Soybean prices see rise as Southern Hemisphere crop expectations decline

Market participants and analysts discussed the prospects for grain and oilseeds

The grain harvest this year will amount to just over 135 million tons. Such a forecast was made during the White Nights 2023 Baltic Grain Assembly, organized by the analytical company ProZerno, by its CEO Vladimir Petrichenko. The event was attended by leaders of the grain sector, heads of companies operating the market for grain and its products, transport companies, organizations responsible for the infrastructure of the industry, as well as leading agricultural producers from various regions of Russia. During the assembly, they discussed the prospects for the new agricultural season.

According to the Center for Grain Quality Assessment, as of June 30, more than 1.5 million tons of grain were harvested, including 306 thousand tons of wheat, the rest fell on barley. At that time, institutions subordinate to Rosselkhoznadzor examined 103,000 tons of grain, said Anita Milekhina, director of the St. Petersburg branch of the Grain Quality Assessment Center. The share of wheat of the 3rd class in the surveyed batches was 49%, the 4th class - 14.3%, the 5th - 37%. Last year, according to the Center, these classes accounted for 27%, 47% and 26% of grain, respectively.

In addition to institutions subordinate to the Rosselkhoznadzor, surveyor companies also monitor the quality of grain. Cargo control by an independent party is often the only way to guarantee product quality, says Evgeny Novikov, CEO of TopFrame. In his speech, he noted that at the end of last year, the share of international survey companies in our market decreased relative to 2021, while Russian ones, on the contrary, increased. TopFrame itself in 2022 increased its share in this segment in Russia to 5.3% from 2.8% in 2021.

It is important to have a clear idea of the quality of the sold grain both for trading it on the domestic market and for international deliveries, and, as Sabina Sodikova, General Director of the Russian division of Agrozan Commodities DMCC, stressed in her report, traders do not need high quality wheat. “We need a medium grain with a protein content of 11.5-12.5%,” she explained, adding that the grain does not have to be from the current year's harvest.

Grain shipments for export last season, according to ProZerno, amounted to 58.2 million tons, and together with processed products, according to the Center for Grain Quality Assessment, the figure reached 72.3 million tons - both of these figures are absolutely record for Russia. In the new season, the export potential will be high due to a good harvest forecast and unprecedentedly high carry-over stocks of grain at the end of the completed season, which ProZerno estimates at almost 27.5 million tons.

Wheat prices in the new season, according to the forecast of Vladimir Petrichenko, will be higher than in 2022/23, but their significant growth is not expected. High carry-over grain balances have formed not only in Russia, but also in Kazakhstan: according to independent expert Evgeny Gan, they amount to at least 2 million tons, and the new crop in the republic, according to various forecasts, is expected to be at the level of 14-16 million tons - more average annual. The cost of grain is also affected by dumping by Ukrainian exporters, whose main task, according to Sodikova, is to sell their products as quickly as possible and get “real money” for it.

     As for oilseeds, since the beginning of July, according to Petrichenko, there has been an increase in prices for soybeans due to lower expectations for the soybean crop in the Southern Hemisphere. At the same time, prices for sunflower oil are falling due to high sunflower stocks in the warehouses of Russian agricultural producers. As of July 1, they amounted to about 1.3 million tons, Petrichenko noted in his report. For comparison, a year earlier, the figure was a record one and amounted to 0.99 million tons. At the same time, the agricultural crop this year is expected to be high, although not a record, but high - 16 million tons. Also, according to the forecast of ProZerno, 4 million tons of rapeseed will be harvested, .5 million tons of soybeans, 1.55 million tons of curly flax.

The profitability of agricultural producers is highly dependent on macroeconomic factors. Gazprombank Vice President Daria Snitko said that in the near future, production costs in the Russian economy will remain elevated due to an increase in the cost of imports, an increase in logistics costs, a continued shortage of personnel and an increase in labor costs, and volatility in exchange rates. At the same time, according to her forecast, under the baseline scenario for the development of the Russian economy, the country's GDP at the end of the current year will be comparable to the high figure of 2021.

On the second day of the Assembly, its participants visited the grain terminal in the port of Vysotsk, which began shipping grain at the end of April this year. According to Petrichenko, it will be more profitable for agricultural producers in a number of regions, including the Volga region, Siberia and partly the Center, to export grain through the new terminal than through ports located in the South.