Main page   About us  |  Our news  |   Our services  |  Contacts
Main page Ikar.ru guide Feedback RSS       In Russian

GRAIN | FLOUR | CEREALS | SUGAR | OILSEEDS | FEEDSTUFFS & INGREDIENTS | MEAT | DAIRY
Search:  


ANALYTICS & NEWS

   IKAR in Mass Media
   Market prices
   Graphically speaking
   Market studies
   Exhibitions
   Partners
   Investment


WORK IN AGRICULTURE

   Vacancies
   Resume


   About us
   Our news
   Our services
   Contacts

IKAR in Mass and Industry Media


Regional Review: CIS nations export overcapacity

world-grain.com, 01.09.17


In a series of articles, World Grain examines the Commonwealth of Independent States (CIS), led by Russia, Ukraine and Kazakhstan, is becoming a bigger player in global grain production and exports. This is the second of three articles in the September issue. To read the first article, click here.

The countries of the former Soviet Union include some of the world’s biggest flour exporters. According to the International Grains Council (IGC), Kazakhstan will be the world’s largest flour exporter in 2017-18, sending 3.25 million tonnes abroad, up from 3.2 million in the previous year. The IGC forecasts Russia’s exports at an unchanged 400,000 tonnes, with Ukraine’s also unchanged at 500,000 tonnes.

The region’s biggest flour importer is Uzbekistan with imports of 1.2 million tonnes in 2017-18, according to the IGC’s forecast, down from 1.35 million the year before. Tajikistan will import 150,000 tonnes, an unchanged figure, while the IGC puts the imports of the other CIS countries at 350,000 tonnes, down from 370,000 tonnes the year before.

Russian overcapacity

The Russian Union of Flour Mills and Cereal Plants is an associate member of the European Flour Millers. According to the European Flour Millers, there were 295 industrial mills and more than 3,000 smaller mills in Russia in 2015. They produced 9.035 million tonnes of flour, with 4.7 million coming from very small mills.

“There is apparently an overcapacity still from Soviet times in milling but they are not by any stretch of the imagination a powerhouse in flour exports,” Swithun Still, director and senior trader at Solaris Commodities SA in Switzerland, told World Grain. “That is partly to do with the expensive logistics in containers.

“Ironically Turkey is only the largest flour exporter in the world due to its close proximity to Russia. Russia pumps wheat into Turkey like there’s no tomorrow. The coasters sail across the Azov Sea into Turkish mills and they grind flour. If it wasn’t for Russian wheat I don’t think Turkey would have a sniff at being such a big player. Large subsidies play a part, government subsidies on the export front.”

If Russia invested in infrastructure and milling capacity, it could steal a portion of the market share from Turkey, Still said, but there isn’t any political will to do that.

Russian inherited from the former Soviet Union a huge overcapacity, Dmitri Rylko, general director of the Institute for Agricultural Market Studies (IKAR) in Moscow, told World Grain. The Soviet Union was arranged in such a way that if an atomic bomb destroyed one mill, another mill would run without problem, he said.

“We have a huge overcapacity,” Rylko said. “However our production dropped during these 25 years pretty substantially and then we added to this huge capacity some fairly new mills. We added substantial capacity of small mills in rural areas.”

He described three types of industrial flour production, starting with entirely greenfield new mills.

“Then we have rather small mills that are basically located on rural sites and represent quite a problem because typically they don’t import, they may not pay taxes and they represent a type of threat to the official capacity,” he said.

The small mills hurt industry margins because while they operate year around, the quality of flour is very low, Rylko said.

The third type of industrial flour production is from new and innovative companies that are managed efficiently, Rylko said.

“They may or may not be part of more diversified groups such as food companies or they may be vertically integrated into farming,” he said. “They may be vertically integrated into bakery or pasta production. They are quite successful companies.”

Russia doesn’t have cooperatives, he said, so the mills are run by private groups. There are also a few state-owned mills.

“The competition is quite tough I would say,” Rylko said.

He questioned official statistics, noting that the figure of 3,000 small mills was possible, but nobody counts.

“There is an official Russian flour production statistic,” he said. “Unfortunately nobody believes in it. We can’t. We make our own figures for Russian flour production. It is much bigger than official ones.”

“If you look at Russian official data for flour production, just be aware that they are highly discounted,” he said. “To the best of my remembering Russian official flour production is about 9 million tonnes. Really, I would say that it is at least 12 million, maybe more. Some of our friends say that it is 14 million. I can guarantee that it is at least 12 million. Otherwise we have pretty strange balances.”

