The war between Russia and Ukraine continues to drive up agricultural commodity prices. New balances are being formed in world agricultural trade. Meeting with industry journalists, Taban Gıda CEO Hasan Hacihaliloğlu said, “There will be fluctuations in prices for a while. However, at the end of this process, there seems to be significant opportunities for us as the operations of some global companies in Russia will shrink.”
Chairman of the Board
While the war between Russia and Ukraine is a hot topic for the world, both politically and economically, tsunami waves that would deeply affect many sectors are being expected. Russia, which feeds the world especially in the field of agriculture, is also one of the biggest supply markets of Taban Gıda, one of the leading companies in the Turkish sector. Hasan Hacıhaliloğlu, CEO of the wheat supply company Taban Gıda, which carries out transit trade to nearly 20 countries in the Asian, African, European and American markets, analyzed the effects of the Russia-Ukraine war on the world agricultural economy and forecasts in his meeting with the sector journalists.
Russia exported approximately 38 m t of wheat in 2021 and is expected to export 31 m t of wheat by the end of June 2022. Today, Russia is a giant power that feeds the world with its wheat production of over 75 m t. Likewise, Ukraine, with its vast cultivation areas, is one of the biggest producers following Russia. The war between these two giant production bases also causes crisis expectations in agricultural commodities that deeply affect the world.
Ukraine, which exports nearly 25 million tons of wheat every year, had realized 18 million tons of sum before the war broke out. Hasan Hacıhaliloğlu, CEO of Taban Gıda, said, “Ukraine has 6 million tons of wheat from the previous harvest period which can be exported after the war. I do not think that this export will take place due to many post-war problems such as port and shipping. This inevitably causes this trade volume to shift to other regions and increase prices. The bigger trouble is with the forthcoming harvest. There are regions planted in October-November. There will also be areas that have been cultivated but damaged. Ukraine will also have cultivation areas and lands in the next month. Even if the war lasted for 1 extra month, there will be no sowing. Therefore, it will cause a decrease in the production of agricultural commodities, especially wheat, corn and sunflower, and keep prices high. In addition, when regional problems such as drought in the USA are considered, next season, we may witness unprecedently high prices."
WHEAT PURCHASE FROM RUSSIA CONTINUES
With an annual trade volume of over 1.5 m t, Taban Gıda reached a turnover of 4.5 billion TL by the end of 2021. The company, which has grown by more than 50 percent compared to the previous year, targets a 20% growth on the basis of tonnage and 30% of turnover in 2022. Taban Gıda, which is among the top 200 in the "500 Biggest Companies of Turkey", aims to increase its power in the global market and expand its supply structure by investing 100 million dollars in production, logistics and storage areas in a 3-year period.
“The wheat purchase of Taban Gıda from Russia in 2021 was 1,170,427 metric tons. Due to the Russia-Ukraine war, many global giant companies withdrew from Russia with regard to the sanctions. This development will enable us, as Taban Gıda, to exhibit a stronger presence and increase our market share,” said Hasan Hacıhaliloğlu. “We expect to overshoot our targeted trade volume in the new season. We in no way have been able to trade with Ukraine for the last 1.5 months. On the Russian side, shipments and trade continue in deep ports. Of course, there are parts that it affects, such as freight prices and insurance conditions."
INVESTMENTS WILL CONTINUE
Performing transit trade based on needs and demand, Taban Gıda analyzes various risks and opportunities created by global crises such as global climate change, pandemic and freight crisis, and carries out new investment moves. Taban Gıda which rolled up its sleeves for ship, silo and flour mill investments has allocated a budget of 100 million dollars for these investments for the next 3 years. Realizing 15 percent of the total wheat import capacity of the Samsun port alone, Taban Gıda will also make its own silo investment in this province.
