Contents. Registration for the XIII International Conference Black Sea Grain-2016 continues

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1 # 49 (154) ember 14, 2015 Contents 1. Prices and trends 2 2. Topic of the week 5 Ambitious plans of Ukraine are under threat 5 Argentina will supply 30 MMT of soybean to the world market? 6 3. Weather. Field works 8 4. Foreign economic activity 9 Ukraine. Exports of soybean and its products, September-November 2015/ Company news Facts and rumours 11 Registration for the XIII International Conference Black Sea Grain-2016 continues Get involved and benefit from qualification and networking. Take advantage of Early Bird registration till ember 31, 2015! Details: 1

2 1. PRICES AND TRENDS Commodity Origin Basis ember 14 ember 04 Sunseed Ukraine/Romania/Bulgaria Black Sea ports Soybean Rapeseed Sunflower oil Soybean oil Palm oil Sunmeal Ukraine 450 seller 430 buyer 445 seller 430 buyer Jan/Mar 360 seller 350 buyer Jan 455 seller 430 buyer 365 seller 350 buyer /Jan Argentina Up-river Ukraine Europe Moselle Ukraine Illichivsk 795 buyer Jan 805 seller 790 buyer Feb 810 seller 800 buyer 805 seller 790 buyer Jan Ukraine Odesa Russia 790 seller Europe Six ports 860 seller 857 buyer Jan/Mar 860 seller 855 buyer Jan/Mar Argentina Jan Jan Malaysia Ukraine 200 seller 190 buyer 200 seller 190 buyer 215 DAF Belorussia 215 DAF Belorussia Russia Azov Soybean meal Argentina Rapeseed meal Ukraine Black Sea Oilseed complex exports through Ukrainian seaports, KMT Sunflower oil Sunflower meal Sunseed Rapeseed Soybean ember 1-7, November October Moldova: Oilseed complex exports through seaports, KMT Sunflower oil Sunseed Sunflower meal Rapeseed ember 1-7, November October Russia: Oilseed complex exports through seaports, KMT Sunflower oil Sunseed Sunflower meal Rapeseed Soybean ember 1-7, November October

3 Oilseed market trends Soybean In the reporting week, soybean quotations on CBOT decreased by 2.14%, mainly influenced by declining market of crude oil. Besides, last week USDA Attache in Argentina increased the forecast of Argentine soybean exports to 11 MMT in the 2015/16 season. Reduction of quotations was limited by high weekly volume of soybean sales from the United States. During the period from November 26 till ember 03, KMT of soybean were contracted, which exceeded the market expectations. The bulk of contracted soybean will be shipped to China. Rapeseed By the end of trading session on Thursday rapeseed futures had dropped by EUR to EUR /MT. Considering that, weekly reduction amounted to 2.67%. Recent reduction in the adjacent markets of crude oil, soybean and palm oil had a negative impact on rapeseed market. In addition, Statistical Office of Canada raised the estimate of canola production in the country to MMT (16.41 MMT last year). Strengthening of EUR exchange rate put additional pressure on the quotations. Domestic oilseed markets Ukraine. Currency exchange rate remained the main factor determining price behavior in the Ukrainian market of oilseeds. Last week, UAH exchange rate was quite volatile it fell sharply, then recovered. Not all processers where in time to change prices following the currency fluctuations (generally speaking, not all of them tried). But, in general, we can say that downward trend in prices for sunflower seed was preserved in the market last week. Only on Friday evening some companies began raising their purchase prices (mainly by UAH 100/MT to UAH /MT EXW) against the backdrop of declining UAH exchange rate in the interbank trading. Ukraine. USD / UAH exchange rate in interbank trading 3

