3 March 2017

Grain logistics as one of continuous chain of grain production

EXPERT VIEW to the news

Agriculture in Ukraine is one of the most powerful industries in terms of grain production volumes both in Europe and in the whole world. Due to its unique black soils our country has the potential of growing 100 mln tons of grain and oilseeds. Entry to the sea makes perfectly benefits for export potential. But, there are a lot of problems in agribusiness in Ukraine as in most of flagship industries, which, unfortunately can’t be solved within a short period of time.

Managers of Alebor Group Oleksiy Tsurkan, Director General of Grain Elevators Division and Mykola Makhnevych, Director and Managing Partner of Boleko Transport Company, shared their thoughts on the problems and prospects for the development of grain production in Ukraine.

– Oleksiy, could you tell us what is the development outlook of Ukrainian grain market from your perspective?

– Crop yield of grains in Ukraine shows and annual increase by 18% in the average during last 12 years. If this trend goes on, during the period from 2018 to 2022 crop yelds will grow almost to 4 tons per hectare. Sowing acreages growth is on average 6% annually and domestic consumption growth just about 8%. Should such an approach have kept, we’ll get grain output of about 97.1 mln tons and export volumes will total 60.5 mln tons. I suppose these figures will be much higher, as far as sowing acreages gain and crop yields growth will grow faster and domestic consumptions rates would not change. Thus, I think we’ll reach export volumes over 60 mln tons in 2-3 years already, not necessary waiting until 2022.

– In the context of your outlook, what tasks emerge for Ukrainian grain market operators? How do you plan to fulfill them?

– As a matter of fact we’ve already started solving these challenges. So, in order to build strong and powerful logistics chain “field-seaport” for exporting grain or selling in domestic market, we established Alebor Group of Companies in 2009. For 7 years of operation within Ukrainian grain market it entered top-20 grain exporters list.

Increase of logistics infrastructure efficiency, which is our priority, every year, becomes more and more important for Ukrainian grain producers and their competitive ability in the global market. Introduction of technology innovations in the sphere of logistics drives further increase of export of grain from Ukraine. Moreover, grain logistics infrastructure development provides for new jobs creation, production value added and facilitates state and local budgets revenues.

Until recently grain traders haven’t faced so many problems with logistics, as far as grain export volumes were significantly smaller and high grain global market prices by far covered extra logistics expenses and handling costs. But against 2011 grain prices on global markets decreased about at a half. Thus, in order to keep grain production margins at appropriate level one should save logistics costs and develop promising directions of grain logistics infrastructure.

– What exactly elements does grain logistics infrastructure consist of? Is it possible to figure out main links of grain logistics chain?

– Every logistics activity is based on generally known 8R rules: supply of required product of required quality in a required amount to a required consumer to the required place and in a required time at the required service cost and required level of logistics service delivery.

Thus, our logistics chain is built according to this very rule. But isolation of any separate chain and making it more important than others will mean the whole chain break. All the stages of crop transportation, from harvesting to selling should be done in a single package and in a consistent way. There are no more important or less important elements.

The first link of this chain is grain harvesting in the field, so called field logistics. This is a new service offered to farmers. Mykola Machnevych, Director of one of our transport companies, will tell you about it in more details.

The second element is delivery of crops without extra losses from the field to linear silos. It’s a part of transport logistics.

The third component is silo logistics – handling of grain and oilseeds in an appropriate quality condition. Silo logistics is one of the most difficult links of grain logistics chain, as far as it has its own components.

The fourth stage is delivery of grain to the consumers of domestic market or to sea port for export by railcars or modern grain trucks.

And the fifth integral part is our own Trading House operation. Its turnover was 1 mln tons of grain and oilseeds last year.

– Oleksiy, you are the Head of Grain Elevators Division of Alebor Group of Companies. Could you specify the problems of grain logistics in Ukraine nowadays and the ways you solve them?

– The most challenging problem to be solved as of today is shortfall of modern silo facilities to store grain crops, as far as most silos in Ukraine have been built during Soviet Union times. Due to outworn technologies Ukrainian crops significantly lose in terms of quality and it is more complicated to be competitive in the global grain market.

Thereof we pay a special attention to the development of the most up-to-date grain storage technologies and deal with the most innovative equipment only. As of today we have two modern silo facilities – Vornovytske and Khrystynivske Grain-Collecting Station with total onsite storage capacity of 178 thousand tons for grain and oilseeds. Also we have Chesne Grain-Collecting Station within our Group of Companies, which is not very new one, but benefits greatly from its location on the roads leading to the Black Sea ports. Nowadays we work on increasing its capacities to 60 thousand tons. So, we are able to store totally about 300 thousand tons of crops at out silo facilities. I’d like to emphasize, that location of our grain elevators is a very important driver in terms of transport connections. Currently we can see significant increase in logistics costs stipulated by energy commodities prices increase and currency fluctuations. Thus, those silo facilities which are located close to fields of the biggest farmers and on the way of grain export flows, will benefit the most in terms of demand for silo services.

– Do silo facilities of Alebor Group have enough technical equipment to perform grain cleaning, sorting and drying?

