Title: U.S. WHEAT ASSOCIATES Moscow 12 September, 2006
1U.S. WHEAT ASSOCIATESMoscow 12 September, 2006
- World Wheat Markets
- The Past and the Future
- Goris van Lit
- Assistant Regional Director
- Europe and North Africa
2Petersons Grain Marketing Strategy anno 1861
- I want you to sell my corn..
- sell at 1.50 per bushel dont take no less...
- unless corn will not sell for that much
- and if corn falls, sell anyhow..
- be sure and sell it before the weevil gets into
it too bad.
Note found in the Peterson family bible, which
Great-Great Grandfather Peterson wrote to his
brother before he left for the U.S. Civil War.
3Mollet de Valles (Barcelona)Grain Exchange Anno
1900
Wheat Quotation Board
Courtesy Molino Moreto, Mollet de Valles, Spain
4Plant/animal products for light.
- Since roughly 3000BC
- animal fats are used to
- make candles.
-
- Since approximately
- 1500BC vegetable oils
- are used in oil lamps.
5Agricultural crops for transportation
6Agricultural crops for transportation
- The first demonstrated diesel engine run on
peanut oil (1898). - Diesel engines kept
- running on vegetable
- oil (bio-fuel) till 1920
- when a suitable mineral
- oil fraction became available.
Rudolf Diesel
7World Production and Use
Source All data is from USDA, World Agricultural
Supply and Demand Estimates, August 11, 2006
release (unless otherwise noted)
8U.S. Wheat Prices (FOB Gulf)
Source U.S. Wheat Associates, Price Report as
of August 11, 2006
9Summary 2006/07 Wheat Markets
- Global production down 21 MMT
- Hard milling wheat supplies tight
- Ample soft wheat supplies
- Global feed use down, food use stable
- World Stocks-to-Use ratio at historic low
- Prices strengthen
- World trade to fall 5 MMT
- India to import 4 MMT
- Black Sea, U.S. exports fall
10Baseline Wheat ExportsMajor Traditional Exporters
11Baseline Wheat ExportsOther Exporters
12Important Trends for the Future
- Consolidation
- Genetically Engineered Crops
- Bio Fuel Production
- Investment Money in Commodities
Bio Ethanol Plant Fort Dodge, IA
13Consolidation
- Larger farms
- Fewer grain exporters and importers
- Shorter supply chains
- Larger transportation units
- Trade and industry mergers, acquisitions and
joint ventures - Vertical integration
100 car unit train transports 10,000 tons of
grain
14Contra Consolidation Trends Exist as well
- Ongoing dismantling of government import and
export entities - Niche markets require smaller shipments.
- Shorter supply chain can require smaller
transportation units - Freight opportunities can
- be rather small scale
- (even containers)
Typical ship carrying max. 10.000 tons of wheat
from the US Great Lakes to Europe
15Genetically Modified Organisms (GMO)
- Widely applied for corn and soybean production.
Showing major agronomic advances. - Commercialization of GMO wheat is delayed by the
commercial food chain rejection as a result of
negative consumer sentiment. - The same supply chain (supermarkets) is using the
consumer fear factor falsely to improve their
customer care for image. - In most markets the issue is mainly
sociopolitical and has little to do with food
safety.
16Genetically Modified Organisms (GMO)what is next
for wheat?
- First commercially available trait (herbicide
resistance) is not released due to the negative
sentiment in different markets. - Fusarium resistant GMO wheat will be available in
3 to 5 years. - Often, wheat is loosing the competition for
acreage as GMO oilseeds and corn show better
economic returns for the farmer. Bio fuel
production may reinforce this trend. - When and where will the first commercial
transgenic wheat be produced?
17Bio Fuels today
- Government incentives and regulations and strong
oil prices drive the production and developments
of bio fuels. - Of the 2006 US corn crop 19.6 or 54.6 MMT,
grown on 6.2 million hectares, will be used for
fuel ethanol production. - For 2006 bio diesel production in the EU is
forecast to total 6,1 MMT, consuming, among other
oils and fats, close to 60 of the EU rape seed
crop. - Brazil has a long history of fuel alcohol
production. Sugar cane is a very efficient
source for alcohol production. New more efficient
technologies emerge. - With a supply not able to satisfy demand, profit
margins on bio fuel production are very healthy.
18U.S. Corn use in Ethanol Production
19Bio Fuels the Future
- U.S. fuel alcohol and bio diesel consumption will
rise as U.S. laws require and markets demand a
growing volume of bio fuels. ( 100
by 2012) - The E.U. will show the same trend with more
emphasis on bio diesel. - Bio fuels will become cheaper as supply and
demand will be more balanced and , new
technologies emerge. - Cheaper raw materials will be used like cellulose
(from straw, grasses and other plants) and animal
fats from rendering and slaughtering operations.
20Wheat and Bio Fuels
- Sugar crops produce fuel alcohol more efficient
than starchy crops like grains and root crops. - Corn and root crops (tapioca) will produce
alcohol at a lower cost and larger efficiency
than wheat. - Fuel alcohol production from wheat only makes
sense in economically protected and/or remote
surplus wheat growing areas (E.U.). - The importance of bio fuels for wheat production
is mainly the competition for acreage with bio
fuel crops (often GMO).
21Investment Funds and Wheat Prices
- Increasing amounts of money are invested in
commodity funds including the grain derivatives. - Hedge Fund, Index Fund and Commodity Fund
managers put a lot of emphasis on technical
analysis. - U.S. futures markets for wheat have also seen a
healthy rise in volume and open interest.
(Tripled for COT wheat since 2003) - Fund investment is adding to the volatility of
the wheat market as funds move in or out of
markets based on technical indicators.
22Investment Funds and Wheat Prices
23Investment Funds and Wheat Prices
- Buyers and sellers of wheat have to add technical
analysis to their tool box in order to make a
decision on physical wheat transactions. - The more volatile movements of markets pose
threats for the unprepared buyer or seller and
create opportunities for prepared ones. - Especially for analyzing short term price
developments, technical analysis become essential.
24Questions Remain
- Consolidation, is bigger better at the end or is
the survival of the fittest idea making the
dinosaurs extinct ? - Where and when will the first commercial
transgenic wheat be produced ? - Do we need transgenic crops to feed the world ?
- Is bio fuel from food and feed crops a
sustainable energy source ?
U.S. Indy Car Series is running on ethanol in 2007
25Thank your for your attention
- U.S. Wheat Associates is at your service
wherever you are.
www.uswheat.org