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Is growing the world beneath wheat a very good transfer by farmers?

Last year was very challenging when it comes to the food market. Just when most of the world was hoping that the numerous problems caused by the coronavirus pandemic would be solved, a new factor affected the events in the global market.

“The conflict between Russia and Ukraine deepened the uncertainty on the food market. There was a sharp jump in the prices of grains and oilseeds both on the world stock exchanges and in our country. At first, prices rose uncontrollably and we all remember well that the state introduced certain restrictions which led to a drop in prices,” recalls Miloš Janjić, director of the Produktna Berza.

Due to the events in Ukraine and the increase in energy prices, it was not easy to establish production, and the drought made it impossible to maintain it on the scale that farmers had hoped for.

“Last year, the prices of wheat and corn were high, but they did not produce. Due to the drought, there was almost nothing of corn, and wheat yields were significantly lower. As for sunflower, it was generally cheaper when we talk about the price without the state subsidy.” , says Vukašin Baćina, a farmer from Banat.

“Unfortunately, for the second year already, we faced a drought with spring crops. Their price at harvest was higher compared to world prices. After that, prices fell, and that trend was maintained until the end of the year. The last realized prices via the Produktna Berza are for corn 31.5 dinars, wheat 34 and soybeans 65 dinars without VAT. This is significantly below the prices that were in the harvest,” explains Janjić.

The price of wheat in 2022 after the padal harvest

And while selling in the harvest has troubled producers in previous years, this time it turned out to be a well-forced solution.

“Most farmers in Serbia cannot store wheat, because all debts are on wheat, so the farmer is forced to sell it to pay loans, debt for seeds, fertilizer…” says Baćina.

“On the other hand, storing wheat with someone is a double-edged sword, because those LLC companies do not have any capital. For example, in my region alone, in Banat, 4-5 companies that stored wheat failed in the last 2-3 years. “Many people are left without wheat and without money. The owners simply open companies, convince people to store with them, sell goods illegally, declare bankruptcy and the wolf eats the donkey. Only those who have their own warehouses can store,” adds this farmer. .

The recently concluded 2022 was in many ways specific when it comes to cereals and oilseeds.

“Historically, the prices of all crops, not only wheat, are the lowest at the time of harvest, because most of the producers sell their goods. All the market factors that we observe, who deal with analysis, are meaningless due to the situation on the world food market caused by the conflict between Ukraine and Russia . The psychology of the market has completely changed. Last year, producers who sold wheat at harvest fared better than those who left it for storage,” explains Žarko Galetin, an agro-economic analyst.

It is expected, he explains, that cereals and oilseeds reach their highest prices after harvest at the end of the calendar year and the beginning of the following year.

“We have a completely reversed situation that our prices are 10, 15 and 20 percent lower now than at the time of harvest. Prices have fallen because Ukrainian and other ports have been opened in the context of the agreement between Russia, Ukraine and Turkey. But we are talking about one wheat of bad quality quality that was stored unconditionally for a long time. That wheat found its way onto the market and lowered the price of wheat all over the world, above all, in the Black Sea region to which we also belong,” adds our interlocutor.

What challenges do farmers in Serbia face?

This season will be no less challenging.

“Predicting what will happen in agriculture is very difficult, especially when you have conflicts in Ukraine, when you have problems everywhere in the world. It scares me that wheat will be cheap in 2023 regardless of the extremely expensive sowing that we had, which is certainly problem. Much, much more wheat has been sown in Serbia than in previous years. Because of the drought, people are afraid to sow corn. When I go through the fields, everything is now green,” Baćina points out.

“There is more wheat in Romania as well, which is interesting. The only thing that could save us is that the sowing was not done in Ukraine. I don’t like to rejoice in other people’s misfortune, but that is the only hope of the Serbian farmer. That wheat will be more expensive because will not be in Ukraine, and we know that Ukraine is the main producer of wheat in the world,” adds this farmer.

An increase in the area of ​​wheat fields is expected, according to Galetin.

“Farmers are returning to wheat for the simple reason that the ratio of earnings to cultivation costs in 2022 was by far the most favorable for wheat. There are many reasons for this. One of the key factors is the weather. Wheat “escaped” from the summer drought. It was harvested at the end of June, beginning of July and did not feel those tropical temperatures and insufficient rainfall,” says this agro-economic analyst.

“Another reason is that wheat is an extensive crop and does not require as much investment as corn, soy, sugar beet… Our agricultural producers, who are financially quite exhausted, also had this motive to choose wheat,” adds Galetin.

