KTG Agrar brings in good grain harvest
Prices of agricultural commodities expected to rise at year-end 2008
- Over 50,000 tonnes of grain and rape harvested
- 70 percent of the harvest sold at high prices at the beginning of the year
Hamburg, 20 August 2008 – KTG Agrar AG [ISIN: DE000A0DN1J4] has harvested roughly 12,500 hectares of its total of approx. 21,500 hectares. In the past weeks, the company brought in over 50,000 tonnes of grain and rape in eastern Germany and Lithuania. “We are very satisfied with the harvest. We sold some 70 percent at the beginning of the year, i.e. at much higher prices than current prices, and can now begin to deliver,” said Siegfried Hofreiter, CEO of KTG Agrar. Starting mid-September, organic and conventional maize and millet will be harvested on the remaining hectares, thereby concluding the 2008 harvest campaign.
Altogether, the company brought in 30,000 tonnes of conventional and 15,000 tonnes of organic grain as well as 6,000 tonnes of conventional rape. Being one of Europe’s leading agricultural companies in terms of its total farmland, KTG Agrar benefits from regional diversification. This not only minimises the risk of crop failures due to regional weather impacts but also greatly increases the utilisation and the efficiency of the machinery. In mid-July, the harvest began on the company’s southernmost land near Leipzig and continued north towards Anklam. The main machines including the combine harvesters were then ferried to Lithuania, where the harvest ended this week. This way, KTG Agrar increases the utilisation of the machines by up to 50 percent.
KTG Agrar is optimistic about the future. Although prices are currently on the decline, the company does not see this as a sustained turnaround. With prices rising sharply in 2007 and the first few months of 2008, a decline had been anticipated in conjunction with satisfactory harvests in the USA and Europe. The fundamentals that lead to rising prices in the long term have not changed. The growing world population, the change in nutritional habits and the trend towards renewable energies are leading to constantly growing demand for agricultural commodities. This demand contrasts with an increasingly limited supply, which is attributable to the decline in agricultural land and the climate change. As a result, global supplies of wheat and maize have declined by 50 percent over the past seven years. At present, the increased capital requirements resulting from higher fertiliser and seed prices are also a relevant factor. Farmers in Eastern Europe, in particular, are finding it difficult to raise the required bridge finance.
This suggests that many producers will sell most of their harvests in the coming months for financial or logistical reasons. KTG Agrar therefore expects agricultural prices to pick up again at the end of the year. The income from the contracts signed at the beginning of the year, the sound financial situation and the large storage capacities allow the company to store the rest of the harvest for the time being and to sell it when prices rise again. “Volatile prices are quite common in this seasonal sector. It all comes down to selling at the right time,” said Siegfried Hofreiter. KTG Agrar plans to continue its dynamic growth in the current year and to boost its EBIT margin in the process. The results achieved to date mean that the company is fully on target.