Market Situation and Outlook 2013/14 Wheat & Maize FOURTH SESSION OF THE AMIS GLOBAL FOOD MARKET INFORMATION GROUP ROME, FAO HEADQUARTERS 1-2 October 2013 1 Prices Falling! 2 1
Brent Crude vs West Texas Intermediate Energy Markets Ethanol prices at near 3-year low Source: http://en.wikipedia.org/wiki/file:brent_crude_vs_west_texas_intermediate.png After reaching a 2-year high in late August, WTI prices fell to $103 (Brent to $109) a barrel by late September, due to reduced supply concerns as chance of military escalations over Syria subsided. Prices also fell on expectations that the US budget impasse could hurt economic growth in the US. AMIS website -http://www.amis-outlook.org/ In September: Sharp fall in ethanol prices, to a 3-year low triggered by sell of in December maize (followed by upward revision of the USDA to this year s maize production), sell-off in gasoline prices and sharp increase in ethanol production. 3 Exchange Rate Movements Selected currencies against the US Dollar (January 2013=100) 130 125 120 124 119 114 In September, US Federal Reserve decision to maintain it pace of monetary stimulus, pushed up stock markets and currencies in emerging markets as long-term US interest rates fell, making higher-yielding investments in the EM more attractive. 115 109 2-Sep 9-Sep 16-Sep 23-Sep 110 105 100 95 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 India South Africa Indonesia Turkey Sources: Reuters and Bloomberg 4 2
Global Wheat Situation and Outlook 5 Wheat Production up 6.8% in 2013 (record) World Production and Area Leading Wheat Producers 1/ Source: FAO/GIEWS-CBS 6 3
Wheat export supplies in 2013/14 tighter than in 2012/13 Major Exporters stocks-todisappearance ratio dropping to 12.6% from 13.5% in 2012/13. The decline in the US wheat production (for 4 th consecutive year) lead to lower ending stocks in the US. Inventories could decline also in other major exporters, except in the EU. AMIS website-http://www.amis-outlook.org/ 7 Wheat Trade to Reach 141mt in 2013/14, up 2% Imports by Region Major Exporters Imports by China to rise by at least 3mt (to 7.5mt) could increase even further! Higher imports also by Egypt, Kenya, Pakistan, Saudi Arabia and Tunisia. Source: FAO/GIEWS-CBS 8 4
Wheat Prices At least 20% down Y/Y December CBOT Wheat Futures Increasing confidence that world wheat supplies would be adequate in 2013/14 put downward pressure on prices during the first part of September, along with declines in other grains and oilseeds, especially maize. However, falls were limited by solid export demand, concerns about lower export potential in Argentina and suggestions that China would need further imports. Source-IGC for AMIS Market Monitor-No12 AMIS website-http://www.amis-outlook.org/ 9 High (record) Prices in Argentina and China USD/tonnes 490 440 390 340 290 240 190 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 China Zhengzhou Argentina MATba USA CBOT Higher prices in China encourage imports Higher prices in Argentina discourage exports too much exports in 2012/13 despite a low production. Sources: Reuters and Bloomberg 10 5
55 40 25 Price Volatility (a measure of risk): Much lower than in recent years! Wheat Historical Volatility (HV, 30D) for December % % 70 78 10 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep 2008 Values 2012 Values 2013 Values 68 58 48 38 28 Wheat Implied Volatility (IV)* for 18 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep 2008 Values 2012 Values 2013 Values Contango-upward sloping (normal) prices signal producers and warehouses to store surpluses and buyers to take advantage of cheap nearby grain availability Forward Curve USD per tonne 270 260 250 240 230 27 Sep 2013 30 Aug 2013 31 Jul 2013 * Show the level of expected future volatility embedded in the option premiums observed in the CBOT s options on futures markets. Sources: Reuters and Bloomberg 11 Latest Wheat Outlook in Summary: From AMIS Market Monitor, October 2013 AMIS website at- http://www.amis-outlook.org/amis-monitoring/monthly-report/ 12 6
Global Maize (Corn) Situation and Outlook 13 Maize Production up 12.7% to a new record World Maize Production and Area Production: Leading Maize Producers 1/ Source: FAO/GIEWS-CBS 14 7
A sharp recovery in maize supplies in 2012/13 Most of the increase would reflect higher maize inventories among major exporters, especially in the United States, where a recovery in maize production in 2013 could boost ending stocks from their historical low level of 16.8 million tonnes to 44 million tonnes, 27 million tonnes higher than their opening level. Higher maize stocks are also forecast for Brazil, China and the EU. AMIS website-http://www.amis-outlook.org/ 15 Maize Trade to Approach 104mt in 2013/14, Up 2% and a Record Imports by Region Major Exporters The main drivers behind the anticipated expansion in world trade of maize are larger imports by China, Egypt, Kenya, Japan, Indonesia and Mexico. Source: FAO/GIEWS-CBS 16 8
World Maize Utilization Source: FAO/GIEWS-CBS Global feed use of maize to reach 541mt in 2013/14. To rise by 18% in the US and by 10% in China. At 148mt, feed use of maize in China would exceed maize feed use the US for the 3rd consecutive season. 17 Maize for Ethanol fuel up 5% in the US (in 2013/14) Maize prices coming down, could help boost ethanol production in the US, but what about ethanol prices? The Blend Wall question: Can E15 (15% ethanol) be achieved if gasoline consumption isn t increasing? http://www.startribune.com/newsgraphics/225564062.html 18 9
Maize Prices Down 28% Y/Y December CBOT Maize Futures New crop supplies and prospects for a large crop in the US, combined with good availabilities in Brazil, led to declines in maize export prices during September. Black Sea prices were broadly unchanged as rain-related delays tempered good crop prospects. Source-IGC for AMIS Market Monitor-No12 AMIS website-http://www.amis-outlook.org/ 19 Prices higher in China but declining in Argentina USD/tonnes 450 400 350 300 250 200 150 100 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Higher prices in China, despite a record crop, point to higher import demand this season Lower prices in Argentina after a record harvest earlier this year boost exports Sources: Reuters and Bloomberg China Dalian Argentina MATba USA CBOT 20 10
Price Volatility (a measure of risk): US crop uncertainty has been supportive to higher volatility % Maize Historical Volatility (30D) for December 50 40 30 20 10 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep 2008 Values 2012 Values 2013 Values % Maize Implied Volatility for December 55 50 45 40 35 30 25 20 15 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep 2008 Values 2012 Values 2013 Values Forward Curve USD per tonne 210 190 170 Recent months were marked by exceptionally tight supply situation (of the old maize crop), thus a sharp downward slope in early September (backwardation). In contrast, good new crop prospects point to a more normal outlook. 27 Sep 2013 30 Aug 2013 31 Jul 2013 Sources: Reuters and Bloomberg 21 Latest Maize Outlook in Summary: From AMIS Market Monitor, October 2013 AMIS website at- http://www.amis-outlook.org/amis-monitoring/monthly-report/ 22 11
More information on AMIS website www.amis-outlook.org 12