global grain markets: key impact factors and price trends

GLOBAL GRAIN MARKETS: KEY IMPACT FACTORS AND PRICE TRENDS

Thomas Houghton

Editorial, Black Sea Grains

May 27, 2016

26 May 2016 Grain Forum & Maritime Days in Odessa 2

• Introduction to Platts

• Global grain supply

• Difficulty of pricing commodities markets

• The global grain market

• The European Union

• USA

• Argentina

• India

AGENDA

3

INTRODUCTION TO PLATTS

Platts is a commodity information and data provider. Founded in 1909, it is

owned by S&P Global, a leading provider of ratings, benchmarks and analytics.

Price Reporting Assessments

Market Reports Breaking News

$

!

Platts is completely independent

Our processes are open and transparent

26 May 2016 Grain Forum & Maritime Days in Odessa

4

Main applications of an index in the physical cargo market

• Frame agreements (long-term contracts) at “market price” which mitigate price

volatility

• Lower-risk, index-linked spot transactions, which help to manage cash flow

• Fixed margins for millers selling flour as a “wheat plus” formula

• Improved “mark-to-market” for risk and accounting functions

• New trading strategies (sell fixed / buy floating priced cargoes in a falling market,

for example)

• A reference for current market price (for analysts, investors, traders just returned

from holidays…)

USING A PLATTS PRICE ASSESSMENT

Other applications of a credible index

• Used in supply contracts as a ‘fall-back’ pricing solution in case of non-

agreement

• Used in arbitration for commercial dispute resolution

• Used by governments for royalty calculations & domestic pricing formulas

26 May 2016 Grain Forum & Maritime Days in Odessa


EMEA GRAIN PRICE ASSESSMENTS


DAILY GRAINS REPORT

GLOBAL WHEAT AND CORN FUNDAMENTALS


GLOBAL WHEAT SUPPLY AND DEMAND

2015/16 2016/17 2015/16 2016/17 2015/16 2016/17

Production 733 717 734 727 734 717

Supply 933 920 951 920 935 933

Consumption 723 724 708 713 719 715

Trade 153 154 167 164 154 153

Stock levels

203 195 243 257 215 218

FAO AMIS USDA IGC


GLOBAL WHEAT PRODUCTION

0

20

40

60

80

100

120

140

160

180

2014-15

2015-16


GLOBAL WHEAT EXPORTS

0

5

10

15

20

25

30

35

40

2014-15

2015-16


GLOBAL CORN SUPPLY AND DEMAND

2015/16 2016/17 2015/16 2016/17 2015/16 2016/17

Production 1003 1015 969 1011 973 998

Supply 1220 1233 1181 1204

Consumption 1002 1026 975 996

Trade 131 130 121 133 129 127

Stock levels

218 207 208 207 206 208

FAO AMIS USDA IGC


GLOBAL CORN PRODUCTION

0

50

100

150

200

250

300

350

400

USA China Brazil EU Argentina Mexico Ukraine South Africa

2014-15

2015-16


GLOBAL CORN EXPORTS

0

5

10

15

20

25

30

35

40

45

50

USA Brazil Argentina Ukraine EU

2014-15

2015-16

DIFFICULTIES IN PRICING COMMODITY MARKETS


RUSSIAN WHEAT BASIS RISK

150.00

160.00

170.00

180.00

190.00

200.00

210.00

220.00

FOB Russia

CME


UKRAINIAN CORN BASIS RISK

120

130

140

150

160

170

180

190

01-Sep-15 01-Oct-15 01-Nov-15 01-Dec-15 01-Jan-16 01-Feb-16 01-Mar-16 01-Apr-16 01-May-16

$/m

t

FOB Ukraine

CBOT

$11.72/mt

~ 29.75 c/bu

$36.96/mt

~ 94 c/bu

GLOBAL GRAIN MARKET DYNAMICS


ARGENTINA


EU WHEAT EXPORTS

0

1

2

3

4

5

6

7

Algeria Morocco SaudiArabia

Egypt Iran Ethiopia Kenya Jordan Yemen SouthAfrica

2014-15

2015-16


US CORN EXPORTS

0

2

4

6

8

10

12

14

Japan Mexico Colombia South Korea Peru Taiwan Egypt Saudi Arabia Guatemala

2014-15

2015-16


US WHEAT EXPORTS

0

0.5

1

1.5

2

2.5

3

3.5

2014-15

2015-16


INDIAN PRODUCTION


THANK YOU

Thomas Houghton

Editor, Black Sea Grains

[email protected]

+44 (0) 207 176 7832

mailto:[email protected]

global grain markets: key impact factors and price trends

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