– As I’ve already mentioned, each grain elevator has its own inner logistics. Main functions of grain-collecting stations are intake, certification, cleaning and drying of grain, its handling and storage in proper quality conditions and shipment of grain into railcars or grain trucks for further transportation. And efficiency and pace of all stages performance determine the efficiency of the entire grain logistics of all the enterprises belonging to Alebor Group.

While constructing silo facilities we first of all think about proper construction and maintenance of all access roads to our silo facilities.

For grain intake we have: three automated intake lines at our Khrystynivske Grain-Collecting Station with total intake capacity of 5 thousand tons per 24 hours. At Voronovytske Grain-Collecting Station there are also three automated intake lines with total intake capacity of 7 thousand tons of grain.

We use Araj (Poland) and national KMZ Industries grain dryers which perform almost 10 thousand tons of grain drying per 24 hours.

For grain cleaning we use Araj and KMZ Industries color sorters with total capacity of about 7 thousand tons per 24 hours.

Our silos are equipped with powerful KMZ and Araj conveying norias.

To perform efficient grain shipment we have our private locomotive and two railway tracks at each grain-collecting station. Their total capacity of shipment is 100 railcars per 24 hours.

All grain and oilseeds are stored in metal silo bins equipped with 24/7 grain condition monitoring automated systems of and active ventilation systems. Also we conduct systematic laboratory tests of grain samples, which are more informative than sensors’ values. That means we perform double control of grain quality.

– Oleksiy, figures and facts presented by you prove that Alebor Group already has not bad potential as grain market player. What are your plans for long-term and short-term future development?

– Having over 7 year experience together with our principles of transparent and open cooperation with partners and customers allow us to have long-term plans. Still and all more than 350 both big and small agriproducers trust us, and this inspires to create ambitious plans.

In our future plans construction of one more grain silo facility is projected. It will enable the Group of Companies to reach total onsite storage capacity of 300 thousand tons of grain and oilseeds. And it will allow us to increase our annual export volumes to 2 mln tons.

Alebor Group has developed very attractive offers for grain producers for new 2017/18 marketing year. But they concern primarily transport component of grain logistics, which is the competence of Mykola Machnevych, Director and Managing Partner of Boleko Transport Company.

– Mykola, at the beginning of our talk we mentioned that one more link was added to the grain logistics chain of Alebor Group, namely, crop harvesting services. What were main drivers and how it is maintained from technical and material points of view?

– We inherited the problem of “battle for the harvest”: how to harvest the crops, where to carry it, how to store it. And the first stage of this battle deals with the process of crop harvesting in the field. Nowadays farmers incur the most losses because of harvesting machinery shortfall. They are waiting for weeks for a combine harvester available for leasing and loose high percentage of crops.

After analyzing modern national grain logistics trends we offered our assistance to agriproducers. And, at the beginning of 2017/18 marketing year we reinforced machinery fleet of Boleko Company which now comprises 5 modern CLAAS LEXION 600 combine harvesters. It ensures efficient decrease of losses during harvesting operations and the lowest rates of grain damage due to high productive capacity and profitability.

Now our customers get rid of at least one “headache”; it particularly concerns small farms which can’t afford maintaining private combine harvesters. Albor Group does not classify its customers as more important and less important ones. We provide our services to everyone who is interested and who needs them.

– How can you comment on the change of game rules for transport operators since 1 June 2016 when there was a restriction on heavy trucks movement on most of public highways came into effect?

– Basically, in my personal opinion, dimensions and weight control on public highways is necessary, and the main advantage of this innovation is further prevention of road surface damage, which is an urgent task while speaking about the present condition of main highways in Ukraine. But the restriction imposed this year considerably complicated our operations while comparing with the previous year.

I hope that setting up of the State Road Fund at the end of previous year will work. The funds will become targeted and it will be possible to spend them solely to roads repair and construction works. It is a very important step made by the government towards logistics systems support, in particular, grain logistics.

– What is the machinery fleet of transport companies belonging to Alebor Group?

– As of today it comprises 100 modern MAN and DAF heavy grain trucks for long-distant transportation and 50 KAMAZ trucks to carry grain from the fields to silos. Availability of such powerful machinery fleet together with private combine harvesters added will ensure faster operations during the next harvest season. Loading of grain from the harvester’s hopper directly to the truck will allow saving valuable time and prevent from extra losses during transfer loads.

– How do you track grain movement during road transportation?

– Each grain truck is equipped with GPS-navigator. GPS tracking system allows dispatch controllers to plan the route in advance and calculate estimated fuel consumption and time required. This system provides for 24/7 on-line monitoring of grain movement. It makes the driver to be more disciplined and prevents from route deviations and making unscheduled stops. This mode allows tracking fuel consumption and movement speed, and even driving style of each separate driver. Also it prevents from thefts of vehicles and grain in the process on the drive. So, we can state that we provide really safe and high quality service. We ensure high level of promptness safety of our freight and carriage services. Our customers are always sure that their crop is in good and caring hands.

Alebor Group takes control of all the stages of logistics – from harvesting grain in the field, its cleaning, drying, handling within silo to transportation to seaport and selling at the most beneficial prices.

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