmers can reconsider spring sowing plans.
It is the introduction of regulatory measures in the form of quotas and duties on grain that can reduce the area under spring crops to a greater extent than weather conditions.
– Export restrictions led to the fact that under the pressure of traders, farmers began to sharply reduce the purchase price of grain, – explains Elena Tyurina, Director of the Analytics Department of the Russian Grain Union.
Forage crops, according to the Russian Grain Union, also fell in price, but to a lesser extent. The decline in prices in Russia is also due to the fall in world prices due to market entry of Australia with a large volume of grain of the new crop and plans to return to the markets of Southeast Asia, where Russia also supplies grain.
– As a result, exporters reduce the price of wheat purchases not only to the world level to compete with other suppliers, but also to the size of the duty, which since the beginning of March is 50 euros per ton. At current world prices and such a duty, the comfortable price at which traders would be willing to buy grain from producers is 12-13 thousand rubles/ton or $170 per ton. By the way, processors in the expectation of a lower price also limited purchases. Under such conditions, many grain producers think if they need to grow large volumes of wheat, because their profitability at the current price level will greatly decrease, – says E.Tyurina. She recalls that in 2020, the average profitability of farmers was 70% with an average production cost of 9 000 rubles/ton – from 6 000 rubles / ton in the southern regions up to 10 000 rubles / ton in regions with low yields. In this situation, all manufacturers were able to get additional profit, invest in development production: purchase of machinery, seeds, fertilizers. At the prices that the market expects, the average profitability of agricultural producers will decrease to 30-35%. Regions with a low level of productivity — the Volga region, the Urals – can get minimal profitability, and they have a reduced incentive to expand production.
Grain prices, according to the forecasts of the Russian Grain Union, can decline until the end of March, and then everything will depend on the forecasts for the new crop season: the state of winter crops and the volume of spring sowing.
– Of course, the reduction in prices is good for the domestic market, including for livestock breeders, but in such a situation, we can lose the basis for good prices in the form of an increase in grain production, – notes E.Tyurina.
At the same time, the expert adds, large farms, especially in the South and in the Black Earth region, have already sold their grain during periods of peak prices. Now the stocks are mostly kept by small enterprises.
At the same time, the demand for feed grain continues to grow on the world market, while the rate of demand for food grain, on the contrary, is decreasing. So, according to the Russian Grain Union, China this season increased purchases of fodder by 8.5 million tons, the European Union and Morocco – by 1 million tons. The total volume of feed purchases on the world market has now increased by 40 million tons and is 222 million tons against 183 million tons five years earlier. For comparison, the increase in purchases of food wheat for this period amounted to only 11 million tons.
– Thus, the increase in the consumption of feed grain on the world market outstrips the growth of food consumption, which is associated with an increase in the world production of livestock products, – says E.Tyurina.