This year, farmers have already harvested 35 million tons of grains and oilseeds, and according to the UGA, about 45 million tons of late crops are on the way. Exports by sea are not fully operational, ports on the Danube are regularly shelled by Russians, and the logistics of land exports are expensive and imperfect. Elevatorist.com asked companies in different regions what is happening to the demand for elevator services and their prices in such conditions.
Demand for storage services has grown, but not everywhere
Ukraine started the season with lower grain stocks compared to the previous year. However, a good harvest of early grains and the lack of active exports have already filled some of the granaries. According to Valeriy Reutsoy, NIBULON's elevator operations director, if there is an excess of elevator capacity in Ukraine, the late grain group will eliminate this excess. Due to the difficult situation with export shipments, the demand for storage in granaries has increased.
"Why? Because exports have decreased. The harvest of the early grain group was not as good as we would have liked, but in terms of yield, it was quite high. There is not much exported, so there are a lot of leftovers. In addition, the late grain group is coming in, and we need to store it somewhere. Today, our expectations for the late grain group are also good. Therefore, we predict that the demand for storage will still be quite high," said Valeriy Reutsoy.
Prometey also noted an increase in demand for storage at elevators, explaining that farmers want to wait for better prices.
"The demand for grain storage is high because the cost, especially of grain crops, is low. Not every farmer has the storage capacity to wait for prices to rise and sell their products later, so they use elevators," the company said.
The demand for grain processing has also increased at Prometeys elevators compared to last year.
"The prices for weed killers are high, and not all farmers, especially individual farmers, have the means to sufficiently treat their fields, so, accordingly, the level of weed impurities in such products is high and needs to be adjusted to the baseline," Prometey explained.
However, this is not the case everywhere. According to Dmytro Dobroshtan, Director of NOVAAGRO AIC LLC of NOVAAGRO Group, in Kharkiv region, demand has generally fallen, and it also varies across the region.
"One elevator has demand for services, while others have almost zero. In the Kharkiv region, demand varies greatly depending on how close the elevator is to the front line, as well as the condition of the farms and their land," says Dobroshtan.
How did it affect the cost of elevator services?
High natural gas prices last year led to an increase in the cost of elevator services. This year, gas prices have fallen, but electricity tariffs have increased. There are also other factors that influence price growth. For example, TAS Agro says that electricity and rising wages have become additional factors in the increase in tariffs.
"Depending on the elevator, tariffs differ. But we are trying to do additional work to reduce the cost of services by saving money. We are doing everything possible to increase the capacity of our grain storage facilities through innovations. For example, we are adding new routes to minimize the movement of grain through the elevator, which reduces the amount of energy consumed at the enterprise, and so on," said Hlib Isychko, Director of Elevator and Storage at TAS Agro.
Prometeys Group, whose elevators operate in the southern regions, has not changed its tariffs for grain storage, drying and cleaning since the beginning of the 2022/23 marketing year.
"This is due to the fact that agricultural producers are currently operating in harsh market conditions: low prices for agricultural products and high prices for fertilizers, plant protection products, and fuel, so the Group's management decided not to raise prices for services, thereby increasing interaction with direct producers," the company says.
Currently, the cost of corn drying at Prometeys Group is at the same level as last year - 180 UAH/t. They noted that further tariffs will depend on the market: if prices for gas/fuel increase during the corn harvest period under market conditions, the company will decide to raise prices.
To retain its customers, the group continues to offer special deals.
"We offer our customers free storage of grains and oilseeds for 90 days. It is also possible to revise the market value of the goods, depending on how much the farmer is ready to bring to the elevator and what quality they are," Prometeys said.
Valeriy Reutsoy, a representative of NIBULON, said that the tariffs at elevators differ by region, but at some enterprises the cost of grain drying has even decreased compared to last year.
"We monitor the elevator services market, stay in the market and take into account regional specifics. In general, we manage to keep prices for a range of services at the level of the previous year. We do this by balancing costs. For example, we compensate for the increase in electricity tariffs by reducing the cost of gas. Accordingly, we even changed the tariff for drying downwards," said Valeriy Reutsoy.
As for storage tariffs, NIBULON has not increased them either.
"Given the increased burden on agricultural producers, we consider it inappropriate to raise prices, although we forecast a fairly high demand for elevator services. This demand, driven by limited exports, is not a reason for abuse. On the contrary, we are doing everything we can to help farmers survive in difficult times. To this end, we are keeping prices down, launching new services, taking a flexible approach to tariff setting, and even introducing an individual approach," the CEO said.
This is the current situation in the elevator services market for the companies that shared their information: so far, amidst the instability, tariffs are generally at the level of last year.
Olena Gayduk, Elevatorist.com
