Ag Growth plans 'significant business' in Ukraine

Crop storage group Ag Growth International said it retained plans for a "significant amount of business" in Ukraine, even amid a revival in tensions which have fuelled a rise in world wheat prices.

Canada-based Ag Growth International, which makes grain storage bins and handling equipment, said that its sales outside North America last year rose 29% to a record Can$92m - of which $57m was in the former Soviet Union, and a "significant majority" of that in Ukraine.

And it forecast a further rise in offshore business this year, driven by Ukraine, where the group sells largely to commercial grain handlers and to large-scale farming operations.

"Management expects to transact significant business in Eastern Europe, particularly Ukraine," Ag Growth said.

The group said it had planned for a "continuing significant amount of business in Ukraine, and a substantial amount of this business has been committed as at the date of writing".

Rising tensions

The comments come amid a rise in tensions over Russia's invasion of Crimea, in southern Ukraine, with the G7 group of industrial powers expected on Wednesday to warn that Moscow must "cease all efforts to annex" the region.

The population of Crimea, which is largely ethnically Russian, will this weekend vote, in a controversial poll, on whether to stay in Ukraine or secede and become part of Russia.

On agricultural commodity markets, the Crimea crisis has fuelled a sharp rise in prices of corn and, especially, wheat, of which Ukraine is a major exporter, as is Russia.

Besides concerns, which have yet to be realised, of logistical setbacks to exports, markets are also concerned over farmer hoarding of crops, for fear of further devaluation in Ukraine's hryvnia, besides over the impact of financial disruptions hampering spring sowings.

'Looking up'

In fact, the pace of increase in Ukraine's domestic grain prices has slowed, Agritel reported, flagging ideas that prospects for the hryvnia are "looking up", lessening the incentive for farmers to hoard crops.

"Several international institutions have announced they would support the Ukrainian currency," the analysis group said.

However, Agritel flagged that prospects for spring plantings were being "penalised" nonetheless by financial worries, noting comments on Tuesday from Ukraine agriculture minister Ihor Shvaika that "the major part of the area [in Crimea] will remain unsown".

Big barley area

In fact, Crimea hosts only small levels of spring sowings, accounting for less than 1% of Ukraine corn area, according to broker FCStone.

However, it accounts for 6% of winter wheat area and one-third of winter barley sowings.

At FCStone, Jaime Nolan Miralles said that the "Crimea region does not represent a significant threat to overall Ukraine spring grain plantings in terms of lost acreage.

"Instead, we note the significant portion of winter barley sown in this area and around 6% of winter wheat sown here."

Will farmers, given financial disruptions, "be able to get the required fieldwork completed?" he asked.

Unpaid bills

Ag Growth International acknowledged that the Ukraine crisis "has the potential to delay the shipment of committed orders and may defer new business".

However, it said that "to date there has not been an indication" that its Ukraine customers have revised investment plans.

"Our customers have requested we keep on schedule and accordingly we continue to ship product to Ukraine as we have throughout the first quarter of the year."

The group said that it had Can$17m in unpaid bills from Kazakhstan, Russia and Ukraine, of which 90% was insured by a Canadian trade promotion group, Export Development Canada.

Quest for storage

The comments came as Ag Growth International unveiled a 31% rise to Can$22.6m in profits for 2013, on revenues up 14% rise at Can$358.3m.

The group said it had been able "to take full advantage" of the boost to demand for storage from last year's bumper North American crops.

And demand remains "higher than typical" as North American growers, deterred by lower prices, opt to store crops rather than sell.

"Moderating agricultural commodity prices have incentivised farmers to store more of their 2013 crop on the farm, which is supportive of post-harvest demand for storage, aeration and handling equipment," the company said.

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