Forecasts are that this production year of wheat in the world will be 10 million tons less than the assumed consumption.

“It will in some way devastate stocks and affect wheat being a commodity in demand and compared to other agricultural crops it could have a relatively better price. Whether that will happen and what the situation will be on the Ukrainian-Russian front, no one knows he doesn’t know. I don’t know how to untie that Gordian knot at the moment. In any case, many factors will affect it. I personally think that wheat producers will do well,” adds our interlocutor.

High investments, expensive loans…

The food market is largely dependent on the events in other markets.

“On the one hand, we have these events in the world such as production and consumption, but currently politics is a big factor that affects the movement of prices in the world. On the other hand, all events in other markets such as the financial market or the securities market are uncertain . Interest rates are rising all over the world, inflation is high everywhere. In 2023, we will have an unfavorable economic climate, and farmers will have to adapt to that,” Janjić believes.

At this point, increasing the area planted to wheat seems like a good decision. However, it should be remembered that our country is an exporter of wheat, and that the state’s decision last year to ban the export of bread grain lowered its price on the domestic market.

“We could not export and sell wheat at the prices that were in the world. That would be a big profit. But we farmers also have to be somewhat realistic. If exports were allowed, all the wheat would have been exported and today there would be a loaf of bread in our country was 200 dinars. That would be a problem for the whole society,” says Baćina.

“We have to make a compromise so that it is good for both the farmer and the end consumer. I respect that the state banned the export of wheat in order not to leave Serbia without bread, but the agricultural producer should have given a good price for that wheat. The state should have done like Slovenia “Slovenia banned the export of wheat, but it bought all the wheat from all the producers at the price that the farmers asked for,” our interlocutor specified.

Future events on the food market also depend on how much wheat will be produced in the world.

“We have enough for our own needs. The fundamental thing for us is export. We are dependent on export. The surplus needs to go somewhere, and it will come out at the price that the market in the world wants to pay. And that is what the price of wheat will depend on be. So sowing wheat can be an extra move and is to reduce the potential risk of drought. And we will know if that is the case only when we see the price in the world and since we can export it,” Janjić explains.

“We cannot predict non-market factors, and they can also affect the price. Not only if our country limits exports, which I don’t think it will, because we have enough for ourselves and for sale on the foreign market. It remains to be seen what will to work with the states in the region and the great powers. Will there be restrictions on exports or transport. In any case, that these events in Ukraine end as soon as possible and that we return to normal circumstances,” says the director of the Product Exchange.

High temperatures do not favor wheat

Although it is still too early to talk about yields and prices, farmers believe that wheat should not be below 45-50 dinars at harvest.

“In order to return the investment, wheat must cost next year between 45 and 50 dinars. The investments are not over yet, so I don’t know how much fertilizer, protection chemicals and diesel fuel will cost in the spring, but I can freely say that it is some the price that would have to be in the harvest in order for the Serbian farmer to be at a positive zero,” explains Baćina.

“The big problem now is the weather. In December and January, we have temperatures over 10 degrees. This is not normal for this time of year. At this temperature, diseases attack wheat. Now the wheat should be under snow. This is the fourth winter in a row in Banat that there is no snow, that there is no winter moisture. And that’s why everything is uncertain. We won’t know anything about wheat until the end of April. Has it produced, what will the price be… The situation is bad at the moment. This weather, I say, is not favorable at all wheat,” says this farmer from Banat.

Although he believes that farmers could do well because of the sowing of wheat, Galetin also warns of the negative effects of the decision to increase the area under wheat.

“I’m somehow not looking forward to it. Not because farmers will do well, but because we will use our most important resource, which is fertile land, to plant an extensive culture that is not profitable in the long term. If we go back to we cannot hope for such a sowing structure, where extensive crops will occupy larger and larger areas,” explains the agro-economic analyst.

“I am rooting for farmers to fare as well as possible financially, but I think that the job of agrarian policy is to stimulate the production of more intensive crops, to encourage them as much as possible through state measures. But that is our fate and we choose to sow those crops which give us better financial effects in the short term,” concludes Galetin.

Although they are trying to make a calculation, the producers’ hands are almost tied at the moment. To everything that caused them pain and headaches in the previous years and decades, we should now add the uncertainty caused by geopolitical events in the world. And they are also difficult to calculate, because they are often very unpredictable.

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