THE IGC: SIX DECADES OF INTERNATIONAL COOPERATION IN GRAIN

1
Prospects for international wheat trade ABITRIGO
13th International Wheat SeminarNatal, Brazil
John Tjaardstra International Grains Council
2
IGC Six decades of international cooperation
in grain
IGC 2006 2
Export Prices
607
112
240 (US/ton)
200
160
(US HRW fob Gulf)
WheatConsumption(m. tons)
Wheat Trade(m. tons)
140
144
20
1946/47
2006/07
1946/47
2006/07
1946/47
2006/07
Nominal
3
Role of International Grains Council
IGC 2006 3

• GTC 1995 aims to
• further international cooperation in global
  grains trade
• promote expansion, openness fairness
• contribute to market stability food security
• By means of
• more market transparency through information
  services
• analysis and consultation on market policy
  developments
• IGC Conferences/Round Tables connecting with
  industry issues
• also monitoring rice oilseed markets

4
Brazil share of grain oilseed trade
IGC 2006 4
Wheat Imports
Grain Oilseed Exports
Meat Exports
Brazil
Rest of world

• A hugely important grain economy
• Brazil accounts for 20 of world grain
  oilseed exports
• 30 of meat exports largest single exporter
• And 6 of global wheat imports

5
Global grain supply demand and trade
IGC 2006 5
(m. tons)

• Production of wheat maize recently outstripped
  by use
• Carry-over total to dip to historically small
  total but figures unreliable (note China
  other data problems)
• Feed food use firm, growth in industrial uses
  (biofuels) setting the pace
• Trade rising but China not yet a major buyer

m. tons (Trade)
Trade ?
6
Industrial uses of grains
IGC 2006 6
(m. tons)

• Over one-third of all industrial use is in
  biofuels (ethanol)
• Today ethanol totals 68m tons grain, a large
  slice of global use
• Mainly maize, but also some wheat, sorghum rye
• Grain ethanol largely driven by US China
  expansion
• But implications for prices, including wheat

Other/Unsp.
Brewing
Starch
(incl. sweeteners)
Ethanol
7
Wheat flour trade 30 years
IGC 2006 7
m. tons

• Continued, if modest, growth especially after
  allowing for past role of FSU imports
• Totals take no account of additional trade in
  secondary products
• Fewer recent annual shocks for most, a more
  predictable pattern

CIS/USSR
8
Wheat imports by region 30 years
IGC 2006 8
m. tons

• Note steady growth in FE Asia (excl. China), N
  Sub-Saharan Africa
• China once a big importer, but recently broadly
  self-sufficient
• S America past decade is generally steady,
  though 06/07 likely record imports on lower
  Brazil crop

Other
NC America
CIS/USSR
EU
Sub-S Africa
N Africa
N E Asia
S Asia
China
Pacific Asia
S America
9
Main wheat exporters 30 years
IGC 2006 9
m. tons

• The big story in past decade is shift from 5
  majors towards Black Sea
• Argentina Australia more subject to crop
  variations but volumes maintained

Other
Argentina
Canada
Australia
EU
USA
10
Wheat trade by main categories
IGC 2006 10
m. tons

• Milling wheat (80 of total) accounts for much of
  the overall rise in trade
• Wheat flour trade decline less than expected.
  Many reasons, including recent Iraq buying
• Durum trade usually depends on N Africa EU
  demand
• Feed wheat difficult to define trade depends
  on relative pricing availabilities

Feed
Durum
Flour
Milling
11
Wheat flour exports
IGC 2006 11
m. tons

• Trade at around 9m tons
• EU (and US) export role has declined
  significantly
• UAE other wheat importers become large regional
  flour exporters
• Remains attractive to utilise spare milling
  capacity for exports
• Long term declining trend remains but trade still
  important for many

Others
China
India
UAE
Russia
Kazakhstan
Japan
Turkey
Canada
Australia
Argentina
USA
EU
12
A bigger role for other exporters
IGC 2006 12
m. tons

• Huge rise in Black Sea milling feed exports
  since 1994
• Low production costs drove output higher
• Also, from time to time, South Asian exports
• Resultant decline in 5 majors total

