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Wheat and barley prices take a tumble

July 22, 2009

Last week the price of grain on Ukraine’s markets fell 10-15%. Buy prices for barley fell US $12.80 to US $86.90 a tonne, while feed wheat slipped US $0.90 to US $100.00/t on EXW terms.

Analysts explain this fall in prices as due to trends on world grain markets. “This is a seasonal phenomenon. We’re expecting a pretty good harvest at the same time as prices are dipping on world markets,” says Yelyzaveta Malyshko, an analyst with UkrAgroConsult. “But this drop in prices is a temporary thing, in my opinion. We’re going to see this decline for a couple of more weeks until the market bottoms out. After that, prices will begin to rise again.”

But no analyst or market player is willing to bet just how low prices will go before they reach bottom.

“A critical factor here will be the behavior of the main grain-importing countries. When it comes to barley, this means the volume purchased by Saudi Arabia, while wheat prices will depend on whether Egypt loosens or maintains its strict requirements for wheat quality,” add specialists from Bunge Ukraine.

“Right now, conditions for harvesting are growing worse in Ukraine. There is rain, which affects the quality of grain as well as the quantity harvested. This means that demand could go up, and with it, so will prices,” notes Andriy Dereval, director of Brigita Agro, a grain trader.

Another significant factor, according to grain traders, is the political situation. “Prices are the same here as in Europe and in Russia. No one tries to undercut them. The question lies elsewhere: a few months back, prices here were really too high, while today they are with the market,” says Roman Shiferson, president of Pole Port.

Still, growers are not happy with the current situation with prices and are not prepared to sell grain for a lower price. “Prices will grow soon anyway,” says Mykola “Niko” Lebed, director of a commercial farm, “and I’m prepared to wait. Lebed says he is not prepared to sell feed wheat for less than US $109.00/t.

The US Department of Agriculture forecasts a world harvest of 656mn t of wheat in this marketing year, which is 26mn t less than last year’s gross crop of 682mn t.

Over the last marketing year (June 2008-June 2009), Ukraine harvested 53mn t of cereals. This year’s crop should be around 10-15% less.

Tags: grain, wheat, barley