Ambar Export BKW,
Konstantin Tkachenko, Aleksei Beskletko 17.09.2018
On a course to becoming a large trader
An interview with Olga Buchynska
This February, the Ambar Export BKW company has got a new director — Olga Buchynska. She has 10 years of experience in agricultural business and great plans for the company. In an open talk with, Ms. Buchynska shared the plans and discussed the overall situation on the agricultural market.
—  You've been working for Ambar Export BKW for over half a year. Could you tell us about your career with the company?
—  I've been working in agribusiness for 10 years. I've spent most of my career working for UkrLandFarming where I held various positions at different enterprises of the holding. Ambar Export BKW, and the BKW group in general, is the second large agricultural company in my career portfolio. What I particularly like about this company is its ambitious plans and development strategies.

Ambar Export BKW has outgrown the size of a medium trader. The company could either stop growing and put up with the idea that the Berdyansk Merchant Sea Port was its ultimate market niche and 800 thousand tons of exports were its trading pinnacle or it could try its hand at other ports like Handysize and Panamax which offer bigger capacities. The owners of the company have chosen the second option. Last year, we expanded to the Nikolaev Sea Port; in June 2018, we have launched transshipment operations at the Chernomorsk Merchant Sea Port.
— So, 800 thousand tons of exports were your limit?
—  The last year’s exports amounted to almost 600 thousand tons. This year’s plan is one million tons. Although, we might need to adjust the plans due to shortages of early grains in some regions. On the other hand, we expect a record yield of corn this year which may help compensate for export losses on early grains. However, we are not alone in the hopes, so the season promises to be very competitive.
— The market was kept in suspense waiting for the USDA report on wheat. How did it influence the demand for Ukrainian wheat on the foreign market?
—  The market was kept in suspense because the price was subject to change due to a possible crop failure. As a result, the price for Ukrainian wheat demonstrated a steady increase not only for obvious reasons but because there were worries of possible failed contracts. It is natural that the producers reacted to the price changes and wanted to sell the product at USD 2−3 higher prices. For all that, the recent USDA report has calmed everybody down and now we are witnessing price adjustments.
—  Do the farmers who did not manage to sell the wheat at a high price try to keep it till the prices go up again?
— They try to hold on to high-quality wheat. It is difficult to persuade producers in south-eastern regions that the wheat price is going to decrease, especially, when they gathered only 50% of the planned crops. Given that, they do not believe in a long-term price decline. That opinion gets reinforced by occasional Ukrainian and Russian news about grain deficit and talks about export restrictions. Politics has a great influence on the market.
— What determines the market climate in your opinion? For instance, in terms of wheat sales. One of our bloggers, Elena Neroba, suggested that the recent wheat "fever" was caused by a hoax designed to test the market temperature.
— Commodity markets are very dependent on politics. I think that more often than not politics is much more influential than such fundamental factors as yields, weather etc.
—  Could you tell us about the company's foreign business partners? Do you cooperate with China?
— This year we plan to strengthen our logistics capacities to enable exports to China. I don’t think there will be Panamax shipments yet. Mutual contracts with other market players are more likely. Besides, we are obtaining the ISCC certification for corn exports to Europe where it will be used for bioethanol production.
—  When there is an agreement with China, does it mean that the deal is in the pocket no matter how long it will take before the agreement is actually signed?
— I think we will stick to the FOB shipments for now. This model is more efficient both in terms of profit and risks. Talking about Ukrainian exports to China, we need to bear in mind that China has very high standards regarding corn quality. It obliges the provider to get a certain accreditation, examine the crops, deliver the goods from certain elevators. This year we shall definitely content ourselves only with the FOB shipments to China.
— Apart from China, you also plan to increase your exports to Europe, don't you?
— That's right. However, our exports to Europe are limited to grains for milling and feed production. Once we get the ISCC certificate, we will be able to export corn for bioethanol production.
How difficult was it to get access to the Nikolaev Sea Port? Do you work with Nika-Tera?
— Of course, we do work with Nika-Tera, but we also cooperate with our permanent business partner Ascet Shipping in Nikolaev and Berdyansk.
— What about the access to the Odessa ports? Is it a must to have a resource base and a range of suppliers to sign a contract with the port?
— First and foremost, one needs to have a solid history of export shipments to start operating in the terminal. It is the best proof that the company is capable of export campaigns. It also requires sufficient finances. In order to sign a seasonal transshipment agreement, one needs to present a clear plan which will convince the terminal authorities that the company can provide a steady grain flow.

