Grain season of MY 2008/09 was characterized by a record-high grain harvest in Ukraine. Vigorous growth of prices for food products resulted in significant increase of areas sown with agricultural crops, which in combination with favorable weather conditions led to high productivity and, consequently, high gross yield.
According to preliminary estimations of the 2008 harvest, production of grain crops during the year increased by 81.8% and achieved 53.3 mln t and production of oilseeds – by 70.8% and achieved 10.3 mln t.
Grain trade is one of the most promising, high-profit and investments-attractive areas in Ukraine. After the new grain harvest was completed, an important question emerged – how to preserve it so as to avoid losses and unnecessary expenses. All manufacturers and consumers of this type of product – agricultural companies, mediators, integrated industrial plants, plants and exporters – need high-quality storage services.
Large transitory stock of grain from marketing year 2007/2008, high grain harvest in 2008/2009, difficult access to facilities of grain elevators and granaries in Ukraine as well as absence of a possibility to quickly export large amounts of grain resulted in excessive supply in the domestic market and, consequently, low purchase prices for grain. Congestion in the market caused a significant decrese of prices for all types of grain. Simultanesouly, the cost of elevators’ services increased.
There two variants of grain storage: bring it to an elevator or store it in own storage facilities.
As of January 30, 2008, there were 590 certified elevators and, according to the forecasts, after a year this figure already achieved 690.
Nearly every farm that grows grain has its own granaries. Although such granaries are considered to be temporary storage facilities, many farms use them to store their grain for the whole year because then they do not have to pay for storage and there is no risk that high-quality grain will be replaced with lower-quality grain or not supplied in time. They have an opportunity not to declare grain and can sell it at the time, to the customer and at the price chosen by the owner and not advised by the Oblast state administration. One more reason is that many farm managers of old school are more interested in their own profit and not profit of the enterprise and they believe it is safer to store grain themselves.
In view of this, despite a shortage of elevator facilities, many farms will continues to prefer to store grain themselves bringing it to elevators only before sale. The current financial crisis will also not facilitate development of elevators attached directly to the farms.
Season-related fluctuations of grain prices (lower during the harvesting period and higher during the after-harvest period) result in uneven nature of its sales by agricultural manufacturers during a year and hence in a sharp increase of demand for services provided by elevators during the harvesting period. Naturally, the maximum load on elevators is observed in the fall – after harvesting is completed and trade and manufacturing companies buy large amounts of grain.
At present, Ukraine is undergoing the process of consolidation of elevator industry through establishment of big holding companies specializing in grain trade.
In the nearest future, one can expect intensification of integration dynamics in the market of grain storage services, active construction of new elevators of all types both linear and export-oriented …
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