4 Interestingly, that actually UAH exchange rate has already returned to the level of early ember (almost 24 UAH per 1 USD), and the prices for sunflower seed exceeded UAH 10000/MT at that time. However, now processers do not hurry to increase prices to that rate. Some of them have already provided themselves with raw materials for the holiday season and, therefore, temporarily suspended purchasing. Others expect excessive supply of raw materials in the market due to forthcoming changes in VAT refund policy in the new tax code. Thus, we can conclude that seasonal rush for raw materials in the market of sunflower seed has come to an end. The next surge of trading activity in the market can be expected beginning from mid-january. The narrowing of price spread between the domestic prices for sunflower seed and soybean was another curious fact in Ukrainian market of oilseeds. If a month ago, prices for sunflower seed were UAH 1000/MT higher than those for soybean, now the difference makes UAH /MT. Currently soybean is of high demand both in export and domestic markets, which is confirmed by November export figures. Bulgaria. Despite further decline of sunflower export prices the domestic prices of this crop in Bulgaria have strengthened. At the same time market operators have reported about trade activation in the domestic market despite the proximity of the New Year holidays and a seasonal lull. It's not improbable that prices are strengthening due to traders' high purchasing activity. According to preliminary data 226 KMT were exported from Bulgaria from September 01 to ember 04, including 46 KMT last week. 384 KMT had been exported during the same period last season. Russia. Rapid price appreciation continues in domestic sunflower market. Russian processers for the most part haven't managed to buy sufficient volumes of seed to meet the requirements for New Year holidays period, so there is still a good demand in Russian sunflower market. Even more important factor of domestic prices supporting for oilseeds is rapid decline in the ruble connected with crude oil depreciation. Under such conditions farmers greatly increase selling prices or stop selling to exchange stabilization. Vegoil market trends Crude oil In the reporting week (ember 03-10) WTI quotations on NYMEX kept falling and lost 10.52%. Summarizing the results of Thursday trading session, futures amounted to USD 36.76/barrel. The results of OPEC meeting, held on Friday, ember 04, became the main factor of pressure last week. Despite low prices and surplus of raw materials in the market, the organization did not take a decision to change crude oil production quotas amounting to 30 million barrels per day. Moreover, OPEC decided to leave the level 4

5 of actual production, which exceeded the quota by 1.5 million barrels. Besides, on Thursday, OPEC reported that last month the countries, included into the organization, increased crude oil extraction by thousand barrels per day to million barrels per day, which was the maximum level since April Further reduction of quotations was limited by information from the US Department of Energy. Within the week, ended on ember 04, commercial crude oil reserves in the country decreased by 3.6 million barrels to million barrels, while extraction declined by 38 thousand barrels per day to million barrels in the USA. Palm oil Last week prices for palm oil did not change and remained at the level of previous Thursday USD 525/MT. On Monday, prices for Malaysian palm oil grew supported by the adjacent market of soybean and expected intensification of the climate phenomenon El Nino in ember this year. However, in the middle of the week prices for Malaysian palm oil began to sink, following the downward trend in the crude oil market, as well as reduction in the soybean market. Besides, publication of updated information on stocks of palm oil in Malaysia (+2.57% compared to the previous month) and decline in exports of palm oil in November (-12.43% during the month) offset the increase in prices, indicated at the beginning of the week. 2. TOPIC OF THE WEEK Ambitious plans of Ukraine are under threat In 2015 planted area of soybean was 27 times as much as in 2001 in Ukraine! Only soybean can boast of such staggering results in Ukrainian agricultural market. And there is more to come. According to forecasts of various ministries and core organizations, soybean planted area was planned to be expanded to 3 Ml ha by 2020 (today it is more than 2 Ml ha), and production to 6 MMT (4 MMT). And these plans seemed to be very realistic. Indeed, in Ukraine there are all conditions for soybean cultivation: humid weather during planting, dry weather at the beginning of flowering, favorable conditions during formation and ripening of beans, enough warmth and sunlight, dry weather during harvesting. 5

