The guarantee of gas supply is more important than conditional savings

13/ 01/ 2022

Artem Rempen. «G.R. Agro» Operational Director This season we are contracting gas on a monthly basis. And although it is more expensive (plus 1-2 thousand hryvnias per thousand cubic meters), but delivery is guaranteed. Instead, trader companies that contracted gas at lower prices in advance, then simply did not buy it on the stock exchange and had no limits to provide consumers ... For us, the guarantee of gas supply during the harvest campaign is more important than conditional savings - because we could not disappoint our customers - agricultural producers. By the way, more than 450 of them have already taken advantage of our free grain storage program, which operates during the current marketing season. By paying only for the primary services of receiving, cleaning and drying the grain, farmers participating in the program can sell agricultural products to any of the market players accredited to the elevators of G.R. Agro. From the moment of sale, storage costs will be charged to these companies, which ensures a balanced process. This season at the elevators of G.R. Agro received corn with an average humidity of about 20-22%, sunflower - 12-14%, and the removal of a ton of percent, as you know, on average is about 2.5-3.0 cubic meters of gas. So we had to increase the tariffs for drying in two stages, and, secondly, simply to the level of cost. At present, there is no technical possibility to find a quick and efficient way to optimize the energy consumption of natural gas equipment. Switching dryers to an alternative is a long process. However, our heating systems are already working on alternative sources and it has paid off. We are currently working in this direction. In order for elevators not to work to their detriment and ensure at least a minimum profitability, at current tariffs, the maximum price level of one thousand cubic meters of gas should not exceed 28 thousand hryvnias. However, another important question is what should be the tariff for drying twice (or even three times) the price of blue fuel? Elevators, as the starting point of food security in the world, of course, will not stop working even in the event of an even greater increase in energy costs. But to what level will the cost of grain storage and finishing services increase? How will this affect the price of agri-food raw materials and, consequently, the price of food? There are currently more questions than answers… According to our estimates, in the near future the margin of agricultural production will decrease. However, not as significant as previously predicted. It will be balanced by a number of external factors. Due to the energy crisis and rising prices for all components of the chain from the field to the port, grain and food prices will continue to be high. And we must not forget that the cost of electricity for industrial consumers has almost doubled in a year.

Artem Rempen

«G.R. Agro» Operational Director

This season we are contracting gas on a monthly basis. And although it is more expensive (plus 1-2 thousand hryvnias per thousand cubic meters), but delivery is guaranteed. Instead, trader companies that contracted gas at lower prices in advance, then simply did not buy it on the stock exchange and had no limits to provide consumers …

For us, the guarantee of gas supply during the harvest campaign is more important than conditional savings – because we could not disappoint our customers – agricultural producers. By the way, more than 450 of them have already taken advantage of our free grain storage program, which operates during the current marketing season. By paying only for the primary services of receiving, cleaning and drying the grain, farmers participating in the program can sell agricultural products to any of the market players accredited to the elevators of G.R. Agro. From the moment of sale, storage costs will be charged to these companies, which ensures a balanced process.

This season at the elevators of G.R. Agro received corn with an average humidity of about 20-22%, sunflower – 12-14%, and the removal of a ton of percent, as you know, on average is about 2.5-3.0 cubic meters of gas. So we had to increase the tariffs for drying in two stages, and, secondly, simply to the level of cost.

At present, there is no technical possibility to find a quick and efficient way to optimize the energy consumption of natural gas equipment. Switching dryers to an alternative is a long process. However, our heating systems are already working on alternative sources and it has paid off. We are currently working in this direction.

In order for elevators not to work to their detriment and ensure at least a minimum profitability, at current tariffs, the maximum price level of one thousand cubic meters of gas should not exceed 28 thousand hryvnias. However, another important question is what should be the tariff for drying twice (or even three times) the price of blue fuel?

Elevators, as the starting point of food security in the world, of course, will not stop working even in the event of an even greater increase in energy costs. But to what level will the cost of grain storage and finishing services increase? How will this affect the price of agri-food raw materials and, consequently, the price of food? There are currently more questions than answers…

According to our estimates, in the near future the margin of agricultural production will decrease. However, not as significant as previously predicted. It will be balanced by a number of external factors. Due to the energy crisis and rising prices for all components of the chain from the field to the port, grain and food prices will continue to be high. And we must not forget that the cost of electricity for industrial consumers has almost doubled in a year.