A new grain season has started in Ukraine – the first batches of the early grain harvest of 2021 have left the fields for elevators and ports. Grain resellers expect new records from the new season. In the meantime, summarize the results of the last marketing year. The commercial director of G.R. Agro Dmytro Sukh told Elevatorist.com about the successes and peculiarities of the past year and experience of the company.
Dmytro, with what achievements G.R. Agro has come to the end of the 2020/21 season?
Dmytro Sukh: In my opinion, one of the most important achievements of the 2020/21 season for G.R. Agro became the acquisition of “Pryshibsky Elevator”. Most companies, realizing the shift of the zone of risky agriculture up, are trying to move along the elevator capacity to the north of the country. Or, for various reasons, abandon this type of business altogether. But we weighed all the pros and cons and made an important decision to delve into what I call “an interesting competitive environment and heightened challenges.” I think we managed to cope with the task. For example, our elevator harvested a little more than 60 thousand tons during the season, and two years ago its indicators were significantly lower – at the level of 4-12 thousand tons.
The second, no less important achievement of the passing season, I consider the growth of trade. Despite the overall decline in yields, we grew by 20%, almost to 400 thousand tons. And this is taking into account the significant drop in yields in Dnipropetrovsk and Zaporizhia regions.
What made such growth possible?
Dmytro Sukh: Increasing storage capacity has made it possible to increase purchases and sales. And we pursued a very aggressive strategy in the market, which allowed us to increase our share.
Which areas of the company’s activity turned out to be the most profitable?
Dmytro Sukh: We do not consider business lines in a group of companies as a business that lives on separate islands. The current market is such that one without the other practically does not exist. Only complementary chains give results. And in this context, I personally believe that it is incorrect to put any one business direction on the pedestal of honor. As pathetic as it may sound, but we have all the good guys: and trading, and elevators, and logistics. And the growth effect we got over the season is teamwork.
Has the expansion of our own fleet also contributed to the common cause?
Dmitry Sukh: Of course. Our own fleet provided an opportunity to increase volumes during the harvesting campaign: we increased grain supplies to elevators. Thus, the amount of grain that was processed has increased, which means that the earnings of granaries have also increased. In the future – this is the additional amount on which the trade has earned. The concept of production chains, which we talked about above, is confirmed. We have all business areas interconnected. Working together is very important here, because in the end everyone wins.
The increase in the fleet allowed G.R. Agro to become more flexible in terms of working with customers, to offer them more interesting terms of cooperation. Your fleet is reliable. And if we tell a farmer that there will be 10 machines, then there will be 10 machines, not 5, and not 3. This is process control. And process control is an understanding, both for us and for the client, of terms of performance of tasks.
Have all the goals been achieved?
Dmytro Sukh: In Switzerland they say “il y a mieux, mais ca coute plus cher” – it’s better, but it’s more expensive. Therefore – yes, speaking in general the season turned out effective, but not ideal. The year was the most restless, the most emotionally tiring.
What exactly did you find most difficult in the last marketing year?
Dmytro Sukh: Volatility of the market, due to which it is very difficult to work, to work so as not to fall into losses. The year was very stressful, and something tells me that the new season will be no less stressful.
Did G.R. Agro work with forward contracts last season?
Dmytro Sukh: There were such opinions, but the experience of previous years: non-fulfillment of forwards or significant delay in deliveries by farmers, continuous market volatility forced to keep horses. We are not manufacturers, but a trading company. Trading what you don’t have in such a market is a very risky step. There is a small percentage of forwards for purchase, about 3%, which we concluded with farmers for early grain. We have concluded them with proven and reliable suppliers with whom we have long experience.
What types of grain and oilseeds did you work with?
Dmytro Sukh: About 260,000 tons of grain passed through the group’s elevators. This and early cereals, and corn, canola and sunflower. However, from working with rape, at some point, we decided to give up.
Dmytro Sukh: This is a very financially intensive crop, which in percentage does not give the required margin, and carries additional risks – the amount of glucosinolates, oil levels, erucic acid. There are more points where you can get a discount, which significantly reduces the margin when diverting the same amount of resource. Therefore, we have determined for ourselves that it is more efficient to use funds for other crops, other types of grain. That is, a banal economy.
How do you assess the overall harvest of the season that has ended?
Dmytro Sukh: The harvest was sad, to put it mildly. The season was “one continuous list of tasks with an asterisk”, from which emotional fatigue has not yet passed. I hope the new season will be more balanced. We look at the clouds and hope.
And what was the most popular crop you worked with: wheat, corn, sunflower?
Dmytro Sukh: Wheat, about 120 thousand tons. This is about a third of the total. As for corn, last year we had a significant drop in yields of this crop in the Dnipropetrovsk region. Well, that’s just colossal. And that’s why we didn’t get the expected volumes for corn, the yield factor worked.
Have you already tried on the new harvest, evaluated it by region?
Dmytro Sukh: In 90% of cases, farmers always say that everything is bad: a lot of sun is bad, rain is bad in any case. And then suddenly it turns out well. You know, as a farmer, I try to be extremely careful in my assessments. With weather like now, it is very difficult to estimate the future harvest – somewhere the fields are dry, and somewhere there are frequent showers and water in the field. Weather risks are very strong, I do not want to mislead myself and others.
Last season, farmers made good money. Do you think they will build their warehouses and will this not lead to an outflow of customers from the company’s elevators?
Dmytro Sukh: High grain prices have given most producers an influx of funds that still needs to be dealt with wisely. Some farmers are still holding back sales, arguing that “I don’t know what I’m going to do with this money.”
Dmytro Sukh: Ansolutely, I’m not kidding, we’ve heard it many times: “I don’t want to sell, where will I spend this money?”. Many farmers have received an influx of unexpected financial resources, which now do not know how to deal with. Imagine, you planned to sell sunflower for 11 000, and suddenly sold for 23 000, or planned in general for 7 000, and sold for 23-24 000. It turns out that, taking into account the expenditure part, you conditionally flew plus 15 000 hryvnia per ton .
Well, is it bad?
Dmytro Sukh: It’s great, it’s very good, it’s just that we now have to deal with this financial resource effectively. It is likely that those farmers who have accumulated sufficient financial resources will consider building their own warehouse for storing grain.
Will it be rational? Not sure. About 30% of the moved volumes of grain we took away “from a place”. Mostly it is a problem grain: bad smell, cakes from moisture, clogging, contamination, quarantine organisms and technical difficulties with loading.
Choosing between the opportunity to boot in the elevator or on the farm, we will quickly choose the elevator. This guarantees fast loading and minimal quality risks. For which, by the way, is responsible for the elevator that shipped the goods and issued a quality certificate.
G.R. Agro for the upcoming season 21/22 offers a free storage service for farmers. We assume the risks of storing grain throughout the period. Less quality risks – more likely to sell on more favorable terms.
Grain is a market. The market works primarily with what is less risky and more understandable.
Please share the company’s plans for the new grain season.
Dmytro Sukh: Plans for the future are what any company wants to achieve: maximum efficiency of each process. And we see that the maximum efficiency can be achieved by total digitalization, ERP and CRM systems become the basis for building and even redesigning business processes. It’s time to move away from working on feelings to working with numbers.
As for the elevators of G.R. Agro, the main investments in them the company has already made, we will only carry out point modernizations. We are not going to dwell on the expansion of the elevator network.
In addition, G.R. Agro intends to add at least 10 more grain trucks to its own fleet.
Dmytro, thank you very much for an interesting conversation!
Maya Muha, Elevatorist.com