6 Moreover, in recent years the changes in climatic conditions have created favorable conditions for expansion of planted area of this crop even in non-traditional area of its cultivation - Polesye. As a result, the annual increase in soybean area amounts to 20-30% in Ukraine. However, these ambitious plans have turned under threat. But it is not the weather conditions (as in many countries) which are the main threat, the threat comes... from the president of Argentina. Newly elected president intends to change export duties on soybean and derived products. As UkrAgroConsult has already noted, this country has huge stocks of soybean, which can sooner or later flow into the market. Moreover, soybean still remains the most marginal crop in Argentina, and no doubt, further expansion of its acreage, and as a consequence, increase in supply of not only cheap soybean and soybean oil, but also soybean meal can be expected. And if this scenario for Argentina comes true, Ukraine, which only starts to strengthen in markets of soybean and derived products, is likely to face strong competition, and perhaps even lose some market outlets. And then further expansion of soybean area in Ukraine can bring not profit as it is observed now, but continuous losses. Nevertheless, UkrAgroConsult believes that Ukraine can not only increase supply of this crop to the world market, but also get more attractive prices. Moreover, Ukraine may become the world s largest exporter of soybean. This is quite realistic, if Ukraine fully refuses cultivation of GM-soybean and switches to growing of "clean" soybean. And then not Ukraine will have to fight for new market outlets, but consumers of non-gm soybean will "line up" for such in-demand product... Julia Garkavenko Leading expert of oilseed and vegoil market UkrAgroConsult Part 1. Soybean Argentina will supply 30 MMT of soybean to the world market? President election in Argentina has become one of the most discussed events of the agricultural market at the end of Mauricio Macri, a supporter of an open market economy, became the winner of the election. Among the main election promises of Macri, relating to agriculture, the following should be noted: Abolition of export quotas and licenses for agricultural products, first of all, this applies to corn, wheat and dairy products; Deregulation of the domestic market (abolition of base and maximum prices); Gradual -5% per year reduction of export duties on soybean and its derived products; Zeroing of export duties on other agricultural products; Rationalization of the tax system in general, including possible revision of VAT. Argentina: Current duties on exports of oilseed complex products Comodities Current level of export duty Soybean 35% Soybean oil 32% Soybean meal 32% Sunflower seed 32% Sunflower oil 30% Sunflower meal 30% Besides, removal of currency restrictions is an important proposal as well. Currently, severe limitation on acquisition of foreign currency (only people, leaving for a trip abroad have the right to buy currency, but they also have to obtain permission from tax authorities) is in force in the country, which resulted in formation and functioning of the black currency market. Certainly, there is a possibility that the promises will remain just promises Ukrainians know this like no one else. Nevertheless, UkrAgroConsult believes that it would be appropriate to analyze the possible consequences of such policy for the world market of soybean, in case these changes are introduced. What can be expected in season 2015/16? Huge farmers stocks of soybean are typical for Argentine soybean market. Ending stocks of soybean have been growing for five consecutive seasons; in the 2014/15 season they reached 31 MMT, or 52% from the overall production. For comparison, in Brazil, ending stocks amount to 18 MMT (20% from production), and in the USA only 5 MMT (5%). 6

7 The reasons for this situation are quite clear firstly, low world prices for soybean in conjunction with 35% duty on exports, and, secondly, - the need to surrender currency earnings (as a result, farmers prefer to keep their savings in commodity, i.e. in soybean). Consequently, if pre-election promises of Macri come into effect, in the 2015/16 season Argentina will be able to supply additional 30 MMT of soybean to the world market. Besides, similar volumes may come to the market in the form of derived products meal and oil. Generally, Argentina has enough capacity to process all the crop, but there are two questions: Will processors be able to compete with exporters by price for raw materials in the domestic market? It is doubtful, especially if exporters pay farmers in foreign currency. Will the world market be ready to consume such volume of soybean meal and soyoil (20 MMT/5-6 MMT)? It is unlikely, given the intention of importers to upload their own processing facilities. Therefore, UkrAgroConsult believes that the bulk of soybean will enter the market in the form of raw materials. Moreover, these raw materials will be supplied to the market at low prices, because Argentine exporters will be able to compete on prices owing to currency devaluation. One more consequence (or rather, a series of consequences) of the foreign exchange market deregulation in Argentina should be mentioned: abolition of restrictions on purchase of foreign currency will lead to weakening of peso. This will trigger an excessive demand for foreign currency by the population. As a result, the deficit of foreign currency (it was under the former president) may be observed in the country. Intensification of exports is required to replenish reserves of foreign currency. Soybean is Argentina's main export commodity. In other words, one more factor speaks in favor of export shipments increase in the coming months. In such conditions, other players in the soybean market are not likely to stand on the sidelines. They will defend their positions somehow. It is possible that within a few months we will hear a number of news about reduction of export duties by exporters or increasing import duties by importers of soybean. Such plans are being already discussed in Brazil. Consequently, in any case, it is not worth waiting for high export prices for soybean till the end of 2015/16. Prospects for season 2016/17 Taking into account the difficult economic situation in the country, farmers will sow agri crops, which are cheaper. These are, primarily, GM crops soybean and corn. In our opinion, soybean is unlikely to lose its positions in Argentine market, especially that in 2017 the duty will decrease by another 5%. As before, the lion's share of Argentine soybean will be genetically modified (simply because it is cheaper in production), but there is a possibility of some increase in non-gm soybean acreage. However, a significant surge in its production is not expected. At present time the market is closely following the sowing campaign for the 2015/16 crop (will be harvested in spring 2016), because the results of sowing will have an impact on not only soybean market, but also grain markets, especially in regard that weather factor has already made some adjustments to the plans of farmers. Sowing in 2016 will be no less intriguing, because its results may have a significant impact on the redistribution of the world markets of oilseeds and not only soybean one... Anna Dmitrieva Expert of oil crops and vegoils market UkrAgroConsult 7