Others
India
Ukraine
Kazakhstan
Russia
13
Chinas wheat supply demand
IGC 2006 13

• Sharp fall in stocks since late 1990s, though
  figures remain vague
• Per caput consumption declining good 05 06
  crops stabilising stocks
• Little immediate prospect of significant buying
• Official emphasis is on quality (has feed wheat
  surplus)

(m. tons)
Net Imports
Stocks
Consumption
Production
14
Role of food aid in wheat flour trade
IGC 2006 14
age of total wheat trade

• Food Aid Convention data, shipments declining due
  to relative decline in aid shipments rise in
  local / triangular purchases
• Less wheat flour, more other grains other
  food products
• But depends on where the food aid needs are

15
Ocean freight rates (BDI)
IGC 2006 15
BDI
US/ton

• Freight major factor for grain importers
• IGC maintains detailed ocean freight database
• After 04/05 peaks, recent renewed strength due to
  China minerals demand
• US Gulf Japan now 49/ton (Panamax), peak was
  70/ton in 2004

US Gulf to Japan Heavy Grain ?
? Baltic Dry Index
16
IGC grain outlook for 2006/07 (GMR 28/09/06)
IGC 2006 16
Argentina, Australia, Canada, EU, United States

• World grain output to fall by 27m, due to wheat
• But total use to rise by 10m on record biofuel
  demand
• World closing stocks projected to dip to lowest
  in 25 years

17
Wheat production, consumption stocks 06/07
IGC 2006 17

• Production to fall to 588m t (618m) but will now
  be less (Australia)
• NH wheat crop quality yields mostly
  disappointing
• Argentina outlook improved but Australia drought
  more serious
• Wheat consumption to dip on cut in feeding, but
  still above output
• World wheat stocks to tighten, including in major
  exporters

(m. tons)
Stocks
Production
Consumption
18
Wheat exporter other stocks in 2006/07
IGC 2006 18

• 5 Majors sharp falls EU / Australia
• Black Sea exporters also reduced
• Indias stocks to remain tight, but China sees
  minor upturn

m. tons
Other
India
China
Net Exp.
Ukraine
Russia
Argentina
5 Major Exporters
Australia
Canada
EU
USA
19
Main wheat exporters 2006/07
IGC 2006 19
m. tons
Other

• Modest rise in trade, to 112m t, with larger
  India/Brazil buying partly offset by falls
  elsewhere
• After heavy early shipment pace, Black Sea
  supplies to tighten
• Argentina sold out, Australia concerns

Ukraine
Kazakhstan
Russia
Argentina
Canada
Australia
EU
USA
20
Current world wheat market - export prices
IGC 2006 20
(US/ton)

• Role of commodity funds on US futures price
  impact
• Global price trends less uniform more regional
  factors
• Recent market strength due to supply worries but
  also slow farmer selling
• Australia crop uncertainties add to bullish
  markets
• NH winter wheat planting progress for 2007 - will
  be closely watched

US HRW, fob Gulf
EU (France), fob Rouen
Argentina, fobUp River
Russia 4th Grade, fob Black Sea
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US price relationships
IGC 2006 21
US farm prices wheat / corn / soyabeans
US/bushel
SOYABEANS
WHEAT
CORN
22
EU price relationships
IGC 2006 21
EU Wheat v Rapeseed
Rapeseed (Fob Moselle)
uro/ton
Wheat - Standard Grade (Rendu Rouen)
23
World wheat areas and yields
IGC 2006 22
Yields
Yield (quintals/ha)
Harvested Area (m. ha)
Harvested Area
24
Global wheat trade scenario the next 10
years
IGC 2006 23

• Overall per caput food wheat consumption
  declining
• But still growth in parts of Asia, Africa Latin
  America, if slower than previously
• Based on 1.2 annual population growth, some 700m
  more people by 2016
• Milling wheat durum trade driven by approx 1
  annual rise in food wheat use
• China imports may not rise significantly, with
  static per caput use
• More importers will mill flour-based products for
  export
• Black Sea exports will continue while competitive
• Wheat flour trade unlikely to expand, but role
  for regional trade
• Feed wheat trade to feature whenever it can
  compete with corn
• World wheat trade projected to rise by around 15m
  tons, to some 125m by 2015

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IGC 2006 24
Thank you hope to see you in London at the
IGC Grains Conference on 12 June 2007!
www.igc.org.uk