Prosperity in agriculture

| Prospects & Investment |

In Q3 financial year 2013 the situation on agricultural production market improved significantly. The change took place in August 2013 when the Synthetic Agricultural Economy Indicator (pl: SWKR) went up by 0.6 point to 100.8 points and was not only 0.5 point higher than one year before, but also the highest in the past 6 months.

Changes of prices of agricultural products

The figure has gone up both owing to improved “price scissors” indicator, as well as the leveled indicator of expected growth. Price increases of most animal products have offset the consequences of falling cereal and livestock purchasing prices in July and August 2013.

Polish and global harvest

Despite slightly poorer harvest in 2013/14 season, supply will continue to dominate Polish cereal market, owing to lower domestic demand and decreased exportation volume. Export capacity is limited by more plentiful harvest we have seen in virtually all major cereal cultivation areas, in particular in Russia, Ukraine and in the North Sea region. A drop in domestic demand results from a marked reduction of pig population – the trend stemmed from high prices of cereals, which make breeding pigs less profitable.

Prices of cereals dependent on livestock farming

The considerable fall of the prices of cereals and fodder may boost the profitability of breeding granivorous animals, with particular regard to pigs and poultry. This could bring about a reversal of the falling trend and continued growth of poultry production. However, increased market supply of pork is not expected until the second half of 2014.

Forecast for agriculture

Analysts foresee that in the near future the market circumstances for farmers may deteriorate, following a seasonal drops of cereal purchasing prices. This year’s fall of prices of cereals is likely to be deeper than price dips over the past two years.

Articles prepares by Strategy and Development Team of Grupa Azoty “PUŁAWY”, headed by Andrzej Górecki.

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Changes in French agriculture

| Foreign Markets |

French President François Hollande is making over the agricultural policy of the French government and is keen on directing the bulk of subsidies to smaller farms. A number of groups, in particular the big agricultural producers, are opposed to the reform, though.

Big ones can do more

A major part of Common Agricultural Policy resources for the development of French farming has been reaching farms with the largest acreage. The number of farms in France has been falling since the 1950′, from 2.3 million in 1955 to fewer than 500,000 at the beginning of 2013. Among the factors such transformation results from is the growth of the number of big operators in agricultural business. By increasing the acreage of farmland, they have placed France in the top five of biggest producers of cereals in the world.

Changes in French agriculture/fot. photopin.comFertilizers do their job

Declarations concerning a reshuffle of agricultural subsidies policy were met with disapproval of many groups, including the largest French Association of Agricultural Producers – FNSEA. This is far from surprising, seeing that large enterprises constitute the driving force of French farming. The nation’s supremacy in Europe is clear with France having the largest acreage of cultivated land in European Union countries (over 15 million hectares), and the highest consumption of nitrogen fertilizers in EU (at 22%). The industry consumes 2.1 million tonnes of pure nitrogen per year, which makes French farming much more efficient.

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Challenges for African farming

| Foreign Markets |

Excessive importation of food and inadequate use of the potential of domestic agriculture, which employs 70% of the population – those are the main challenges faced by the African farmers.

Food imports

At present the value of food products imported by African countries is 40 billion USD. Experts believe that the money could be used in a much better manner, for example to develop domestic farming. In 2010, 66 million tonnes of cereals were imported to Africa, while local farmers provided 157 million tonnes. Market specialists stress the importance of achieving self-sufficiency of African farming in 10 years’ time. It would enable the African countries suffering from food shortages to import from their neighbors rather than from other continents.

Budding support for farmers

In 2003, 54 members of the African Union signed a declaration in the capital of Mozambique. The declaration concerns investing 10% of national budgets in the development of agriculture and rural areas. Unfortunately, only a few of those nations (Guinea, Senegal, Burkina Faso, Ghana, Niger and Mali) have been lucky to have their governments act on the declaration.

Nigeria may serve as an interesting example. The country has drawn up a system which motivates to invest in agriculture. Central government shares the loan risk with the agricultural producers. The purpose is to encourage the banks to provide advantageous loans serving agricultural progress and development.

Eliminating famine and poverty

Those are the key aims of African countries. Taking into consideration the fact that 70% of the continent population works in agriculture, promoting farming as the driving force of economic growth is a burning necessity. The chief issue is looking for innovative financial tools serving individual farmers as well as attracting investors who might boost the efficiency of African farming.

 

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Fluctuations of cereal prices in Argentina and Australia

| Foreign Markets |

The recent few months have brought a marked drop on the global cereal market. The changes of prices reached 30 % and more. It is now expected that the trend will be reversed with the AA factor influencing the situation in the coming weeks.

News from the Southern Hemisphere

The information which is the most likely to have a strong influence on the global cereal market is coming from South America. Experts and market analysts from Argentina estimate this year’s harvest at 10.5 million tonnes of wheat, while the previous estimates of Argentinian Department of Agriculture were far more optimistic at 12 million tonnes.

Australian authorities have also announced a change of crop forecast, which is to reach 24.5 million tonnes, or 930,000 less than previously expected. Market analysts are confident that the change of initial estimates will make an impact on the global cereal market and pricing. A loss of Australia’s export capacity will raise the global risk factor concerning the prices of cereals.

Consequences for the global market

Current AA factor may prove a key threat to the world, pulling prices up as a result of shift in demand-supply balance. The changes are happening at an even faster pace than comments and emotions about this agricultural sector circle the world.

AA factor repercussions are felt by the exporters from the Middle East. Analysts have drawn attention to a growth of interest in purchases of cereals from the Arabian Peninsula, Asia Minor and Egypt.

American farmers are also involved in the changes of the situation on the global market. American market analysts have observed a sharp growth of domestic wheat exports in 2013 season.

Fluctuations of cereal prices in Argentina and Australia

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2013/2014 Season – A time of stockpiling

| Foreign Markets |

Relying on numerous pieces of news coming from various countries in recent weeks, it has become possible to prepare a forecast regarding the situation on global markets in 2013/2014 season.

Import plans of China

We have learned that People’s Republic of China is going to import as much as 66 million tonnes of soy in 2013/14. Compared to data from previous years, this figure will constitute a record high. However, the quantity of imported soy is lower than USDA estimate. The figure will be higher by 7 million tonnes than in the preceding season, where soy imports reached 59.2 million tonnes.

The situation of wheat market

Following the publication of USDA report, the price of wheat is currently falling. This results from the fact that the 2013/14 wheat harvest forecast is 701.1 million tonnes. Another factor pushing prices downward is the promising crops in Russia, Australia, Canada and the European Union.

USDA forecast is higher than an earlier prognosis by United Nations Food & Agriculture Organization, which mentioned 695 million tonnes as well as a forecast of The International Grains Council, which was announced last Thursday and spoke of 680 million tonnes.

Influence on food safety

Stockpiling of agricultural produce is absolutely indispensable in the context of safeguarding the food resources for the world population. At the moment, global grains stock would suffice for around 70 days of consumption. Such inventory is an attempt at protecting the global market from fluctuations of demand for grains. Current reserves are fairly low, which will influence the prices of grains on the market, especially combined with optimistic forecast concerning harvest and production.

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