Barley prices in Ukraine fall ahead of harvest, but market expects price recovery

The barley market will remain under pressure on purchase prices in the coming weeks due to expectations of a high harvest, but the situation may change as early as early July due to limited grain supply and active export demand from China. This was reported by the analytical department of the PUSK agricultural cooperative, established within the All-Ukrainian Agrarian Council (VAR).

“The market expects a good harvest of the winter group, in particular barley. If weather conditions remain favorable, we can count on a high grain quality and above-average yields. This factor is currently contributing to a decrease in purchase prices. At the same time, the FOB market is not showing such a sharp decline as the domestic market,” analysts note.

Current purchase prices in ports remain lower than the levels resulting from export quotations.

“The new harvest on FOB is currently quoted at around $220–223 per ton. Excluding transshipment and document processing costs, the price on a CPT-port basis should be about $210–212 per ton. However, in fact, the market today offers $203–206, with a discount of $4–6 per ton already built into the price. Such distortions usually do not persist for a long time,” experts explain.

The key factor supporting the market will be the insufficient coverage of export contracts by forward purchases. In July-August, about 70–80% of Ukrainian barley exports will be focused on China.

“About 600–700 thousand tons of Ukrainian barley have already been contracted for July-August, but only about 200 thousand tons are covered by forwards. This means that traders will still need to purchase about half a million tons of grain on the spot market. At the same time, most vessels under Chinese contracts will begin to enter ports in early July. If farmers hold back sales due to low prices, the market may face a supply shortage. That is why, after a short-term decrease in prices, there are all prerequisites for a return to the level of 210–215 dollars CPT-port already in the first half of July,” the PUSK predicts.

According to experts, current price levels are unattractive for producers, since due to the increase in the cost of cultivation, even average yields do not guarantee sufficient profitability. This may restrain active sales of grain from the new harvest and support further price recovery.

Tags: Ukraine, barley, prices, harvesting