India- Oilseed Sector Addressing Quality, Supply, Logistics and Hedging Issues A PRESENTATION BY McDonald Pelz Global Commodities
Oil, Oilseeds and India Use One word to Explain consistency of India in Global Markets: Bad Use two words for consistency/importance of India in Global Markets: Not Bad Please explain consistency of India in Global Markets : Not Bad Enough ( to ignore)
What strikes your mind when you think of India? Chaos? Regulatory concerns? Un reliable supplier? Un reliable customers? Bad logis9cs? Unknown devil.. A black box Informa9on arbitrage High government interven9on India was the only Surplus country in Grain Deficit South East Asian Region Mcdonald Pelz has established an Asian Link to take care off above concerns concerns 3
More mouths to Feed 1,800 60% 1,600 1,400 50% 1,200 40% 1,000 800 30% 600 20% 400 200 15% 15% 15% 15% 16% 16% 16% 17% 17% 17% 17% 18% 18% 18% 18% 18% 17% 17% 17% 17% 10% - 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2014 2015 2020 2025 2030 2035 2040 2045 2050 0% % OF WORLD Population Urban % Source: Population Reference Bureau MCDP Analysis India will become most populated na9on by 2030 Agriculture under stress Urban popula9on expected to increase at rapid pace- consump9on will increase South Asia will become worlds biggest demand hub Changing Demographics will put lot more stress on Land resources 4
Direction of Global Trade World, Region, Country 2015 2025 2040 2050 Change % change WORLD 7 349 8 142 9 157 9 725 2 376 32% Consuming Countries 0 0 0 0 0 Sub-Saharan Africa 962 1 240 1 744 2 123 1 161 121% AFRICA 1 186 1 504 2 063 2 478 1 291 109% Egypt 92 109 134 151 60 65% South Africa 54 58 63 66 11 20% Nigeria 182 234 327 399 216 119% China 1 376 1 415 1 395 1 348-28 -2% Japan 127 123 114 107-19 -15% Republic of Korea 50 52 52 51 0 1% Southern Asia 1 823 2 049 2 310 2 424 601 33% Bangladesh 161 179 197 202 41 26% India 1 311 1 462 1 634 1 705 394 30% Pakistan 189 227 279 310 121 64% Indonesia 258 285 312 322 65 25% Philippines 101 116 137 148 48 47% Consuming Countries popula9on possibly will increased steadily Producing Countries will see stagnate popula9on Welcome to Asian and African Markets Exporting Countries EUROPE 738 738 721 707-32 -4% NORTHERN AMERICA 358 384 416 433 75 21% South America 418 438 484 494 75 18% Russia 143 143 136 129-15 -10% Population in Million 5
China and India (Soybean Vs Veg Oil Import Index) 350 300 250 200 150 100 319 290 238 221 206 187 181 177 122 112 100 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 India Veg Oil Import Index China Soybean Imports India China Years Veg Oil Imports Index Soya Imports Index 2005-06 4856 100 28317 100 2006-07 5440 112 28726 101 2007-08 5907 122 37816 134 2008-09 8789 181 41098 145 2009-10 9068 187 50338 178 2010-11 8582 177 52339 185 2011-12 10027 206 59231 209 2012-13 10732 221 59865 211 2013-14 11571 238 70364 248 2014-15 14070 290 78350 277 2015-16 15508 319 80500 284 000mt, Source: USDA 6
Love IT Hate IT but you cannot Ignore IT 000mt, Source: USDA India has cri8cal Role to Play in Global Supply Chain across all commodi8es 7
Global Markets and India YEARS OF INDIAN SURPLUSES- LA NINA India/South Asia YEARS OF INDIAN SHORTAGE- EL NINO Rest of world World waiting for India to Export Global Markets waiting for India to Import
Global Supply Hedge El- Nino Effect on Global Crop Production India was the biggest exporter of grains, oilseeds and meal in the Asian region Important role in global supplies -la nina Global produc9on shrinks- india act as supply hedge India proximity to - freight spread India stayed food self sufficient. 2008-15 Source: FAO Paper Important is to understand Indian exports increases mainly in years of global deficit Important balancing Role in Global Supply Demand Economics 9
Soybean and Mustard Sown Areas Soybean Areas Mustard Areas Mustard Highly Monsoon sensi8ve Areas
India Market Share Commodity Country 2011/2012 2012/2013 2013/2014 2014/2015 2015/2016 Soymeal Imports South Asia 966 1,205 1,354 1,594 1,727 Southeast Asia 11,415 12,486 13,746 14,883 15,922 Commodity Country 2011/2012 2012/2013 2013/2014 2014/2015 2015/2016 Soybeans Imports South Asia 257 398 535 1,246 2,470 Southeast Asia 5,798 5,603 6,151 6,711 7,200 Commodity Country 2011/2012 2012/2013 2013/2014 2014/2015 2015/2016 Soybean meal India 4,391 4,354 2,742 1,072 100 Reducing Market share in Expanding Market- Marred by Weather and Global Excess Supplies
