Key Factors to Impact Ukrainian Agribusiness in 2022. Grain Market Outlook

UkrAgroConsult

Article author:

Sergey Feofilov

CEO, UkrAgroConsult

Crazy grain prices and uncontrollable costs, unclear margins, rising logistics costs, random market activities are all the legacy of 2021! I can assume the only thing to thank 2021 is the new and clear vision the year has brought about world markets – now we realize much better what has been lost for the 2 pandemic years.

It is now clear that 2021 trends continue this year, and changes in the global economy are seriously affecting businesses from a field to the end food consumer.

Our main assumption from the 2021 experiences is the pace of change in the global economy has accelerated sharply with inflationary pressure. The answer to this can only be an adequate analysis and forecasts of rapidly changing markets. UkrAgroConsult team focuses on providing our customers with the results and consequences of these changes in the global and regional agri markets.

The next assumption, or rather a wish to the subscribers and readers of our analytics and market reports – to make a fresh start at the earliest possible date in 2022 in your strategies adaptation and business reorganization: whoever succeeds first, will win the most.

Typical examples of uncertainty are the variety of proposals how to curb record high inflation. Some strongly believe inflation will go away in 2022, others call for austerity programs. The next more and more discussed option is government targeting of the tailored prices, incl. food ones.

And the first forecast of UkrAgroConsult for 2022 – these proposals if applied are unlikely to lower food inflation, anyway this might reduce the prices growth rates.

The next forecast from UkrAgroConsult for farmers – the 2022 is the year of explosion in profit margins of inputs/high-tech suppliers. In 2020-2021 there was a jump in margins of grain and oilseeds producers. However, now is the time for growing margins of suppliers of advanced agri technologies – seeds, fertilizers, chemicals, etc. and input markets were dramatically switched from buyer’s in 2020 to seller’s markets in 2021.

In 2022, the trend of rising inputs prices will persist. It is seen from growing gas prices, the disruption of supply chains and jumping logistics costs.

Correlation between the inputs/technology market and the grain market is getting more and stronger. Inputs growing prices either will promote grain and oilseeds prices increases due to rising costs, or the stabilization/reduction of the range and quality of the technologies applied. As a result, grain supply volatility increases. These are the main risks to the harvest, but we expect that it is not so much the 2022 harvest as the 2023 harvest may be concerned.

Risks of decreasing margins both in trading and grain production make the markets look for alternatives. Business assignments and market research carried out by UkrAgroConsult in 2021 showed a growing interest in the grain and oilseeds processing and export of finished (or at least semi-finished) products. Sure, investment risks of Ukraine’s agri sector and food industry will be reduced soon while these sectors are still seriously underinvested.

In December 2021 and early 2022, it seems to me that we did not see the previously usual unstoppable various forecast flow for 2022 and this is obviously a challenge for the UkrAgroConsult team.

In the coming years, those companies that know, realise and reflect the changes and newly appeared trends in their strategies, will succeed. Otherwise, serious losses are predictable.

In conclusion, I would like to wish everyone peace, good health, success in business, highly profitable investment projects!

UkrAgroConsult

Tags: Ukraine, UkrAgroConsult, grain, prices, Sergey Feofilov, logistics, trading, fertilizers