Black Sea Grain: Development Drivers and Growth Limits

Transcription

1 Black Sea Grain: Development Drivers and Growth Limits Sergey Feofilov UkrAgroConsult 15Th International Black Sea Grain Conference April 18-19, 2018 Кiev

2 Disclaimer Past performance is no guarantee of future results. The opinions expressed in this presentation are the opinions of the writer and do not represent the official position of UkrAgroConsult.

3 Black Sea Region in the Global Grain Trade

4 Growing Global Grain Exports, MMT

5 Black Sea Region: ANSWER to the CHALLENGES OF THE THE PAST Key Factor of Competitiveness is Low Production Costs

6 Wheat: On-farm Production Costs USD per tonne Ukraine Russia Australia 216 Source: Australian Export Grains Innovation Center, estimates

7 Price Forecasts: growth, decline EU Ag Outlook 2030 vs.2017 World Bank 2030 vs OECD-FAO 2026 vs.2017 Wheat 16.8% 7.0% 23.9% Corn 14.0% 5.5% 26.2% Soy -3.7% 3.6% 14.4%

8 Manufactures Exports (% to total merchandize exports) $ Bl EU USA China Ukraine n/a n/a Poland n/a Source: World Bank

9 Business View We lose Natural Capital at very high rates. Private Profits often promote Public Losses Water, Ozon Layer and other Problems Usage of mineral fertilizers varies from 150 to about 500 kg per ha Future of the World Food System More Food at lower usage of inputs

10 Time of Uncertainty: Next years? Come on! we can no longer depend on a societal model that was developed for a world of less than one billion people. Source: Come On! Report to the Club of Rome, 2018 To the Brink and Back? The world, it seems, is becoming less liberal, less international, and less orderly. Source: To the Brink and Back? Munich Security Report 2018 P.8

11 The next years: KEY GLOBAL CHALLENGE COMPETITION Competition in the field of Grain Production/Supply

12 Black Sea Region: Expansion of planted area Forecast Ml ha f + Ukraine ,4 1.1 Russia Source: UkrAgroConsult estimates

13 BRAZIL: CURRENT SCENARIO AND FORECAST FOR PLANTATION AREA (Ml ha) 2015/ /2025 expectations Soybean Corn Total % Source: Alphamar

14 Ukraine: Heavy Import of Agrarian Technology Th.$ KMT Crop Fertilizers Crop protections Seeds Combines Tractors Source: State Statistic Committee

15 Ukraine: Farmers Incomes as Key Source of Financing of Grain Production Source: State Committee on Statistics of Ukraine

16 Declining Farm Profitability ,9 25, ,6 25 % ,7 19,6 16,9 26,7 32,3 22,3 29, , UAH/USD ,9 11, , Source: State Statistic Committee

17 Source of Financing: Foreign Direct Investments Annual Growth in FDI (share Capital) in Ukraine, Bln. USD

18 Ukraine: Bank Sector as a Source of Financing Total Assets and Loans of Ukrainian Commercial Banks

19 Ukraine: Bank Sector as a Source of Financing National Bank of Ukraine Base Rate

20 Competition in the field of Demand/Consumption

21 Consumption: Declining Growth Rates of the Global Trade

22 Growing Protectionism in spite of General Global Expansion Governmental acts from all over the world that could be considered as acts of protectionism This is slightly less than record number of the acts in 2015 But this is 95% more than in 2010 Source: Global Trade Alert, Swiss

23 WORLD population, Bln people

24 World GDP by Region based on PPP, %

25 Competition Factor: New markets

26 Sub-Saharan Africa Drives Growth in Global Wheat Imports Source : USDA

27 Middle Class Developed Countries Total number less that 1 B people Asian Countries: China Middle class doubled since 2000

28 Asian Countries: Middle Class India Good News: Indian Middle Class amounts to 300 Ml people according to HSBC Another News: India s missing middle class Multinational businesses relying on Indian consumers face disappointment Source: Economist January

29 Black Sea Region of the : Key Factor of Competitiveness is Low Production Costs Black Sea Region: ANSWERS FOR THE CHALLENGES OF THE COMING YEARS?

30 Scenario 1 Intensive Farming

31 Ukraine and Russia. Grain Production forecast, MMT Ukraine MMT MMT Russia MMT MMT

32 Yield Growth, forecast

33 Why the Prices Go Up: Weather Market? Ukraine

34 Low Farm Production Costs FOR HOW LONG? Farm Production Costs, Forecast

35 Scenario 2 The importance of being supported by Government

36 Level of State Support of Ag Producers % of gross revenue in agriculture (% PSE) Russia Каzakhstan ЕU Source: OECD Ukraine Украина Россия Казахстан ЕС

37 Scenario 3 Switch to higher margin business patterns

38 Scenario 3 Active usage of instruments allowing farmers to switch from low margins to the best margin practices Switching to more marginal crops Expanding on-farm elevator construction. To go to new business areas, not to increase production of the traditional goods Organic Food, Niche Crops etc. Better usage of professional independent market research and analysis Other Instruments

39 Recommendations: agri market analysis and forecasts Challenge - Too many facts too many info now Answer - Real global advantage now is how effective is the information processing

40 THANKS FOR YOUR ATTENTION! Sergey Feofilov