Every year producers of wheat
flour hope to get active and unimpeded experience of work on the market.
However, annually the enterprises face various obstacles on the way to the
prosperous work. It should be noted that during almost the entire first half of
2012/13 MY the situation on the export market of flour was relatively stable
and measured, but in late 2012 the situation changed and presented the
unpleasant surprise for flour millers. At the same time, since the second half
of MY the current market trends changed again, indicating that Ukrainian
exporters of wheat flour can "cross" through the existing problems of
the market and continue moving forward. Thus, you can read in the current
article about how the situation developed in the reporting season, and what
difficulties had to be overcome on the way to successful work of grain
processors.
Good
start
Despite
the low selling rates of finished products last MY, many producers of wheat
flour did not lose hope for improvements in the new season. Since beginning of
2012/13 MY, flour producers continued developing export trading of their
commodities. The persistence of exporters led to increased rates of shipments
of flour milling products. According to the market players, in the current
season export volumes of the finished products can significantly overcome the
result of 2011/12 MY. According to data of the State Statistics Service of
Ukraine, during the whole period of last MY Ukraine exported 115.2 thsd tonnes
of flour. At the same time, in the current MY from July 2012 to January 2013
the shipments totaled 116.2 thsd tonnes. Taking into account that there is
enough time until the end of the current MY, flour milling enterprises are
quite capable to increase the volume of flour exports.
As for
the main directions of flour supplies, we should note that in the current
season the companies significantly increased the export volumes to the CIS
countries. According to the State Statistics Service of Ukraine, in the period
from July 2012 to January 2013 the supplies of flour finished products to the
CIS countries grew to 62.9 thsd tonnes, an increase of 25% compared with last
MY, when Ukraine shipped 46.9 thsd tonnes only. Also, in the reporting period
wheat flour producers increased shipment volumes to the Middle East to 9.5 thsd
tonnes, up 30% compared with the shipments in 2011/12 MY. Thus, Moldova
(26.7%), Indonesia (25.3%) and Azerbaijan (17.7%) were the main three leaders
of the countries-importers in the season. However, due to very rapid rates of
flour shipments to Azerbaijan in recent years, the country can take the second
position in the list of the main countries-consumers of Ukrainian wheat flour
in the nearest future.
Naturally,
we can not ignore the major companies-suppliers of flour for exports. According
to the State Statistics Service of Ukraine, the bakeries LLC "Kombinat
Khliboproduktiv TALNE", "Lugansk-Niva Ukraine", Vinnytsia Center
of Grain Production #2 became the leaders among grain processing enterprises in
terms of foreign shipments in 2012/13 MY. It is worth reminding that in 2011/12
MY, Vinnytsia Center of Grain Production #2, LLC "Kombinat Khliboproduktiv
TALNE" and Company "Enlil" were the leaders of flour shipments.
Limitations
- not an obstacle for the strong
According
to the market operators, since the beginning of the current season flour
millers were not expecting for new challenges. Thus, almost the entire first
half of the current MY showed conventional, probably characteristic
difficulties for the flour market. Traditionally, problems with getting rail
cars for flour shipment by the milling enterprises and difficulties to ensure sufficient
grain volumes for processing for the enterprises, prevented the stable
operation on the market. However, many flour millers tried to cope with these
difficulties, continuing to supply products on foreign markets as usual.
The
official report on imposition of the special duty on wheat flour at 20% of the
customs value by Indonesia since the beginning of December 2012, became rather
unpleasant and unexpected news for exporters of flour at the end of the first
half of 2012/13 MY. According to the market participants, the duties cover both
imports of flour of food and feed purposes. According to grain processors,
imposition of the reporting limitations on the imports of grain by-products to
Indonesia was caused by the fact that the country intends to increase
production of own flour volumes.
In the
new circumstances, a number of traders, supplying the finished products to the
country, reported that they plan to increase the share of flour presence on the
domestic market, and look out for a way to deliver the finished products to
other countries. Also, grain processors reported about their plans to increase
flour shipments to the main countries-importers of Ukrainian products. In
particular, countries of Asia, the Middle East and the CIS were called as potential
buyers of flour from Ukraine.
Optimistic
continuation
Since the
beginning of 2013 the situation on the export market of flour did not worsened,
despite the fact that Ukraine lost the main importer of its products -
Indonesia. On the contrary, due to the increase of prices for grains and
by-products on the world market, Ukraine received additional opportunities to
press its major competitors - Russia and Kazakhstan – on the export market.
It should
be noted that since the beginning of January 2013, Turkish companies reduced
activity on the export market of flour. Previously flour producers in Turkey
purchased grains from Russia and Ukraine, which are currently not active on the
exports of milling wheat, and significantly reduced their grain processing operations.
Despite the fact, some plants reported that Turkish flour exporters still
remain the main competitors for the shipment of finished goods to African
countries.
However,
the plans of market participants to increase the supply of flour on the domestic
market failed, due to the fact that since the beginning of 2013 the Agrarian
Fund entered the market, which used its reserves and activated flour supplies
to bakeries. According to the market operators, the stocks of flour products
reduced the consumer demand for commercial flour on the domestic market. And
grain processors had no choice but increasing the exports of flour.
Price
situation
It is
worth noting that in the second half of the season, the export price for the
finished product became the top-priority of Ukrainian companies. As of early
March 2013, flour milling complexes declared the selling prices for top-grade
flour at the level of 360-415 USD/t from the enterprise, down 40-100 USD/t
compared with the main countries-competitors.
Despite
the fact that the offer prices for Ukrainian flour also increased compared with
the beginning of the current MY, most companies are looking to the future with
optimism. However, most Ukrainian companies are not afraid of the current
lowering of flour prices on the domestic market of Russia. A number of
companies plan to significantly increase the selling prices of flour, due to
expensive raw materials, assuming that even with such increase of prices, the
demand for the final products of Ukrainian origin will remain quite
satisfactory.
Conclusions
Taking
into account the above mentioned factors, we can safely say that most of the
season was not bad for the exporters of flour in Ukraine. Despite all
difficulties and obstacles, the companies managed to keep the main selling
markets for their products. However, in recent years more and more experts are
saying that operators of the Ukrainian flour market need to expand into new
markets for wheat flour. In the current MY flour producers showed quite good results,
while expanding the geography of supplies. However, the final sum up will be
possible at the end of 2012/13 MY only.
