Black Sea Grain: Development Drivers and Growth Limits Sergey - - PowerPoint PPT Presentation

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Black Sea Grain: Development Drivers and Growth Limits Sergey - - PowerPoint PPT Presentation

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Black Sea Grain: Development Drivers and Growth Limits Sergey Feofilov UkrAgroConsult 15 Th International Black Sea Grain Conference April 18-19, 2018 iev Disclaimer Past performance is no guarantee of future results. The opinions

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Black Sea Grain: Development Drivers and Growth Limits

Sergey Feofilov

UkrAgroConsult 15Th International Black Sea Grain Conference April 18-19, 2018 – Кiev

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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.

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Black Sea Region in the Global Grain Trade

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Growing Global Grain Exports, MMT

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Black Sea Region: ANSWER to the CHALLENGES OF THE THE PAST 2003-2018

Key Factor of Competitiveness is Low Production Costs

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Wheat: On-farm Production Costs

USD per tonne

  • Ukraine - 133
  • Russia - 121
  • Australia – 216

Source: Australian Export Grains Innovation Center, estimates

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Price Forecasts: growth, decline

EU Ag Outlook 2030 vs.2017 World Bank 2030 vs. 2017 OECD-FAO 2026 vs.2017

Wheat 16.8% 7.0% 23.9% Corn 14.0% 5.5% 26.2% Soy

  • 3.7%

3.6% 14.4%

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Manufactures Exports

(% to total merchandize exports)

2000 2010 2015 2016 2016 $ Bl

EU

78.78 75.56 79.21 80.29 1584.0

USA

81.76 66.16 64.19 63.38 968.0

China

88.22 93.55 94.3 94.74 2004.0

Ukraine

69.4 64.64 50.12 n/a n/a

Poland

80.2 79.1 78.9 80.3 n/a

Source: World Bank

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Business View

  • We lose Natural Capital at very high rates.

Private Profits often promote Public Losses

  • Water, Ozon Layer and other Problems
  • Usage of mineral fertilizers varies from 150 to

about 500 kg per ha

  • Future of the World Food System – More

Food at lower usage of inputs

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Time of Uncertainty: Next 10-15 years ?

Come on!

…we can no longer depend on a societal model that was developed for a world of less than one billion people.

Source: Come On! Report to the Club of Rome, 2018

To the Brink – and Back?

The world, it seems, is becoming less liberal, less international, and less orderly.

Source: To the Brink and Back? Munich Security Report 2018 P.8

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The next 10-15 years: KEY GLOBAL CHALLENGE – COMPETITION Competition in the field of Grain Production/Supply

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Black Sea Region: Expansion of planted area Forecast Ml ha

2010 2015 2017 2025 f

+

Ukraine 26.7 26.7 27.4 27.8 0,4…1.1 Russia 75.2 79.3 80.6 83-90 3…9

Source: UkrAgroConsult estimates

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BRAZIL: CURRENT SCENARIO AND FORECAST FOR PLANTATION AREA (Ml ha)

2015/2016 2024/2025 expectations

Soybean

33.3 52.7

Corn

15.9 23.4

Total

49.2 76.1 + 55%

Source: Alphamar

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Ukraine: Heavy Import of Agrarian Technology

10000 20000 30000 40000 50000 60000 70000 200 000 400 000 600 000 800 000 1 000 000 1 200 000 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 KMT Th.$ Crop Fertilizers Crop protections Seeds Combines Tractors

Source: State Statistic Committee

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Ukraine: Farmers’ Incomes as Key Source of Financing of Grain Production

Source: State Committee on Statistics of Ukraine

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Declining Farm Profitability

7,9 11,3 32,7 19,6 16,9 26,7 32,3 22,3 11,1 29,2 50,9 46 25,3 5 5 5 5 8 8 8 8 8 12 22 25,6 26,6

5 10 15 20 25 30 10 20 30 40 50 60

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

UAH/USD %

Source: State Statistic Committee

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Source of Financing: Foreign Direct Investments

Annual Growth in FDI (share Capital) in Ukraine, Bln. USD

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Ukraine: Bank Sector as a Source of Financing

Total Assets and Loans of Ukrainian Commercial Banks

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Ukraine: Bank Sector as a Source of Financing

National Bank of Ukraine Base Rate

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Competition in the field of Demand/Consumption

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Consumption: Declining Growth Rates

  • f the Global Trade
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Growing Protectionism in spite of General Global Expansion

  • 2017 – 642 Governmental acts from all over

the world that could be considered as acts of protectionism

  • This is slightly less than record number of the

acts in 2015

  • But this is 95% more than in 2010

Source: Global Trade Alert, Swiss

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WORLD population, 1950-2050

Bln people

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World GDP by Region

based on PPP, %

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Competition Factor: New markets

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Sub-Saharan Africa Drives Growth in Global Wheat Imports

Source : USDA

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Middle Class

Developed Countries

  • Total number – less that 1 B

people

Asian Countries: China

  • Middle class doubled since 2000
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Asian Countries: Middle Class

India

Good News: Indian Middle Class amounts to 300 Ml people according to HSBC Another News: India’s missing middle class Multinational businesses relying on Indian consumers face disappointment

Source: Economist January 2018

  • https://www.economist.com/news/leaders/21734454-should-worry-both-government-and-

companies-india-has-hole-where-its-middle-class-should-be

  • https://www.economist.com/news/briefing/21734382-multinational-businesses-relying-indian-

consumers-face-disappointment-indias-missing-middle

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Black Sea Region of the 2003-2018: Key Factor of Competitiveness is Low Production Costs

Black Sea Region: ANSWERS FOR THE CHALLENGES OF THE COMING 10-15 YEARS ?

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Scenario 1

  • Intensive Farming
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Ukraine and Russia. Grain Production

forecast , MMT

2026-2030 2026-2030 2000-2017 2013-2018 50 100 150 200 Russia Ukraine 80-120 MMT 60-65 MMT 95-130 MMT 140-160 MMT

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Yield Growth, forecast

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Why the Prices Go Up: Weather Market ?

Ukraine

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Low Farm Production Costs – FOR HOW LONG?

Farm Production Costs, 2018-2023 Forecast

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Scenario 2

  • The importance of being

supported by Government

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Level of State Support of Ag Producers

% of gross revenue in agriculture (% PSE)

  • 15
  • 10
  • 5

5 10 15 20 25 30 35 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Украина Россия Казахстан ЕС

Source: OECD

ЕU Russia Каzakhstan Ukraine

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Scenario 3

  • Switch to higher margin business

patterns

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Scenario 3

Active usage of instruments allowing farmers to switch from low margins to the best margin practices

  • Switching to more marginal crops
  • Expanding on-farm elevator construction.
  • To go to new business areas, not to increase

production of the traditional goods

  • Organic Food, Niche Crops etc.
  • Better usage of professional independent

market research and analysis

  • Other Instruments
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Recommendations: agri market analysis and forecasts

  • Challenge - Too many facts too

many info now

  • Answer - Real global advantage

now is how effective is the information processing

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THANKS FOR YOUR ATTENTION!

Sergey Feofilov

+380 44 451 46 34 +380 44 220 52 42 agro@ukragroconsult.org