Black Sea region facing the global market challenges Sergey Feofilov UkrAgroConsult 16 Th International Black Sea Grain Conference April 10-11, 2019 – К yiv
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 .
Black Sea Region: Ambitious Outlook • Low Farm Production Costs - Key Factor of High Competitiveness - FOR HOW LONG? • Production/Supply Slice
Crop Margin Evolution Key Factor of High Competitiveness - Low Farm Production Costs – FOR HOW LONG? 60 30 50,9 25,6 26,6 27,2 50 25 46 40 20 22 32,7 32,3 32 29,2 30 15 % 26,7 25,3 UAH/USD 22,3 19,6 16,9 12 20 8 10 11,3 11,1 5 8 8 8 8 10 5 7,9 5 5 5 0 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Source: State Statistic Committee The 2018 Margins are UkrAgroConsult Estimation
Ukraine: Production Costs Evolution, $/MT 450 400 350 300 250 200 150 100 50 0 2013 2018 2013 2018 2013 2018 wheat corn sunseed Black Sea: Key Factor of High Competitiveness - Low Farm Production Costs – FOR HOW LONG?
Ukraine: Production Costs Evolution UkrAgroConsult calculations on basis of official Statistics of Ukraine
Ukraine: Production Costs Evolution Ukraine: Prices of Plough Land Urea Prices: FOB Black Sea vs CPT Ukraine Derzhgeocadastr of Ukraine, by Jan 1, 2019 Key Factor of High Competitiveness - Low Farm Production Costs – FOR HOW LONG?
Ukraine: Farmers’ Incomes as Key Source of Financing of Grain Production 2018 Source: State Committee on Statistics of Ukraine
Ukraine: Farmers’ Incomes as Key Source of Financing of Grain Production
Ukraine: Macroeconomic Stability for 2016-21
Ukraine: Macroeconomic Stability for 2016-21
Ukraine: Macroeconomic Stability for 2016-21
Ukraine: IMF Group Forecast, 2019-2021 IMF Group Ukraine Forecast , 2019-20 GDP and Wages, Forecast 2019-20 GDP $B Wages $ GDP $B Real GDP,% Inflation FX Rate
Black Sea Region: Ambitious Outlook
Black Sea Region: Ambitious Outlook COFCO Int'l aims to double grain purchases in Black Sea region Source
Black Sea Region: Ambitious Outlook Consumption/ Demand Slice
Global Economic Prospects: Darkening Skies Washington, DC: World Bank. January 2019 Source
US Economy Growth Rates: Economic projections of Federal Reserve Board members and Federal Reserve Bank presidents March 2019 individual assessments of projected appropriate monetary policy Percent (%) 2019 2020 2021 Change in real GDP 2.1 1.9 1.8 Dec. projection 2.3 2.0 1.8 Source
Global Economic Prospects: Darkening Skies Washington, DC: World Bank. January 2019 Global Trade Growth, volumes
Scenario 1 • Political? • Economy? • Political Economy? The importance of being supported by Government
Trade Wars: The Pain and the Gain February 2019 UNCTAD Report Source
Trade Wars: The Pain and the Gain February 2019 UNCTAD report • 82% captured by firms in other countries • Europe to profit the most • But negative global effects likely to dominate • Tit for tat could escalate to global level Source • PARIS, March 25 (Reuters) - Agricultural commodity merchant Louis Dreyfus Company reported higher annual profits as it managed to capitalise on trading opportunities created by a U.S.-Chinese trade dispute, giving a boost to its oilseed business. Source
Political? Economy? Political Economy? Soy Appeared to be the Most Political Commodity US Farmers great Puzzles of 2019 • What to Plant – SOY or CORN? • 2019: Will US Farmers be compensated again for the Trade War? • Will China Buy Rapeseed from Canada?
Political? Economy? Political Economy? European Union answers to the challenges: • Increased State Support to Farming Sector • Creating Germany's and European “national champions” Source • Europe Ready to Help With WTO Reform Source
Scenario 2 Looking for margins: Increase Your Competitiveness thru Specialization?
Ukraine: Tendency to Specialization by Crop
Russia: Tendency to Specialization by Crop
Brazil: Tendency to Specialization by Crop
Greg Stone: GOODBYE, KANSAS WHEAT? IS WHEAT GOING THE WAY OF OAT PRODUCTION IN THE U.S.? CORN IS KING? “I used to hear in the Corn Belt that wheat was a dirty word,” he says. “Now it’s getting that way out here, too .” 3/26/2018 By Tony Dreibus Source
HOW TO FIGHT FAKE NEWS – THE NEXT SCENARIO ?
NEXT SCENARIO: FIGHTING FAKE NEWS? Challenge Reality of Commodity Analysts and Traders is as follows: • You are overwhelmed with information - too many sources, too little analysis, too little time HOW TO THINK OF TOMORROW? • Answer - Real global advantage now - how effectively the information is processed
Rumors about Wheat Export Restrictions and CME Quotations: Russia and Ukraine Rus. export Ukr. milling wheat restrictions export restrictions Rus. export restrictions Rus. export restrictions FAKE NEWS – THE NEXT SCENARIO?
UkrAgroConsult Forecasts Accuracy Ukraine Grain Production, March release, 10Y average – 91%
Ukraine: Corn Production Forecasts UkrAgroConsult Numbers vs USDA Numbers % to final production
NEXT SCENARIO: FIGHTING FAKE NEWS • Does USDA still matter? One-month gridlock allowed agri-tech start- ups to step in and fill the information void • RISKS: • USDA Wasde Repots During the Shutdown were Missed • About 15% Decrease in the USDA2020 Budget Expenditures • New Players in the Global Analytics – Could They Fill the Gap? • Anyway - Stronger Competition is Easily Predicted in the Commodity Analysis Market • Agricultural data providers cash in on US federal shutdown FT, Mar 8, 2019 GREGORY MEYER — NEW YORK EMIKO TERAZONO — LONDON
Контакты THANKS FOR YOUR ATTENTION! Sergey Feofilov call: +38044 364 5585 www.ukragroconsult.com uac2015@ukragroconsuit.org 36
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