THE WAR WILL CAUSE AGRICULTURAL COMMODITY PRICES TO RISE A NEW BALANCE IS FORMING IN WORLD AGRICULTURAL TRADE
While the Russian-Ukrainian war is on the whole world’s agenda with all its heat, both politically and economically, tsunami waves are expected, which would deeply affect many industries. Russia, which feeds the world especially in the field of agriculture, is also one of the largest supply markets of Taban Gıda in wheat. Hasan Hacıhaliloğlu, the CEO of Taban Gıda, which is the leader of the wheat supply market in Türkiye, and carries out transit trade to almost 20 countries in Asia, Africa, Europe and American markets, evaluated the effects of the Russian-Ukrainian war on the world agricultural economy and prospects. “There will be fluctuations in prices for some time, but at the end of this process, there will be major opportunities for us as some companies will have their activities in Russia,” remarked Hasan Hacıhaliloğlu.
Russia exported about 38 million tons of wheat in 2021, and by the end of June 2022 it is expected to export 31 million tons of wheat. Russia, today, is a giant power that feeds the world with over 75 million tons of wheat production. Likewise, Ukraine is one of the largest producers that comes after Russia with its planting areas. The war of these two huge production bases also causes expectations of a crisis in agricultural commodity, which deeply affects the world. “Ukraine, which exports about 25 million tons of wheat every year, achieved 18 million tons of this figure before the war,” said Hasan Hacihaliloglu, CEO of Taban Gıda, “After the war, Ukraine has more than 6 million tons of wheat that can be exported from the past harvest period. We do not think this export will happen due to many problems that would arise after war, such as ports, and shipping. This causes the volume of trade to shift to other regions and prices to rise. The bigger nuisance is related to the upcoming harvest. There are regions planted in October-November. At the same time, there are areas that have been planted but damaged. Apart from this, Ukraine will have planting areas and land in the next 1 month. Even if the war lasts another month, it will cause the production of agricultural goods, especially wheat, corn, flowers, to decrease and prices to stay high. In addition to this, regional problems such as drought in America are added, and in the next season we may witness prices that the world has never seen,” he said.
Taban Gıda’s wheat import from Russia is 1.170.427 metric tons…
Taban Gıda, whose annual trade volume is more than 1.5 million tons, reached 4.5 billion TL turnover as of the end of 2021. Growing over 50 percent compared to the previous year, the company aims to grow 20 percent tonnage-based and 30 percent turnover based growth in 2022. Taban Gıda, ranked in the top 200 in the rankings of “Türkiye’s 500 Big Companies”, has built its strength in the global market by investing 100 million dollars in a 3-year period in production, logistics and warehousing and is in the goal of increasing and enlarging the supply structure in the global market. “Taban Gıda’s wheat purchase from Russia in 2021 is 1,170.427 metric tons… Due to the Russian-Ukrainian war, many world giant companies withdrew from Russia due to sanctions. This development will allow us to show a stronger presence as Taban Gıda, and will increase our share in the pie,” Hasan Hacihaliloğlu said. “We are expecting our trading volume will rise above our targets in the new season. We have not been able to trade with Ukraine in any way for the last 1.5 months. On the Russian side, loading and trade continues in deeper ports. Of course, there are points that affect such as freight prices, and insurance conditions,” he added.
Investments will continue.
Performing transit trade based on needs and demand, Taban Gıda analyzes various risks and opportunities created by global crises such as global climate change, pandemic, and freight crisis, and makes new investment moves. Taban Gıda which has rolled up its sleeves for ship, silo and flour factory investments over the next 3 years, has allocated a budget of $100 million for these investments. Taban Gıda, which alone realizes 15 percent of the total wheat import capacity in the port of Samsun, where it carries out long-term leases, will make its own silo investment in this city. Since last year, the parent company Vivalon AG has established its own fleet with a total of $25 million in ship investment, and the company is also looking positively at new ship purchases. Hasan Hacihaliloğlu stated that the developing agenda does not affect investments, yet they are pending, “Silo investment in Samsun will come to life this year… In some African countries, our feasibility studies for storage are underway. It is at the beginning of the list of investments that we plan to make in a short time. We are ship operators now, and our investment plans in this area are always ongoing. We’re thinking about expanding our fleet. We have come to the final stage in the investment of the flour factory in Russia. But the war pushed us to wait and see for a while. We have uncertainties about our trade, of course, because our largest supplier was Russia. In the coming days, sanctions against Russia may change our position. Nevertheless, our largest supplier will be Russia and Ukraine. It is very unlikely that the need for wheat in the world will be met from any region other than Russia and the Black Sea basin. The region will maintain this advantage for many years. There may be changes in the way we practice trade in transit trade, but our experience and strength in these markets and the fact that we are in the near geography, will create new opportunities for us in the medium and long term. Global players, especially drawn from Russia, will increase our share of the cake. That is why our investment decision continues. We are aiming for a growth above our planning in 2022,” he informed.
Ukraine’s planting shortage can cause big problems.