Kazakhstan a major flour exporter

Kazakhstan has more than 11 million tonnes of wheat flour capacity, Rylko said. Last year, the nation processed about 5.5 million tonnes of wheat, which means it has the same volume in excess.

“These are mostly big mills, several hundred,” he said. “The background to the industry is private.

“Kazakhstan is the second-biggest exporter of flour after Turkey. It is mostly a question of geography because they have lucrative markets in the belly of Kazakhstan, and numerous ‘stans,’ such as Uzbekistan, Tajikistan, Kyrgyzstan, Afghanistan.”

Market analysts believed 2015-16 was one of the best seasons for flour trading within the last nine years, but the nation still managed to improve on its export totals in 2016, according to an attaché report on the sector. The principal reason behind the strong sales was the devaluation of the national currency, which made Kazakhstan extremely price competitive.

“However, Kazakhstani wheat flour exporters are also dependent on the financial situation of Central Asian importers,” the report said. “Other Central Asian countries also experienced currency devaluations. Additionally, Afghanistan, a major flour importer from Kazakhstan, has demonstrated a preference for lower quality, cheaper wheat flour, such as 4th and 5th class, which still suits round bread baking.”

Some southern and eastern Kazakhstani flour mills initiated wheat flour exports to China, the attaché report said.

“However, these Chinese importers impose very specific import requirements, such as flour must be bagged only in two-kilogram bags,” the report said. “This has sent flour mills urgently scrambling to meet the Chinese import requirements in order to act on these new market opportunities.”

Export figures for January-February 2017 showed total flour exported by Kazakhstan to China increased 273.2% compared with the same two months in the previous year.

Ukraine's exports growing

Sergey Feofilov, general director of UkrAgroConsult, said in describing Ukraine’s industry that milling wheat production on average is 60% of the total wheat production. The nation produces milling and feed wheat.

“Milling capacities in Ukraine are loaded at a level of 50%, 55% only,” he said, noting that flour exports have increased sharply over the past four years. “Key destinations for wheat flour exports include China, North Korea and also has some countries at the Middle East. As far as I remember in the previous season, 2016-17 total flour exports were a record high at a slightly less than 400,000 tonnes. Ukraine is not able to compare with flour exports from Kazakhstan.”

He estimated the total flour production capacity of Ukraine at 7.5 million tonnes.

“Currently about 40% to 45% of this capacity is used by the industry,” Feofilov said. “Ukrainian flour milling enterprises of all sizes, including mills, consume 4.5 million to 5 million tonnes of wheat per season. The share of small mills is 10% to 15% of total flour production.

“Ukraine has more than 550 mills, 335 of them are working. The total share of the 20 largest companies exceeded 50% in flour production structure in 2016.”

The main factors influencing flour production in Ukraine are population, the population’s purchasing power and the price of bakery products, along with flour production cost which has increased, cutting profitability and the demand for flour in export markets.

“Because of the Crimea annexation and the armed conflict in Donbas, millers have lost these markets,” Feofilov said. “As of Jan. 1, 2015, the population of Ukraine decreased to 42.9 million people, which is 6% less than on the same date in 2014 (45.5 million).”

Since 2005, export shipments from Ukraine have been growing. In the 2016-17 season, Ukrainian flour exporters set a new record and shipped abroad 398,000 tonnes, compared to 344,000 in the previous season, Feofilov said.

“The need for sales growth forced many of the largest Ukrainian companies to start or increase shipments of flour to foreign markets,” he said.

http://world-grain.com/articles/news_home/World_Grain_News/2017/08/Regional_Review_CIS_nations_ex.aspx?ID=%7BB7056B36-0C0E-4463-AAC3-06F26CFE236B%7D



All viewing: 177
Discuss

Where The Margin Is
Annual Conference Agribusiness
media feedback

IKAR is a member of International research project Agri Benchmark from May 2010

Agri Benchmark

Putin Is Growing Organic Power One T-34 Tank-Tomato at a Time



Grain | Cereals | Sugar | Oilseeds | Feedstuffs & Ingredients | Meat | Dairy


IKAR. Institute for Agricultural Market Studies. www.IKAR.ru

© 2002-2019  
IKAR. Institute for Agricultural Market Studies
24, Ryazansky str., off. 604, Moscow, Russia
Tel/Fax: +7 (495) 232-9007 | www@ikar.ru |  Feedback

Rambler's Top100 Рейтинг@Mail.ru
Google translate: Google translate: Russian Google translate: German Google translate: French Google translate: Italian Google translate: Portuguese Google translate: Spanish Google translate: Turkish Google translate: Lithuanian Google translate: Chinese Google translate: Korea