The company, which has established its own fleet with a total ship investment of 25 million dollars by the umbrella company Vivalon AG since last year, is also looking forward to the acquisition of new ships. Stating that the hot agenda did not affect the investments, but they are waiting, Hasan Hacıhaliloğlu said, “The silo investment in Samsun will be realized this year. Our feasibility studies for storage areas in some African countries are going on. It is the primary investment that we plan to realize within a short time. We are ship owners, our investment plans in this area are always going on. We are considering expanding our fleet. We have reached the final stage in the flour mill investment in Russia. But the war forced us to wait and see for a while. Of course, there are uncertainties about our trade because our largest supplier was Russia. Sanctions against Russia in the coming days may change our position. Still, our largest suppliers will remain to be Russia and Ukraine. The chances of meeting the world's wheat need from a region other than Russia and the Black Sea basin is quite low. The region is going to maintain this advantage for many years. There may be changes in the execution forms of trade in transit trade, but our experience and power in these markets and our location in the near geography will create new opportunities for us in the medium and long term. Especially global players withdrawing from Russia will increase our market share. Therefore, our investment decision hasn't changed. In 2022, we aim to overreach the growth plans."
UKRAINE'S TROUBLE WITH SOWING MAY CAUSE BIG PROBLEMS
“Even though the agricultural economy is currently focused on war, problems such as climate change always remain on the agenda of the sector. It is an issue that occupies the agenda in Turkey as well as in the world. In Turkey corn production is increasing whereas wheat production is decreasing. The farmer prefer corn because of its fertility. Still, the war is on the hot agenda of the country at the moment," said Hacıhaliloğlu. "The sanctions that are being imposed on Russia now and that can be imposed in the coming period will determine the course. Turkey's foreign dependency on products such as wheat, corn, barley and sunflower is increasing every year. We need to import. In Turkey, wheat cultivation areas are gradually decreasing. Corn, sunflower and oilseeds are on the rise. The number of small uncultivated lands is increasing. If the war continues, Ukraine's shortage of sowing may cause major problems. The exclusion of Ukraine, especially in oil seeds, will expose both Turkey and the world to great difficulties," he added.
IN THE LONG RUN, BALANCES WILL CHANGE IN FLOUR EXPORTS AS WELL
Turkey ranks first in flour and second in pasta exports in the world. However, it seems that, this sector, too, will be affected by the Russia-Ukraine war. Hasan Hacıhaliloğlu, CEO of Taban Gıda, said, “Turkey is still the leader in flour exports. It is one of Russia's biggest customers and markets. If sanctions continue, this will continue to increase. Maybe Turkey will be a transit trade point for Russia. Trade will be carried out to many countries through Turkey. Russian wheat prices were lower than other major producer countries, which was an advantage for us. We managed to quote more competitive prices. It may continue like this for a while. The main reason why we are the leader in flour export is the advantages provided by Russia. Once Russia will redirect its production surplus to export, we will lose the leadership. Another risk is on the Iraqi side. Turkey also exports flour to Iraq to a large extent, but I think that our country will lose this position in a few years. Because Iraq is establishing its own structure. New factories began to open. If Turkey loses this market, it will suffer greatly."
TABAN WILL ALSO GROW IN THE FEED RAW MATERIALS MARKET
With production and logistics investments that will bolster the supply chain in the next 3 years, Taban Gıda aims to increase its market share in the product group that includes a variety of feed raw materials such as soybean and sunflower meal, barley, corn, wheat bran on top of wheat. Setting an important growth target in this area in 2022, the company has updated its growth target for 2023 due to the fluctuations in cash flow with regards to the price increases and the need for cash capital, along with the changing agenda. “The ongoing war and the uncertainties in trade have skyrocketed the prices. Due to the uncertainty in the markets and insecurity in the banking systems, the need for cash capital increased. This protects us for different sectors. The feed raw materials market is a very large market. It is one of the important areas of our growth projection. However, we have postponed this target to 2023. Because recently, there has been a significant increase in prices. We are in a cash capital-intensive process. However, we aim to reach significant volumes in the feed raw materials sector in the next harvest period,” Hasan Hacıhaliloğlu concluded.