El Nino and Impact on Indian Production Weather Event India Production Govt Proc Year Weather Event Monsoon Impact Grain Production Rice Wheat Pulses Soybean Rice Wheat 72.77 2002-03 El Nino Drought 174.77 71.82 65.76 14.91 22.9 15.80 2003-04 Netural 213.19 88.53 72.16 13.13 7.818 24.6 16.80 2004-05 El Nino -12% Drought 198.36 83.13 68.64 13.38 6.876 27.5 14.79 2005-06 Netural 1% 208.6 91.79 69.35 14.2 8.27 25.1 9.23 2006-07 Netural 3% 217.28 93.36 75.81 14.76 8.85 28.7 11.13 2007-08 La Nina 10% 230.78 96.69 78.57 14.57 10.97 34.1 22.69 2008-09 La Nina 5% 234.47 99.18 80.68 14.66 9.905 32 25.38 2009-10 El Nino -21% Drought 218.11 89.09 80.8 18.24 9.96 34.1 22.53 2010-11 La Nina 0 244.29 95.98 86.87 17.09 12.74 35 28.34 2011-12 La Nina 4% 259.29 105.3 94.88 18.34 12.21 34.04 38.15 2012-13 Mild El Nino -8% Mild Drought 257.13 105.24 93.51 19.25 14.67 31.8 25.09 2013-14 Netural 6% 265.04 106.65 95.85 18.43 11.8 31.5 28.02 2014-15 Mild El Nino 257.07 105.48 86.53 17.15 10.3 30.5 28.08 2015-16 Strong 252.02 103.61 93.82 17.33 9.13 * Numbers as per GOI Projection All no in mmt Impact of current year El- Nino is s9ll to be seen on wheat crop next year 2016-17 crop Expected impact on rice crop is higher due to dry spells in southern peninsula Rain deficit in key pulses regions lead to big rally in pulses prices in 2015-16
The Indian Way
Indian Grains Trade GLOBAL TRADE- STANDARDIZED INDIAN EXPORTS- CUSTOMIZED
Actual rake, vessel loading pictures
Key considerations- sourcing from INDIA Traditional Service Setup But India Requires more than Just Price Data Sources and Information Tool: Market is not very transparent- Information Platform Ncdex for commodity Prices tools are very much essential to know the Right offering Have good agency support- as India can Impact prices on either side
TIGHT ROPE TO WALK Surveyor Customer Supplier Indian Infra Market volatility, aggregation, small suppliers, Infrastructure and customer expectation is a tight rope to walk
RIGHT TOOLS FOR PRICING Tools for Decision Making- Shared with our customers Right Tools for Decision making Source: Inhouse
KEY CONSIDERATIONS- SOURCING FROM INDIA Traditional Setup India participates in Global markets in years of global shortages- so selection of counter party is very important Traditionally Indian Trader expects prices to come down at harvest Not many are still accustomed to- Global Thinking Big Trading Houses- Work on Basis- Short India at harvest and convert position in basis- works well in bullish markets. Local Traders take cash shorts So Better????? Selec8on of Sound counter party -there are no standard products and contracts in India
KEY CONSIDERATIONS- SOURCING FROM INDIA Other Important Notes: Monsoon sets the tone of crop production- impacts supply in country Role of Surveyors: Very Critical- Presence of International Surveyors Trading Companies: Presence of Global Majors and Big Indian corporates like ITC Quality consistency: Difficult Grading system not Developed Domestic Market- Very competitive, Cash market no means to hedge for domestic shippers Shipment slots- First come first serve- requires investments in warehouse bookings India export by Land Route to Bangladesh Transit Time- 5-10 days to major destinations Keep Contracts and Quality specifica8on as simple as Possible
Year 2016-17 Some Forecast Models
WE PROVIDE INSIGHTS- Beyond Data and Information to our Customers US Black Sea China Demand SoAM Asia- Producer and Consumer of grains and Oilseed- we are here to cater your requirements Wheat Market sumit@mcdonaldpelz.com +91-7042537773
WORLDWIDE MCDONALD PELZ India Office 111, Centrum Plaza Sector-53, Gurgaon India Phone: +91-7042537773 sumit@mcdonaldpelz.com McDonald and Pelz is a cash grain, oilseed, and renewable energy brokerage organization whose aims and goals are to help our customers in the buying and selling of their products. Over the past 31 years McDonald and Pelz has become the industry leader and it is our objective to maintain this status through our growth globally.