8 3. WEATHER. FIELD WORKS Ukraine. Warm weather in ember across the territory of Ukraine contributed to improvement of winter rapeseed conditions. Winter rapeseed has emerged on 571 Th ha (88%). It is in good condition on 31.6% of the sprouts (180.3 Th ha). The share of rapeseed in satisfactory condition equals 35.9% (205 Th ha). The share of weak and sparse plants amounts to 32%. Rapeseed was lost on 0.5% of the area. Russia. Abnormally warm weather remained in the country during the first week of ember. Maximum air temperature was positive almost every day.. +3 С, and minimum air temperature ( С and below in some places) was observed mainly during one or two days and on the last day of the decade. The average air temperature of all the days of the decade exceeded the norm by 5-8, in some areas even by 9-11 С. Snow cover has melted almost everywhere under the influence of very warm weather and rainfall, snow has disappeared from the fields in some places. Winter crops weak vegetation was observed during most days of the decade. Their condition is good and satisfactory, moisture supply is sufficient. Due to cold snap plants vegetation was stopped during the last days of the decade. Romania. There is a gradual decrease in air temperature throughout the country. The average air temperature ranged from -1.. to + 8 C. Maximum air temperature increased up to 12 C in most agricultural areas. The minimum temperature reached -7 C in low land regions. Frost and ice crust formation were observed on the fields. Precipitation mainly in the form of rain and wet snow had been observed in some regions. Snow cover was formed only in the northern and central regions of the country in the highlands. Romania. Snow depth 8

9 Rapeseed plants condition was satisfactory and good. Depending on seeding terms, plants are at the stage of 6 to 15 leaves formation. Moldova. Warmer than usual with precipitation deficit weather was observed in the republic during ember The average weekly air temperature reached ºC mainly above norm by 1,7-3,8ºC. The maximum air temperature increased up to +12 ºС. The minimum air temperature dropped up to -6Cº. In general precipitation wasn't observed during the week, precipitation sum didn't exceed 1-3 mm (10-40% of weekly limit). Winter crops remained dormant most of the time, only on some days low winter crops vegetation was observed in daytime. Crop wintering conditions were mostly favorable. Belarus. Agro-meteorological conditions for winter crops remained satisfactorily at the end of the first - the beginning of the second decade of ember. The snow cover on fields was absent. The soil remained largely melted. A slight freezing of the top soil layer is observed only at night under the influence of freezing temperature.. Plants lose their hardening under the influence of warm weather. In the absence of snow cover The threat for winter crops may be represented only by intense cold snap. 4. FOREIGN ECONOMIC ACTIVITY Ukraine. Exports of soybean and its products, September-November 2015/16 Despite the fact that in the new season soybean harvest in Ukraine didn't exceed the results of 2014/15 MY, exports of soybean and processed products show significant increase in early months of 2015/16 MY. It's due to good demand for Ukrainian soybean products from importers and exporters along with the exporters' desire to sell volumes of soybean / oil and meal as soon as possible. Soybean. Within three months of season 2015/16 soybean exports from Ukraine reached record 689 KMT; shipments reached 445 KMT in November. For comparison, Ukraine exported 663 KMT of soybean in September-November season 2014/15. Turkey continues to strengthen its position among Ukrainian soybean importers, its market share reaches 53%. Moreover Turkish demand is a key driver of exports increase. The main reason is that Turkish poultry and eggs market is characterized by stable increase in demand (both domestic and exports) during recent years. This fact in turn acts as an incentive to build additional soybean processing capacities and, accordingly, its imports increase. 9

