YEAR 2020: WHAT A PITY THAT YOU ARE LEAVING AT LAST
The year 2020 was successful for UkrAgroConsult despite all the problems, both local and global ones. We rebranded the company, opened a new website, improved the efficiency of processing raw market information using Big Data tools, and brought in new consumers and customers.
2020 started so good, but then all got messed up and confused. Indeed, it was a year of crazy events. Primarily, they included the pandemic, aggravating uncertainty, recovering Chinese demand, Australia’s comeback, prices, increasing state regulation of exports, trade wars, elections etc.
All we hope for returning to our day-to-day life, this will be so to some extent – but there is no turning back anyway, now somebody will fall, somebody will go up.
The main current problem of not only the Ukrainian agricultural market, but also of the global one is to find its place in the new reality. This is a common problem for both traders and farmers, as well as for analysts, this is a long-term task.
Traders, for whom 2020 was a year of defaults, need to increase reliability of grain suppliers in 2021. Previously, this was in many respects secured by forward contracts. Of course, traders/exporters will reduce the volume of forward contracts in favor of spot deals. However, spot price is more expensive, more competitors, better contract price and payment terms are to be offered that is costly, and in Ukraine’s conditions all these costs usually fall on the shoulders of farmers.
I do not rule out a significant rise in commodity loans from seed, PPP, and fertilizer suppliers. However, after the period of defaults, farmers anyway need to restore trust and reassert themselves as grain suppliers – this is what will open opportunities for an increase in funding.
Grain selling farmers unexpectedly modified their behavior – they had trained in delaying wheat sales after price growth and applied all this experience to sunseed and corn sales. They sought to sell at the highest prices, but could deceive themselves.
Now, in our new report (AgriPriceMentor), what we talk about is better terms for farmer forward contracts. So, we recommend our customers both contract signature dates (indicating the best price periods) and, consequently, the optimal delivery time.
AgriPriceMentor helps farmers better identify the most profitable crops, i.e. to decide on the cropping pattern for the 2021 harvest. Yes, every thought now is about wheat, corn, sunflower etc. But one of my customers, a farmer, substantially expanded his barley plantings two years ago due to high current prices. The most remarkable thing is that the same decision was made in Canada, Russia, the U.S. – and barley prices collapsed a year ago. Thus, it’s not all that simple with the markets of wheat, corn, and sunflower in 2021.
By the way, pulse prices (peas, kidney beans) are now fantastic – should growers expand their acreage when the main consumer is imposing high import tariffs and seeking food self-sufficiency? Are there alternative markets? Our AgriPriceMentor is what addresses these problems. All the above + online consulting before striking the deal allowed our subscribers to raise profitability as early as 2020.
UkrAgroConsult’s forecast presented at a free webinar about accelerated 2020/21 wheat price growth has entirely come true. So, market participants who followed this recommendation managed to sell their grain much more expensively by signing contracts for other prices and other delivery dates and by executing these contracts.
Another forecast by UkrAgroConsult – made in January 2020 about restoring the Agrarian Policy Ministry – has come true in every detail as well. We wish the Agrarian Policy and Food Ministry of Ukraine to work more comprehensively. Its main goals are to be expanding export markets and increasing farmer profits.
Unfortunately, my forecast about land market regulation has also come true. Yes, the land bill was passed, but still requires major improvements – the law regulates mostly the functions and tasks of government bodies, and to a far less extent sets the functioning conditions of the land market itself.
In 2020, Ukraine reinforced its position in international agricultural markets. The adaptation to new realities is in progress – Ukraine increasingly exploits its raw materials export potential. However, this potential (specifically regarding raw materials) is already close to exhaustion. I am sure that a new model of the Ukrainian agriculture’s participation in international division of labor will be needed in 2-4 years.
Happy New Year 2021 to all!
I wish everyone good health, business success, new projects, new efficiency!!!
Director General UkrAgroConsult
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