Global Sourcing of Agricultural Commodities A key dimension for the livestock sector

Policies and Challenges to meet the EU demand

55th FEFAC Annual General Meeting

Marcel Combot COCERAL

Brussels

15 June 2012

Agenda

1. COCERAL facts and figures

2. Global Grain Trade today: sourcing challenges

3. The EU and the world grain market

4. The EU and the world market for Oilseeds, Oils & Meals

5. Challenges for the EU supply

6. Conclusions

1. COCERAL facts and figures

COCERAL – facts and figures

• COCERAL is the EU association representing the trade with cereals, oilseeds, feedstuffs, olive oil and agrosupply

• Founded in 1958

• Members are national associations representing grain merchants, storers and/or international traders

• 30 Member Associations in 19 countries + Unistock

• Associate Member

– Switzerland

30 Member Associations 19 EU ountries

1 Associated in Switzerland

6

COCERAL

What COCERAL does not do • To interfere in commercial issues • To formulate standard contracts • To provide arbitration

IGTC International Grain Trade Coalition

http://www.igtcglobal.com/

CELCAA European Liaison Committee for the Agricultural and Agri-Food Trade

http://www.celcaa.eu/

EFIP European Feed Ingredients Platform

http://www.efip-ingredients.org/

2. Global grain trade today :

sourcing challenges

Europe: a steady continent in the fast moving world

North America

Caribbean

Central America

South America

North Africa

Sub- Saharan

Africa

Europe

Russia Ukraine

East Asia

Southeast Asia

Oceania

South Asia

Middle East

Imported

Exported

The EU: A major importer of Agricultural products Nr 1 in meals, Nr 2 in oilseeds and oils and Nr 4 in grains

Source: USDA, Toepfer

3. The EU and the world grain market

World: Grain Consumption increasing, Demand for ethanol flat recently, but feed/food growing

Source: USDA, Toepfer

World: Share of Feed Grain Use by Region

Share in feed grain use 2012/13

Share in growth in feed grain use over 10 years

Source: USDA, Toepfer

4. The EU and the world market for

Oilseeds, Oils and meals

World: Drivers in SBM Use

Share in SBM use in 2012/13

Share in growth in SBM Use over 10 years

Source: USDA, Toepfer

World: SBM Use by World Region in MMT

EU-27: Largest Soybean Meal (SBM) importer (mln t), with main suppliers from South America

12.014.3 14.6

13.211.3 11.1 10.8

9.97.8

8.59.1

8.7 9.0 9.1

0.1 0.10.2

0.5

0.31.1

0.4

0.3 0.20.2 0.5

0.50.5

0.6

22.3 22.423.6 23.2

20.721.6

20.9

0

5

10

15

20

25

2005 2006 2007 2008 2009 2010 2011

Others

United States

Brazil

Argentina

World

Source: GTIS, Toepfer

EU-27: Soybean imports (mln t): North and South America are the main suppliers

9.4 9.0 9.58.5 8.8

5.95.0

0.91.0

1.0

0.9 0.7

2.42.6

3.1 3.23.3

3.72.0

3.0

2.3

0.50.5

0.8

0.7

0.6 1.3

1.2

0.0 0.1

0.1

0.1

0.20.2

0.5

0.3 0.2

0.4

0.5

0.30.7

0.5

14.3 14.0

15.214.4

12.613.5

12.1

0

2

4

6

8

10

12

14

16

2005 2006 2007 2008 2009 2010 2011

Others

Ukraine

Canada

United States

Paraguay

Brazil

World

Source: GTIS, Toepfer

5. Challenges for the EU Supply Chain

Ensure food security in the EU

Interdipendency and tension

Domestic and Third Countries

Supply

Policies and Challenges for the EU Supply What the traders look forward to

• transparency • predictably and a clear set of rules • a level playing field for all operators in order to

avoid unfair competition or market distortions

Policies and Challenges for the EU Supply Common Agricultural Policy - CAP Reform • Public intervention: effective instrument if used as a safety net

securing a minimum income to agricultural producers

• Contractualisation and producers organisations:

– No supporte if applied to the cereals; oilseeds and by-products markets

– Cereals and oilseeds traded on global market and regulated with functioning tools (futures and frame contracts at national and international level)

– Market management by producer and interbranch organisations would fragment the market and lead to competition distortions

• Greening: caution - going too far could lead to national disparities in

how the measures are financed and this could have an influence on the relative competitive position of farmers within the EU and have a negative effect on crop production, availability and marketing

Policies and Challenges for the EU Supply Agricultural Market Information System (AMIS)

• G20 and Action Plan on Volatility: for governement and not for traders

• FUNCTION

– improve agricultural market information

– collection of reliable data on wheat, maize, rice, soybeans

– report on abnormal market conditions (not clear what is intended for that) and strengthen global warning

– collect and analyze policy information and build data collection

• Global Market Information Group => technical representatives from countries participating in AMIS => production, stocks, trade, utilization and prices (including future prices)

Policies and Challenges for the EU Supply Agricultural Market Information System (AMIS) • Private sector participation:

– essential to contribute setting up a methodology of reporting data reflecting the realities of the business

– definition of indicators: futures markets; convergence, use;

• High level ambition shared: no double work from existing sources providing data

• Expectations from Russia, China, India

Policies and Challenges for the EU Supply Market in Financial Instruments Directive (MiFID)

COCERAL is in favor of

• transparent financial agricultural commodity markets • harmonization of the EU and international rules for well-

functioning markets, • adequate levels of liquidity and

effective price volatility management

Policies and Challenges for the EU Supply Market in Financial Instruments Directive (MiFID) The future MiFID legal framework should strive

• to not unduly impact the liquidity of futures markets or curb the development of new risk management tools

• to ensure that the costs for farmers and other non-financials to access the exchanges would not be prohibitively high

• to ensure coordination at European and International level for new legislation and apply a sector adapted approach when introducing new rules.

• to avoid threatening convergence by limiting the use of financial instruments or reducing liquidity in the market.

• to increase transparency by ensuring greater reporting of positions held by categories of users.

Policies and Challenges for the EU Supply Market in Financial Instruments Directive (MiFID)

With regard to the Proposal for a Directive (COM2011)656/4:

Exemptions

Coceral is in favour of the provisions exempting companies trading

financial instruments for their own accounts or for their group

companies, or trade commodity derivatives for accounts of direct

customers/suppliers on ancillary basis

Position limits

• Rigid position limits can in turn restrict the ability of the economic

operators to hedge all their risks, ultimately resulting in greater

costs and increased volatility –

• Position limits would be more appropriate as part of a wider

position management approach

Position reporting – endorses weekly aggregate position reporting

Conclusions

• EU is a steady but important agri-business player worldwide

• Crucial to access to multiple sources year around (domestic production/import)

• Attention to secure level playing field to provide efficient , cost effective, safe and sustainable supply to the EU industry and livestock sector.

Thank you secretariat@coceral.com