Prospects for the new grain season: cost is rising, profits are falling
February has already become a traditional month for the active conclusion of forward contracts for Ukrainian grain and new crop oilseeds. Current prices for new crop grain in 2022 are on average $50 higher than in February last year.
Price formation is influenced by the following factors:
Political. Uncertainty around Ukraine led to a sharp rise in prices in January. However, the role of this factor should not be overestimated. Shipment of grain to ships is still unhindered, there are no difficulties with cash flows and payment for goods.
weather. There is no official data on the state of crops yet. However, autumn and winter conditions were somewhat worse than last year.
The rise in the cost of material and technical resources. Autumn-winter 2021 was marked by a sharp increase in fertilizer prices. Domestic prices for nitrogen fertilizers have doubled compared to the same period last year, which stimulated an increase in imports. The share of mineral fertilizers in the structure of growing costs may increase up to 20-25%.
Competition. Competition is expected to increase in the new season both in the wheat market and in the corn market.
Stock pressure. Currently, the stocks of wheat and corn in Ukraine are record for at least 5 years.