Sergey Feofilov: Demand-side uncertainty will affect grain prices in late 2020

At present, some protectionist moves take place in the Black Sea countries like Romania and Kazakhstan. But before these moves, the Black Sea grain supply had been quite nice, even excellent: Ukrainian export in the current season even slightly exceeds the initial estimates. By early April total grain exports hit 44 MMT –  a record export volume never seen for 9 months before.

Now the 2020 grain production in Ukraine and Russia is much more important for the supply side. Dry weather continues but still nothing dangerous for 72-73 MMT harvest in Ukraine and 45-50 MMT export next season. Similar situation is for Russia.

Anyway, from supply side the Black sea will remain quite sufficient in the coming season. But from the demand side – we see the drop in demand that is an unpleasant reality.

The problem is how much buyers will be ready to pay for grain? Actually all biggest importers of Ukrainian commodities face decline in their GDP. Declining incomes make customers hardly able to buy as much as previously.

UkrAgroConsult expects current hike in wheat prices is short term – 3-4 months. After that, competition will increase plus lower consumer incomes will result in impressive price correction. By October – December 2020 and early 2021 wheat/other grain prices might be under serious pressure just from the demand side.

And this is the biggest problem of the Black Sea agri sector – farmers’ incomes and grain production in 2021.

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