“Although the agricultural economy is now focused on war, issues such as climate change are always on the agenda of the industry. It is an issue that occupies the agenda of Türkiye, as well as the whole world. While the production of corn increases in our country, wheat production is falling, and farmers prefer corn due to productivity reasons. Nevertheless, war is now on the country’s hot agenda,” Hacıhaliloğlu said, “The sanctions imposed on Russia right now and the ones that can be imposed in the coming process, will determine our course of action. As a country, our external dependence on products such as wheat, corn, barley, and sunflower is increasing every year. We have to import. Wheat planting areas in Türkiye are decreasing everyday. Corn, flowers, and oilseeds are on the rise. The number of small lands which are not planted is growing more and more. If the war continues, Ukraine’s planting troubles can cause major problems. With Ukraine being out-of-the-game, especially in oilseeds, leaves both Türkiye and the world facing great troubles,” he said.
In wheat flour exports, the balances will also change in the long term.
Türkiye ranks first in the world in wheat flour exports and second in the export of pasta. However, it seems that this sector will also be affected by the Russian-Ukrainian war. Hasan Hacihaliloglu, CEO of Taban Gıda, said, “Türkiye is still a leader in wheat flour exports. One of the largest customers and markets in Russia is Türkiye. If sanctions continue, this will continue to increase. Perhaps Türkiye will become a transit trading point for Russia. Trade will be carried out through Türkiye to many countries. Prices of Russian wheat along with other major producing countries remained below, and this has been an advantage for us. We were able to give more competitive prices. This may continue this way for a while longer. The biggest reason why we are leaders in flour exports is the advantages that Russia provides. Leadership will go away from us when Russia directs its production surplus to exports. Another danger is on the Iraqi side. Türkiye exports flour to Iraq, but we believe that our country will lose this position in a few years. Because Iraq is building its own restructuring. New factories began to open. If it loses this market, Türkiye will be wounded gravely,” he said.
Growth target in feed raw materials market in the coming harvest period…
With production and logistics investments that will support the supply chain in the next 3 years, Taban Gıda aims to increase its market share in the product group that includes a variety of feed raw materials such as soybean and sunflower meal, barley, corn, wheat bran, in addition to wheat. The brand, which set a significant growth target in this field in 2022, updated its growth target to 2023 due to fluctuations in the cash flow and the need for cash capital, especially due to price increases, along with the changing agenda. Hasan Hacıhaliloğlu, “The war and uncertainties in trade have moved prices upward at a very serious rate. Due to uncertainty in markets and insecurity in banking systems, the need for cash capital has increased. This allowed us to remain in protection in different sectors. The market of feed raw materials is a fairly large market. It is also one of the important areas of our growth projection. But we have updated this goal to 2023. Because there is a serious increase in prices in the recent period. We’re in a process with cash capital density. However, we aim to reach significant volumes in the feed raw materials sector in the coming harvest period. ” he said.
WASDE report for the end of March has been announced.
In the March 2021/22 wheat analysis, which includes USDA’s world agricultural supply and demand estimates (WASDE) of the United States Department of Agriculture; the global wheat outlook was explained as rising production, declining trade and consumption, and rising closing stocks. Production increased under Australia, with the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) raising its wheat production forecast by 2.3 million tonnes to a record level of 36.3 million. Wheat trade declined by 3.6 million tons to 203.1 million tons due to decreased export growth rates in Ukraine and Russia. Due to the conflict in the Black Sea region, Ukraine’s wheat exports decreased by 4 million tons to 20 million tons, while the imposition of economic sanctions and the restricted state of cruise of ships due to war, Russia reduced wheat exports by 3 million tons to 32 million tons. But export increases in Australia and India partially offset the decline in global trade. For the 2021/22 season, Australian wheat exports are expected to increase by 2 million tonnes and India’s wheat exports by 1.5 million tonnes. Thus, a total of 27.5 million tonnes of wheat is expected to be exported in Australia and 8.5 million tonnes in India. Due to increased wheat production and competitive prices, Australia is expected to reach a record high with a rapid increase in exports. Many countries such as Türkiye, the EU, Egypt, Afghanistan, Algeria, Kenya, Pakistan, Tanzania and Yemen — reduced their wheat imports due to the Russia-Ukraine war and excessively rising prices. Global closing stocks reached 281.5 million tons, increasing 3.3 million tons due to the increase in stocks of Russia and Ukraine, despite declining stocks in countries such as Türkiye, the EU and India.
Information on World’s Wheat (million tonnes)
Production
|
2011/12 | 2012/13 | 2013/14 | 2014/15 | 2015/16 | 2016/17 | 2017/18 | 2018/19 | 2019/20 | 2020/21 | 2021/22 |
701 | 659 | 718 | 732 | 740 | 757 | 763 | 732 | 762 | 774 | 778 | |
147 | 142 | 157 | 153 | 166 | 177 | 176 | 168 | 184 | 189 | 206 | |
704 | 679 | 698 | 716 | 720 | 736 | 740 | 738 | 743 | 763 | 789 | |
191 | 172 | 192 | 208 | 227 | 248 | 271 | 265 | 278 | 289 | 278 |