10 At the same time, the EU countries have significantly reduced soybean purchases from Ukraine: exports to the EU reached 268 KMT last year, or 41% of the total volume, and only 143 KMT (21%) in 2015/16 MY. Also other importers Egypt and Israel reduced their purchases of soybean from Ukraine. Soybean meal. Ukraine has increased soybean meal exports more than twice within three months of the season. 28 KMT of soybean meal went abroad in September-November of 2014/15 MY abroad took, but exports reached 64 KMT during the same period of season 2015/16 being also a record high. In particular, exports amounted to 32 KMT in November. Belarus is the main importer of soybean meal from Ukraine. 43 KMT or 67% of all shipments went there during September-November. In addition, it is worth noting the appearance of the list of Turkish meal importers (9% or 5.5 KMT). Soybean oil. There was also a record in soybean oil exports from Ukraine: 38 KMT were shipped from the beginning of the season (23 KMT during the same period last year) exports reached 14 KMT in November. Ukrainian soybean oil market outlets are not very varied, but the important detail is presence of such oil giants as China and India. For example the bulk of soybean oil from Ukraine went to the EU (83%) and India (9%) last year, China (58%) and the EU (39%) remained major importers during September-November of season 2015/16. 10

11 Ukraine: Soybean exports, KMT 2015/ /15 September October November ember January February March April May June July August 49.1 Ukraine: Soyoil exports, KMT 2015/ /15 September October November ember 13.3 January 4.9 February 9.4 March 22.1 April 15.8 May 10.3 June 11.3 July 14.1 August 12.0 Ukraine: Soymeal exports, KMT 2015/ /15 September October November ember 19.6 January 7.5 February 14.4 March 30.5 April 16.4 May 8.8 June 31.4 July 38.7 August COMPANY NEWS Russia. The largest in Siberia Oil Extraction Plant AgroSib-Razdolye LLC would open a new line producing lecithin for food industry in The new line will be opened in February 2016, at the same time the company will reach the production capacity 1.8 MT of phosphatide concentrate per day based on sunflower and 3.6 MT - based on rapeseed. Lecithin is used in food industry for chocolate production and products with chocolate glaze, margarine, spreads, bakery and confectionery products, as well as baby food. According to the company Altai lecithin is planned to be supplied to the European part of Russia as well as to China. Russia. "Kazan oil extraction plant" which belongs to GC "Nafis" intends to put into operation sunflower husk processing line to meet its own needs for electricity and heating. According to the director of the company, power center putting into operation will significantly reduce the cost of gas and electricity because power center will work on its own raw materials. The plant will produce 100 MT of steam in 2 boilers for production of heat for heating. The equipment has been installed, adjustment is carried out automatically at the moment. Russia. Sunflower seeds processing plant LLC "Chernozemie" in the Lipetsk region will be ready for launch in early 2016, the plant will be released at full capacity according to the season - in September The plant's capacity is 2 KMT of seed processing per day (about 300 KMT of oil per year). The plant will work without waste: granulated husk from seed will be used as alternative fuel. 6. FACTS AND RUMOURS Ukraine significantly increased high oleic sunflower oil exports in November Season 2015/16 began with extremely low figures of high oleic sunflower exports- only 1.0 KMT were shipped in September and October. However, in November deliveries of high oleic sunflower oil to the world market have significantly increased and reached 7.2 KMT. The lion's share of shipments - over 80% - fell at the EU countries, primarily Spain. Moreover, exports to China, India and the UAE are carried out. It is worth noting that high oleic sunflower oil shipment decreased compared to the same period of season 2014/15: a little less than 15 KMT had been exported during September-November