The acceptance area — is a "narrow" space in every port, therefore, the quotas for monthly, quarterly and yearly use of the area are spelled out in the contract. The terminal managers keep a close eye that the quotas are observed to avoid losses. There is no guarantee that the company will not face such problems as bad yields, poor crop quality, working capital shortages, inability to close the deal, volatile prices. However, those are the traders' problems, not the terminal lookout.
—  What helped you increase export volumes?
— Our greatest achievement is that we managed to build one of the best teams in Ukraine over the past half a year. I have no doubts that this team can buy and sell from 800 thousand tons to 1.5 million tons of grain per year. I think the goals we have set for this season are perfectly reachable.
— Who is your end buyer?
— Berdyansk Sea Port exports are arranged according to the CIF terms of a full sales cycle (from a producer to the end consumer). In the Nikolaev Sea Port, we mainly operate under the FOB contracts, but there are also CPT contracts as well. Our transshipments in Odessa are mainly based on FOB and CPT contracts as well.

It is true that we are new to the deep-water ports. We are aware that it is more challenging for us to compete with multinational companies in terms of transshipment rates or contracts. But we are fighting for our place in this business. If there is a better CPT contract, we will choose it over a FOB one.

CPT is a safe enough market, it brings fast money. It’s easy and transparent. It allows us to increase exports by faster turnover. That is why we never turn down such contracts. Economic viability is our main criterion for decision-making. Of course, we have obligations to the ports, which we dutifully observe, but given the current situation, we never miss good CPT contracts.
— Since you operate in the Berdyansk Sea Port, we cannot but ask if you have experienced any problems in the Kerch Strait caused by the construction of the bridge.
— We have started experiencing problems now when vessels are delayed for 3−5 days in the strait. There are rumors of the possible increase in the freight rates and this, in turn, will reduce the purchase price in the port and our margin. But we do not abandon this region, on the contrary, we are building capacities there since this is where we first started. The plan of shipping through Berdyansk is quite ambitious, but, I think, it is feasible.
A Bridge in the Side: Kerch Restrictions for Ukrainian Grain Traders
A Bridge in the Side: Kerch Restrictions
for Ukrainian Grain Traders
—  What countries receive goods from this port?
— Turkey, Egypt, Israel, Algeria, Tunisia, Lebanon, as well as European countries.
— How damaging is the situation in the Kerch Strait? Missing deadlines? What reasons do they give for delaying vessels?
— Delays are always costly. Vessels are detained for inspection and document verification. The delays may last from 3 days to a week. I think an increase in freight rates by USD 3 is quite feasible.
— What is your attitude to market competition? There are many new large trading companies like GrainCorp, Sierentz coming to the market.
—  We are not afraid of competition. New companies are coming and going every season. Our company is steadily growing. Naturally, there is competition, but soon it will not be about prices but about services.

