Grain storage capacity: did grain appear superfluous?

2011 crop has once again demonstrated the problems of grain industry of Ukraine. Another bumper crop, 57 million tons, which was harvested in Ukraine in 2011, once again clearly demonstrated the failure of the park of grain storages. Despite the vigorous actions of large agribusiness enterprises aimed at reconstruction and construction of new storages, lack of capacities for storage and processing of grain products, poor infrastructure of export and in general still have place. In addition, the situation is complicated by the actions of state to challenge exportation, resulting in the collapse of the already established schemes.

Lots of grain, not enough place to keep it.

According to official figures by Serhiy Kvasha, the Director of the Department of economic development of the agricultural market of Ukrainian Ministry of agrarian policy, the total capacity of grain warehouses in Ukraine is 31.7 million tons, of which 2.3 million tons are of port grain terminals. The bureaucracy in export grain operations and high tariffs significantly affects the export process. Thus, simple arithmetic shows real problems with the storage of grain. This, in turn, has also become a deterrent to Ukraine towards the establishment of a joint grain pool of three countries, Russia, Ukraine and Kazakhstan. It was discussed 5 December 2011 as part of the link-up between Moscow, Kiev and Astana.

Nevertheless, despite the risks, the agricultural sector continues to demonstrate its investment appeal, both in terms of profitability and share of profitable enterprises - more than 70%.

It is worth noting that in 2011, the part of agroholdings greatly increased the land bank, including through asset consolidation and consolidation of enterprises. According to information supplied by KSG Agro, through the acquisition of 15 new businesses this year, the holding company had been able to increase the land bank with 25.5 thousand hectares to 59, 2 thousand hectares, and till 2016 is planning the further expansion of land up to 200 thousand hectares.

Such growth required new elevator capacity. As a result, in the year of 2011 more than 10 large grain storages were was introduced into operation. In 2011 company Myronivsky hliboproduct has increased the total amount of storage of cereals and oil-bearing crops at 70%, including through the introduction of two grain elevators in Vinnytsia Oblast, and a grain elevator in Cherkasy oblast, into operation in September 2011, with a total capacity of 274 thousand tons of cereals. "Nibulon" LLC launched the elevator complex in Zhytomyr Oblast with capacity of 77 thousand tons, also the Terminal elevator in the Kiev region with turnover up to 250 thousand tons of grain a year was put into operation.

Stable demand for elevators.

Expert opinion confirms the permanent demand for grain storages. "Together with the growth of the agroholding structure, increasing of their land assets the investments into storage systems grow" says analyst of company «AAA» Maria Kolesnik. According to her data, the timing of the construction of storages decreases. The majority of grain storages started its operation in 2011 have been fully implemented - from design to launch into operation within one year.

It is worth noting that the construction of new grain storages is made mostly by large companies, at the same time small farmers do not have the capacity for storage and processing of grain, or it is extremely expensive for them. Modern grain storages may help in resolving this problem.

As President of the Vinnytsia Oblast Mykola Dzhyha says, 10 new grain storage complexes built in 2011 in Vinnytsia oblast (today there are 43 of them, most of them obsolete) will reduce storage costs by 30%.

Investments go mainly in construction of new grain storages because upgrading the outdated facilities is not good for financial gain. It most often refers to modern storage complexes, which include ventilated metal silos for storing grain with grain transportation system (conveyors, bucket conveyors), grain drying and cleaning systems, as well as with infrastructure for monitoring state of grain.

Grain storages are equipped with technological equipment of domestic or foreign manufacturers (United States, Denmark, Spain, Italy, Poland, Argentina). Design, construction, as well as delivery and installation of equipment is made by domestic design and construction companies.

Misty year…

Clearly predict the activity of the construction of storages in 2012 is impossible because of the project of Bill on land market, which is under consideration in Parliament, it aims at restricting the amount of land to be used. Under the Bill, one person is not entitled to acquire more than 100 hectares, as well as hire more than 6 thousand hectares in one area and more than 5% of land with agricultural destination in one area. Also the establishment of State land bank is supposed to be done, which will become the actual land monopolist. If the Bill will be in its current form, it puts additional challenges to large agroholding companies which asset thousands of hectares, to find ways to preserve their land banks without violating the law.

However, regardless of the forthcoming Bill, agrarian companies talk about their plans for development. Thus, agroholding Mriya is going to increase its park of grain storages through the construction of two new complexes with a capacity of 100 thousand tons each. Svarog West Group "is planning to build two new storages with a capacity of 50 thousand tons each for autumn harvest 2012. The construction of two grain storages with a capacity of 60 and 70 thousand tons is scheduled to be held in Kirovohrad Oblast by the companies "Hermes-trading" and "UkrAgroKom". Another storage complex up to 213 thousand tons is to be entered into operation by "Loture-agro". Ukrlandfarming said about his plans for the introduction of two storages in Kherson and Ternopil oblasts, and the current capacity will be increased from 1 million tons to 1.8 million tons of grain storage. Kernel Group also has significant plans to increase its grain storages park on 2\3 over the next two years by the construction of 6 storages with a total capacity of 400 thousand tons of grain.

However, according to the experts, farmers will not hurry with capital investment, at least until the regulatory framework is not clearly described and it will not become clear how to proceed. Thus, at the beginning of the Act, most likely there will be no much activity, given the same weak base lending and echoes of the financial crisis in Eurozone.

In conclusion, it is worth to stress that an urgent need for technological modernization processes, storage and processing of grain exists. And it is desirable that the State policy was directed at supporting initiatives and investment in upgrading of technological capacity of the park of grain storage complexes.

ugmk.info