12 Ukraine. Exports of sunflower oil In November Ukraine exported 373 KMT of sunflower oil that was slightly lower than exports in November 2014 (378 MT). During three months of the season Ukraine exported 950 KMT of sunflower oil. This is 100 KMT less than during the same time last year. India (33%), EU (23%) and China (16%) were the major importers in September-November. Romania has imported 0.5 MMT of soybean meal in season 2014/15 Summarizing the results of season 2014/15 Romania has imported 496 KMT of soybean meal, which is 3% higher than imports figures in season 2013/14 and only 1 KMT less than the record season 2011/12. Soybean meal imports increase is due to both growing demand from the animal production and price conjuncture peculiarities of the season 2014/15: in view of the low prices of soybean products finished output imports are more profitable than raw materials for its production at enterprises of Romania. Kazakhstan. Sunflower oil exports are lowest since season 2008/09 Season 2015/16 began with a significant sunflower oil exports reduction in Kazakhstan. So, sunflower oil exports reached only 3 KMT within two months of 2015/16 MY (September-October). This is 33% less than in September-October of season 2014/15 being the minimum exports volume for the specified period since season 2008/09. It should be noted that sunflower oil exports decline from Kazakhstan is observed during two seasons. As a reminder, sunflower yield reduction and seed importer's from Russia high activity resulted in sunflower and sunflower oil deficit in Kazakhstan, which has led to significant increase in retail prices for oil in some Kazakhstan regions. Russia. Rapeseed oil exports continues to decline Russia has exported 23.3 KMT of rapeseed oil in October against 28.7 KMT in September, and 39.7 KMT in October Within 4 months of 2015/16 rapeseed season (July-October) exports reached 87,3 KMT, that is almost two times less than during the same period in 2014/15 MY (159.7 KMT). In addition, according to preliminary data, rapeseed oil exports continued to decline and amounted to about 20 KMT in November. Belarus. Almost half of rapeseed crop has already been crushed According to official data, vegetable oils production (mainly rapeseed) reached 66.4 KMT in Belarus since the beginning of the season (July-October). Accordingly, seed processing can be estimated at level of

13 KMT. It represents a little less half of harvested rapeseed crop in the country. Most likely oil production at the Belarusian enterprises will sharply decline at the end of the season. ember WASDE USDA report In the ember WASDE USDA report the estimate of oilseeds production in the world in season 2015/16 was cut by 2 MMT to 529 MMT. Soybean. The forecast of world soybean crop in the 2015/16 was cut by 0.9 MMT to MMT mainly due to reduced estimate for India (-1.5 MMT compared to November forecast). It should be noted, that increase of the forecast for Ukraine, Russia and Canada somewhat compensated for the reduction in India. Rapeseed. The estimate of rapeseed production was raised by 0.5 MMT to 67.5 MMT owing to Canada (+1.7 MMT), offsetting some reduction in India. Palm oil. The estimate of palm oil production in the 2015/16 season was cut for Malaysia by 0.5 MMT, and Indonesia by 2 MMT due to dry weather provoked by El Nino. The estimate of world oilseed trade was raised by 0.7 MMT to MMT due to increase in the forecast of soybean exports from Argentina, Serbia and Ukraine, and correspondingly imports to Pakistan, Taiwan and Iran. USDA. Estimate of oilseeds production in CIS countries, KMT Sunflower seed Soybean Rapeseed 2015/16, ember 2015/16, November 2015/16, ember 2015/16, November 2015/16, ember 2015/16, November Ukraine Russia Kazakhstan Moldova Turkey Belarus Black Sea Vegoils & CIS Team: Julia Garkavenko & Anna Dmitrieva Tel.: multichannel agro@ukragroconsult.org Follow us: 13