During several recent years, the market segment of milling rye and rye flour in Russia did not demonstrate dynamic development. The high level of competition from Belarus, as well as reduction of the harvested areas of rye to the minimum rates for two recent decades, had a negative impact on the segment.
On the other hand, the market of buckwheat grain demonstrates new records for the second year in a row. In the season-2017/18, the grain planted areas increased by 29% compared with last year, which will lead to a new record in buckwheat production in the current season. Also, the export volumes of buckwheat can increase.
During several recent years, information from the buckwheat sector often became a trigger for news, raising concerns about the sufficient domestic consumption of the grain, which raised interest in the grain cultivation only. Therefore, in 2016/17 MY the planted areas under buckwheat increased to 1.2 mln ha (up 26% compared with 2015/16 MY). Due to increasing of the planted areas, and the growth of the average yield to 1.06 t/ha (0.95 t/ha in 2016), the general harvest of buckwheat increased to the maximum figures for Russia at 1.2 mln tonnes (up 38% compared with 2015/16 MY).
In 2017/18 MY, buckwheat areas grew to 1.7 mln ha, which became the highest rate for 20 recent years. In the current season, APK-Inform Agency forecasts a new record in the production of buckwheat, which will reach 1.7 mln tonnes.
Taking into account the record harvest volumes last year, in 2016/17 MY there was no deficit of buckwheat offers on the domestic market. During the season, the demand of consumers was moderate, which resulted in a gradual decline of prices. In the period from the beginning of July 2016 until the end of May 2017, prices for buckwheat in the European part of the country reduced by nearly 25`000 RUR/t (to 15`000-20`000 RUR/t CPT), and in the Siberian Federal District – down 30`000 RUR/t (to 11`000-16`000 RUR/t CPT). At the same time, due the high demand for buckwheat of Russian origin in several countries (Ukraine, Lithuania, Japan) and rather competitive prices and good quality of the grain, the crop remained rather attractive for production.
In the beginning of 2017/18 MY, there was a seasonal price decline, in terms of coming of new crop grain on the market. Market operators stressed that in July-September period the bid prices in the European part of Russia decreased by nearly 5`000 RUR/t, and reached 11`000-15`000 RUR/t CPT. At the same time, the qualitative characteristics of the grain often met the corresponding State Standard requirements (GOST), and only in individual cases they rouse censure.
In the Siberian District, there was no such active downward trend, and since the beginning of August the purchasing prices reduced by nearly 1000 RUR/t (to 10`000-15`000 RUR/t CPT). However, the trend developed due to the decline in trading and purchasing activities before coming of the new crop grain on the market. According to market operators, to date the Siberian District still continues harvesting the grain, and adverse weather conditions somewhat slow down the harvesting campaign.
Taking into account the carry-over stocks, the total supply will reach 1.96 mln tonnes (up 39% compared with the previous season), which support the bearish trend in the current season. At the same time, if the export volumes continue increasing, it will strengthen the prices. One of the key buyers of Russian buckwheat, Ukraine, has much higher prices for the grain, which give good prospects for increasing of foreign supplies.
During several recent years, the was observed a clear trend for reduction of planted areas under rye in Russia: in 2016, the planted areas declined to a very low rate at 1.3 mln ha (down 2.4% compared with 2015). At the same time, due to the high overwintering conditions of the planted areas with winter rye (almost all rye areas in Russia are represented by winter varieties) and favourable weather conditions in 2016, there was a significant increase in the yield to 2.03 t/ha (up 0.36 t/ha to 2015/16 MY), and despite decreasing of the planted areas of rye, its production volumes increased to 2.5 mln tonnes (up 21.8% to 2015/16 MY).
In 2017, the rye areas dropped to 1.2 mln ha (down 7% compared with 2016), and the harvest volumes are estimated at 2.3 mln tonnes (down 7.9% to 2016/17 MY).
As for development of the price situation on the market of milling rye in 2016/17 MY, it is worth noting that during the season the prices were rather high, due to the limited number of grain offers with high quality indicators. And in June 2017, bid prices for rye in the European part of the country often varied within the range of 7`800-9`000 RUR/t CPT.
The first offers of new crop rye began coming on the market in the European part of Russia in late July 2017 only. Due to the unfavourable weather conditions in the European part, the start of the harvesting campaign was postponed for more than two weeks. However, the delay did not support the prices and make impact on the qualitative indices. In early September, the bid prices reduced by 3000 RUR/t, and varied within the range of 5`000-7`500 RUR/t CPT. In the Siberian District, in August-September period the prices reduced by nearly 1500 RUR/t, and as of September 15 the bid prices varied within the range of 4`800-7`000 RUR/t CPT.
In 2016/17 MY, Russia reduced the production volumes of rye flour to 593.6 thsd tonnes, down 6% compared with the figures of 2015/16 MY.
The exports of rye flour demonstrated rather small volumes, and during several recent seasons the figures were rather stable at the same level - 5 thsd tonnes. In 2016/17 MY, Mongolia, Azerbaijan and Uzbekistan were the main countries-importers of Russian rye flour.
In July-August of the current season, the exports totaled 689 tonnes, up 1.8 times compared with the same period in 2016/17 MY. Increasing of deliveries on foreign markets can contribute to development of an upward trend in the production of rye flour. Thus, in the first month of 2017/18 MY Russia produced 45.7 thsd tonnes of rye flour, against 43 thsd tonnes in the same period of 2015/2016 MY.
In the second half of 2016/17 MY, the market segment of rye flour demonstrated a bearish trend, due to the need of flour millers to boost product sales, and coming of Belarusian product on the market at the lower prices. Some representatives of grain processors reported that due to low selling rates and high competition on the part of Belarus, they produce rye flour in the customized way only. In June 2017, the offer prices reached its minimum figures (10`500-13`000 RUR/t and 10`700-12`500 RUR/t EXW, in the European part and the Siberian District, respectively).
In the season-2017/18, the selling prices started rising in some Federal Districts. The situation developed due to difficulties with purchasing of raw materials for grain processing. According to market participants in the Central District and some oblasts of the Southern District, in the beginning of the current season the imports of Belarusian flour at the prices of 8`500-9`500 RUR/t FCA provided high competition rates for Russian rye flour. In mid-September, selling prices for rye flour in the European part of Russia varied within 10`000-13`000 RUR/t EXW, down 3000-4000 RUR/t compared with the same period in the season-2016/2017.
In early July, in the Ural and Siberian Districts selling prices for rye flour slightly increased, due to problems with purchasing of raw materials. In terms of increasing of the number of grain offers, prices for rye flour started gradually reducing, and in the second ten-day period of September they varied within 10`000-12`500 RUR/t EXW. Market operators estimated the demand level as low, which also brought pressure on the prices.
According to representatives of the milling industry, in the first half of the current season the prices will continue gradually declining, and the demand for finished products and coming of Belarusian rye flour on the market will provide its pressure on the prices.
Vera Sosna, Alina Timofeyeva, APK-Inform Agency