In the coming weeks, pressure on purchase prices will persist in the barley market due to expectations of a high harvest; however, as early as the beginning of July, the situation may change owing to limited grain supply and active export demand from China.

This is reported by the analytical department of the First Ukrainian Agricultural Cooperative (FUAC), established within the Ukrainian Agri Council (UAC).

"The market expects a good harvest of the winter group, in particular barley. If weather conditions remain favorable, one can count on high grain test weight and above-average yields. It is precisely this factor that is currently contributing to the decline in purchase prices. At the same time, the FOB market is not showing as sharp a drop as the domestic market," the analysts note.

Current purchase prices at ports remain lower than the levels implied by export quotations.

"The new harvest is currently quoted on FOB at around 220–223 dollars per tonne. After deducting the costs of transshipment and document processing, the price on a CPT-port basis should be around 210–212 dollars per tonne. However, in fact the market today is offering 203–206 dollars, with a discount of 4–6 dollars per tonne already factored into the price. Such distortions usually do not persist for long," the experts explain.

A key factor supporting the market will be the insufficient coverage of export contracts by forward purchases. In July–August, about 70–80% of Ukrainian barley exports will be oriented toward China.

"For July–August, about 600–700 thousand tonnes of Ukrainian barley have already been contracted, but only approximately 200 thousand tonnes are covered by forwards. This means that traders will still need to purchase about half a million tonnes of grain on the spot market. Moreover, most vessels under Chinese contracts will begin entering ports as early as the beginning of July. If farmers hold back sales due to low prices, the market may face a supply shortage. That is precisely why, after a short-term decline, prices have every precondition to return to the level of 210–215 dollars CPT-port as early as the first half of July," the FUAC predicts.

In the experts' opinion, current price levels are unattractive for producers, since due to the rising cost of cultivation even an average yield does not guarantee sufficient profitability. This may restrain active sales of new-harvest grain and support a further recovery in prices.