Undoubtedly, multinational companies that are present on the market have a number of advantages: they have transshipment capacities and cheaper financial resource compared to Ukrainian companies. For instance, Ambar Export BKW buys a lot of grain on FCA, EXW terms. It is a labor-intensive process, and it is less interesting for multinational companies, because it requires the manager to be at the loading point, monitor the process, do the paperwork and work directly with agricultural producers. Unlike big companies, 95% of our purchases are made in UAH. Besides, we have not yet worked with holdings much. New companies that just enter the market tend to make the purchase with foreign currency on CPT terms and do not get involved in the VAT refund process. We have a lot of specialists involved in the process of checking counterparties and the papers needed for VAT refund.
— Does it mean that there is a place in the sun for everyone in the Ukrainian trading?
—  Exactly. The main factor, of course, is the price. But the quality of the provided trader services is also important: the speed of shipment, the speed of payment, assistance to agrarians with the papers, the turnaround time, help in correcting mistakes, etc. All of it is human relations, i.e. the most expensive resource, which will eventually rise in price in this business.
—  Fly-by-night companies that "cheat" farmers are quite common on the market. Have you ever encountered them?
— I have no comment because we do not work with such companies. There were, however, a few legal entities our company turned down during the verification process for various reasons: some had a questionable registration; others stated buying 1 ton of grain and selling 100 tons or offered recommendation letters by companies who never gave them ones. If we are in doubt, we always ask potential suppliers: "Who do you work with?". As a rule, they name companies in the top-10 exporters list.
— Does it take a phone call to clear things up?
— Yes. In fact, many companies know each other well. It takes a call or two to the company they named to clarify the issue. We receive such calls as well. Checking the supplier during the procurement is the most important thing.
— So how come these fly-by-night firms survive?
—  Every pot has a lid, I guess. It is a matter of how desperate a buyer is or how carefully he checks the supplier.
— Do the names of the beneficiaries of such companies are known on the market? Is there a blacklist?
—  Unfortunately, there is no such blacklist in Ukraine. Although there are companies in Ukraine that came up with an initiative to create such a list.
— Are you ready to join the initiative?
— Yes, we are. However, such ghost companies disappear as quickly as they emerge.
— Can it turn out to be an endless list?
—  I feel it can. It is a problem and it should be addressed at the state level. The state must protect legal exports from the illegal ones.

One of the ways to solve the problem is blocking tax invoices. However, the company must have an unconditional right to refund the registered tax credit without additional conditions and sets of copies of documents from suppliers on the origin of the goods.
— What is the proportion of legal and illegal exports today?
—  It is difficult to say. However, it is not the only problem in the agricultural sector. There are also grain theft during harvesting and transportation, problems with land registration and disputed land. There are farmers who evade paying VAT, and, of course, producers, who do not want to pay VAT, and are unaware of opportunities for exporting under commission agreements.
—  Olga, your phone has buzzed many times during the interview. How many calls do you get per day?
—  I have received 4 phone calls, 2 WhatsApp calls, 4 Telegram messages, 3 calls and 14 messages via Viber during this hour. It is a usual thing. My whole working day passes like this. I have to be on my phone all the time. There are days when I need to charge the battery twice. Sometimes it is less busy. Tuesdays and Thursdays are trading days, when there are many offers for sale and, consequently, many calls to make and to take.
— So there is such a thing as trading days, right? Are Tuesday and Thursday your days?
— Yes. Tuesdays and Thursdays are the trading days (as we call them). We get the price very late on Monday. There is not always enough time to agree on the terms of a deal by the end of the day. Once the price is out, everybody waits to see which way the price will go, what the competitor will offer, what FOB and CIF deals there are. On Tuesday, the price is clear. Producers know they need to show what they sell on Monday, but the actual sale will take place on Tuesday when all the high and low prices are known. The same goes for Thursday. Friday is the day for those who could not make a sale on Thursday.
— What are your TOP resources to start the day? What webpages do you check during the day? Do you have any favorite browser bookmarks?
— Currently, I use AgroChart.
— Where do you get information on stock exchanges?
— Everybody checks market quotes provided by CBOT, EuroNext. They are available from many agencies' websites: Reuters, AgroChart, and Agflow. It is a matter of personal preferences where to check them.
— Do traders have weekends?
—  Some people involved in trading do have weekends. There is no rest for logistics specialists and the head of the contract execution department. They are the ones who have neither days off nor holidays. All the operations depend on them. Loading of goods, coordination and registration, resolution of controversial issues or emergencies require their daily presence whether it is a regular working day, a weekend, or a holiday. Everyone should be in touch and act together.

In other words, people involved in trading have no days off, it is a continuous process.
—  Thank you for an interesting talk. We wish you to reach the planned million tons. We’d be happy to inform our readers about the achievement, so we will be looking forward to learning about it.
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