Global market trends and grain flows

GTA Advisory & Compliance Workshop

Melbourne 28/7/14

A global perspective • Prices driven

offshore…price discovery starts offshore

• Understanding broad trends critical…another piece of the puzzle

• World grain import demand increasing at 2-5% p.a. & growth has to come from somewhere.

• Australia’s share of global exports declining

Where is the export growth coming from?

World grain import growth • Steady import

demand growth means each year we have find ~ – Wheat 3-5 MMT – Soybeans 5-6 MMT – Corn 4-7 MMT

• Yield growth and additional plantings required to allow this to occur

-10%

-5%

0%

5%

10%

15%

1983

/198

419

84/1

985

1985

/198

619

86/1

987

1987

/198

819

88/1

989

1989

/199

019

90/1

991

1991

/199

219

92/1

993

1993

/199

419

94/1

995

1995

/199

619

96/1

997

1997

/199

819

98/1

999

1999

/200

020

00/2

001

2001

/200

220

02/2

003

2003

/200

420

04/2

005

2005

/200

620

06/2

007

2007

/200

820

08/2

009

2009

/201

020

10/2

011

2011

/201

220

12/2

013

2013

/201

420

14/2

015

World imports growth (5 YA)

Corn Soybean Wheat

United States • Times are changing • Most transparent & world price

benchmark but is this still warranted • Was # 1 exporter wheat, corn and

soybean but other origins are now challenging….

• US growing record large corn and soybean crops but other areas exporting more to meet rising global demand

• US planted area is already maximised • Wheat losing out in the production

mix at expense of corn and soybeans…other countries picking up

• Ethanol production plateauing • Will continue to be production &

export powerhouse…yields, amount of crop grown

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

US share of world exports

Corn soybean wheat

South America

Higher prices more production • Brazil’s soybean plantings have nearly

doubled in the past decade while corn has increased by around 25%.

• Higher world prices is allowing grain to be grown further from the ports and infrastructure is gradually improving

• South American climate and soils well suited to summer crops which is expected to see Brazil overtake the US as the major soybean exporter

• USDA expects South American soybean exports will continue to expand in the coming year to meet the growing global demand as US exports stagnate.

• Brazils soybean exports are expected to a further 45% in the next decade.

• Most of this export growth is expected to occur in Brazil and Argentina to a lesser extent

0

50

100

150

200

250

300

South American production (MMT)

soybean corn

Europe

• Overtook the US as the #1 wheat export country last year

• Should hold the tittle this year with a ~150 MMT wheat crop

• Expansion of the EU to 28 countries helping the export effort as they include more eastern European countries such as Romania

• Mostly soft wheat exports but Germany ships some hard wheat out of the Baltic

• Land is already fully utilised so capacity to grow more is limited to yields

0%

5%

10%

15%

20%

25%

30%

35%

Share of world wheat exports

US Canada EU

Aust Argentina Black Sea

Black Sea Taking a larger share of world exports • Russia / Ukraine and Kazakhstan • Black Sea wheat exports have grown

from 5% to 25% in past 15 years. • Their importance is expected to

continue to grow • USDA forecasting Black Sea will account

for 30% of global wheat exports by 2023 as more land comes under production.

• Also becoming a more important corn exporter

• Increasing Black Sea exports ant adding to global price volatility…cheapest seller and variable climate

0%

5%

10%

15%

20%

25%

30%

35%

Share of world wheat exports

US Canada EU Aust Black Sea

China Driving world commodity prices

• China will continue to drive global commodity prices

• Oilseeds, milk, meat, wool, wheat, feed grains, energies, minerals

• Already takes 60% of world soybean imports….expected to be 74% of world trade by 2023.

• Feed grain imports expected to start to rise to feed rapidly population

• USDA forecasting corn imports of 22 MMT (3% world trade) by 2023 from current 3-5 MMT (15% world trade)

• Wheat imports not expected to increase substantially….focus on oilseeds and feed grains

• Will remain very pragmatic…e.g. MIR162

0

10

20

30

40

50

60

70

80

World soybean imports (million tonnes)

CHINA Other Asia Non Asian

SE Asia • SE Asian accounts for 60% of

Australian wheat exports • Indonesia the most important

destination with ~ 4 MMT which is 55% of their total wheat imports because of quality and proximity.

• Indonesia wheat imports forecast to grow at 3% annual which is ~225kt a year

• Vietnam, Australia’s second largest wheat importer, forecast to grow at 3% p.a. which would add another 1 MMT of imports in 10 by 2023. Australia currently enjoys a 60% share of Vietnam's wheat imports.

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Bang

ladh

esh

Chin

a

Indo

nesia

Japa

n

S Ko

rea

Indi

a

Paki

stan

Phill

ipin

es

Mal

aysia

Mya

nmar

Taiw

an

Thai

land

Sing

apor

e

Sri L

anka

Viet

nam

Oth

er

Australian wheat exports to Asia kt (12/13)

Australia • Production increases largely

linked to productivity with most of the arable land already being cropped

• Share of global wheat exports declining as import demand grows

• Extreme volatility here to stay…arid climate & large domestic consumption on east coast

• Domestic demand growth slowing • Logistics focus following

deregulation…over capacity will put pressure on export elevation margins

02468

101214

Domestic demand growth slowing (MMT)

Barley Sorghum Wheat

0%

5%

10%

15%

20%

25%

1980

/198

119

82/1

983

1984

/198

519

86/1

987

1988

/198

919

90/1

991

1992

/199

319

94/1

995

1996

/199

719

98/1

999

2000

/200

120

02/2

003

2004

/200

520

06/2

007

2008

/200

920

10/2

011

2012

/201

320

14/2

015

2016

/201

720

18/2

019

2020

/202

120

22/2

023

Australia share of world wheat exports declining