Bunge - Wheat Market update. IAOM Manila 2012

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Crystal Davidson
6 years ago
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1 Bunge - Wheat Market update IAOM Manila 2012

Bunge Today Key Facts Net Sales: $59 Billion Employees: ~35,000 Facilities: ~400 Countries of Operations: 30+ 6% 9% 12%

Sugar & Bioenergy Food & Ingredients Fertilizer A global leader in oilseed processing A global leader in grain and oilseed

distribution Leading producer of oils, margarines & industrial fats in the Americas and Europe Growing oils position in

2 Bunge Today Key Facts Net Sales: $59 Billion Employees: ~35,000 Facilities: ~400 Countries of Operations: 30+ 6% 9% 12% 19% Average Net Operating Assets Agribusiness Sugar & Bionenergy 54% Food & Ingredients Fertilizer Other Agribusiness Sugar & Bioenergy Food & Ingredients Fertilizer A global leader in oilseed processing A global leader in grain and oilseed marketing 21 mmt sugarcane milling capacity producing sugar, ethanol and electricity Leader in global trade and distribution Leading producer of oils, margarines & industrial fats in the Americas and Europe Growing oils position in Asia Fertilizer operations in Brazil, Argentina and the U.S. Joint venture with OCP in Morocco Leading corn and wheat miller in the Americas

3 Bunge Operating Companies Bunge Limited White Plains, NY Bunge Argentina Buenos Aires Bunge Asia Singapore Bunge Brazil São Paulo Bunge Europe Geneva Bunge Global Agribusiness White Plains Bunge North America St. Louis 3

4 A few basics for those who don t know! Pricing terminology Price components Futures ( transparent forward price for a given commodity) + Basis ( Cash price or price in relation to futures) FOB/ FLAT ( Free on board) Price + Freight C&F/FLAT ( Carriage and freight) Price

5 Futures Markets US Futures Exchange Markets Chicago Board of Trade(CBOT) SRW/ SWW* Kansas City Board of Trade(KCBOT) - HRW Minneapolis Grain Exchange (MGEX) NS/DNS *Sometimes these are used for other wheat types but remember the markets are not full hedges(representative) for those! It is unlikely that CBOT prices will move 1:1 with Aus wheats. Futures Contract: commitment to make or take delivery of a specific quantity and quality of a given commodity at a predetermined place and time in the future All terms of the contract are standardized and established beforehand except for the price All contracts are settled either through Liquidation by offsetting purchases or sales Delivery of the actual commodity (occurs less than 1% of the time)

6 Cash Markets Pricing of cash quantities expressed in relation to futures, known as basis or premium Cash, Forward, Flat price = futures price + basis eg. In December, SWW for January delivery in Portland are priced $0.35 cents/bu over the March(H) futures contract at $9.10 Cash Price = $9.45/bu or $347 /pmt Basis can be over (+) or under (-) futures price Represents the relationship between the local market and the futures market based on: Storage Transportation Local supply and demand Quality Substitute pricing

7 Price Fundamental Analysis Methodology What we try to do! Employing supply & demand curve logic to derive directional price & price range assumptions Determining the markets price equilibriums Supply p¹ p e p 2 Demand Quantity

8 The issues US Corn, Russia. E.U. West Aus..

9 CORN REMAINS VERY TIGHT. And will need to ration to wheat

10 Wheat is also relatively tight but not as bad as Corn.

11 The world s wheat stocks are basically sat in the US.the question is when the demand reaches there..

12 Wheat Scorecard Where are the stocks are and are not! As the current competing Origins run out of wheat the question will be when this demand comes to the US?? ORIGIN Stocks/Use Comments Comfortable >20% USW ALL 28% USW HRS 35% USW SRW 32-35% USW HRW 26-28% USDA exports high? CANADA 22-25% USDA exports high AUSTRALIA 25-28% USDA exports high Tight <20% - All need to ration eventually RUSSIA Effectively stopped KAZAK Effectively stopped UKRAINE Effectively stopped EU Stopping Dec/Jan ARGENTINA Stopping Feb/March BRAZIL Stopping March

13 Weekly sales are behind last year and the 5yr average? USDA 12/13 FORECAST (32MMT)

14 When will US Sales pick up as Russian & French pick up? Will Aus/Can pick up the slack? USDA 12/13 FORECAST (32MMT)

15 WA is defficient in rainfall this season, SA is also a question-mark..

16 1. US Drought/Russian Weather 2. Improved US weather 3. Pre-USDA report/us weather fund money off the table 4. USDA report Tighter US Corn and Wheats stocks. 5. Range bound but in a downward channel largely determined by corn & price other origin wheat.

2013 What will tip the scales for wheat BEAR Aus or Can fill the export gaps before USW. Weekly wheat sales staying sub 700-800k Further rainfall in Aus. Good planting Rains for US winter crop.

17 2013 What will tip the scales for wheat BEAR Aus or Can fill the export gaps before USW. Weekly wheat sales staying sub k Further rainfall in Aus. Good planting Rains for US winter crop. Non-US wheat continuing to win GASC. Any legaslation limiting/reducing the Ethanol mandate in the US. Macros,what the funds do. FLAGS USDA/WASDE report Oct 11 Acreage forecasts AUS weather SAM weather for corn seeding. Weekly sales Corn & Wheat. Ethanol margins/corn demand ( vs Petrol) BULL Current competing origins will all need to ration 1mmt+ US weekly wheat sales. Official suspension of Russian exports. Port Congestion in Canada pushing demand to PNW. Early frosts in Australia. Any problems with global corn. Macros,what the funds do. 17

18 18 Bunge Port Facilities Thank You

World Wheat Supply and Demand. Crop Quality Seminars 2013 Ian Flagg

World Wheat Supply and Demand. Crop Quality Seminars 2013 Ian Flagg World Wheat Supply and Demand Crop Quality Seminars 2013 Ian Flagg Beginning Stocks 250 200 Exporter beginning stocks down 35% from 5-year average 199 199 174 150 125 100 83 122 50 0 27 14 14 32 48 38