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Kernel taps rise in Russian grain exports

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Kernel Holdingsrevealed record grain sales in the 2013-14 financial year, tapping into the rise in Russian grain exports and Ukraine's record high harvest.

Grains sales increased to a record 1.3m tonnes in the October-December quarter, a rise of 22.5% year-on-year, the sunflowers-to-silos company, one of Ukraine's biggest agribusinesses, reported.

The rise reflects earlier bullish projections, with Kernel forecasting exports totalling 4.0–4.5m tonnes in the financial year.

The strong results reflect strong export growth from Ukraine, which reached 22.1m tonnes in the first six months of 2013-14, an increase of some 28%, or 4.83m tonnes, year-on-year, according to Ukraine's farm ministry.

'Solid utilization'

Kernel for the October-to-December period reported a 3.7% increase to 1.268m tonnes in crop volumes being handled by its export terminals, which it attributed to "higher utilization at the Taman grain trans-shipment facility and solid utilization of the Ukrainian ports ".

The group's own grain sales volumes soared 22.5% to 1,335,265 tonnes, a rise Kernel attributed to "a notable increase in grain exports from the Russian Federation and the overall advance of exports from Ukraine following a record high harvest."

Taman is in fact one of Russia's fastest growing ports, growing from capacity of 1m tonnes in 2011 to 2.5m tonnes in 2013, and viewed ultimately as a potential competitor in grains to Novorossiysk, which has capacity for some 11.5m tonnes of grains.

One of Taman's big disadvantages is a lack of rail access.

Bulk oil sales drop

Kernel, in a trading update, did report a further contraction in sunflower related sales, reflecting the weak 2012-13 harvest.

Bulk oil sales dropped 31.6% year-on-year to 261,747 tonnes. Bottles oil sales recorded a sizeable 10% fall totalling 30.3m litres.

However, crush rates appear to have stabilized with 726,807 tonne processed over the period while oil production recorded a modest 2.3% rise to 34,572 tonnes.

Competition 'even greater'

Ukraine's farm ministry recently raised its estimate for grain exports in 2013-14 to 33m tonnes from 32.5m tonnes previously, reflecting favourable harvest conditions in the region.

Russian wheat exports are to reach 16.5m tonnes in 2013-14, according to the US Department of Agriculture, from 11.3m tonnes last season.

With Russia and Ukraine able to find 'just one more cargo' the higher export estimates raise the question where the extra exports will end up?

Egypt would be the logical choice. Egypt bought 295,000 tonnes of wheat at its third tender this month, according the Gasc grain authority, taking purchased to 890,000 tonnes so far in 2014, as it looks to exploit recent multi-month price lows.

However the latest tender saw one cargo of 55,000 tonnes of US wheat.

US wheat was purchased "the first time this season," noted a major European commodities house, adding it was priced, "well below the offers from Europe and the FSU, even after taking the extra freight cost into account."

"We now have a situation where all the various regions of supply are about in balance when delivering into North Africa which means that the competition is even greater", they said, adding "It's no coincidence that France Agrimer, the French grains authority reduced its estimates of exports outside the EU for this season by 300,000 tonnes."

Landbank optimizing

In addition the group continued with its programme of optimizing its landbank.

In October, Kernel completed its sale of remotely located farming operations in southern Ukraine, generating $7m, leaving it landbank at 405,000 hectares.

Shares in the group stood up 2.1% in European trading, standing at E9.57 per share at the time of writing.


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