An Abundance of World Wheat: The Americas & Australia Compete for Stagnant World Trade

Transcription

1 An Abundance of World Wheat: The Americas & Australia Compete for Stagnant World Trade Daniel W Basse President AgResource Chicago, IL January 2016 Daniel W Basse Daniel Basse Daniel President W Basse AgResource President March 2016 President Chicago, IL AgResource Chicago, March 2017 IL Noember basse@agresource.com 2016 Daniel Basse President AgResource Daniel W Basse Chicago, IL President AgResource Company January 2017

2 World Ag Markets Where Are We Today? World major grain production (wheat/corn/soy ) is record large. 2016/17 global major grain supplies are up 116 MMTs with end stocks rising 18 MMTs to a record large 546 MMTs. This is the 3 rd year in a row of record large grain supplies/stocks. Not een the crop woes of the EU oer the past 2 years hae eased the supply pressure. It s a world awash in grain! World Bio Fuel demand has become mature! Future grain demand growth will come from expanding world liestock herds or new policy direction. The problem is that the expansion of world liestock herd reduces producer profitability as US/world meat production reach record high leels. The world only needs 1.8% more grain/year to meet expanding caloric intake. A trend increase in world crop trend yields can meet this demand without additional cultiated acres. We are back to the ag price landscape! China is also awash in grain! It has found a way (Farm Policy/tax) to slow imports of barely, sorghum, and corn deriaties such as DDG s (and ethanol). China imported a record 31 MMTs of total grains in 2014/15 or 1 out of eery 5 MMTs of grain that traded in the world! China to export corn by 2018/19? The 2017/18 world wheat crop is estimated to be down 2% at 739 MMTs due to reduced US seeding and a return to trend yields. Howeer, carry-in stocks are record large implying another year of record or near record large wheat stocks.

3 World Ag Markets Where are we Today? After $29 trillion of world QE, where is the economic growth? World politicians are getting the message of needed fiscal stimulus. Inflationary trends start to bubble with a risk on mentality in raw materials. Nationalism takes hold with the recent otes of Brexit, Trump and now the French or Italians? The US dollar to remain in a bullish phase as the US raises interest rates and lowers the corporate tax rate. King Dollar according to Trumponomics. US interest rates lead the charge higher with 6-7 increases by the US Central Bank in their lending rate in the next months. The US economy is nearing full employment. The world s largest energy importer from becomes a net energy exporter by World 2017/18 corn production record large with South American supplies up MMTs with US exports to slow. Corn remains cheap relatie to wheat. Today, the world is producing record amounts of food. The key question going forward is whether future economic growth (outside of the US) can eleate demand to absorb all of the supply? US ag producers are asking is: How does this all end while other non US world grain suppliers raise their own production.

4 World FOB Wheat Prices 4

5 Fob Wheat Prices in Turkish Lira Lira/MT ex France ex Russia ex US Gulf Mar 17 Oca 17 Kas 16 Eyl 16 Tem 16 May 16 Mar 16 Oca 16 Kas 15 Eyl 15 Tem 15 May 15 Mar 15 Oca 15 Kas 14 Eyl 14 Tem 14 May 14 Mar 14 Oca 14 Copyright 2017 AgResource Company. All Rights Resered.

6 World Flour Exports Lira Hurts! MMTs 3,5 3,0 2,5 2,0 1,5 1,0 0,5 Turkey US Europe Argentina Kazakhstan Pakistan 0, Copyright 2017 AgResource Company. All Rights Resered.

7 2017/18 World Grain Stocks Estimated at record large Stocks Growth lasted 12 Years! MMTs Wheat Corn

8 Global Area Harested: Mil HA up 1.4 Mil HA (3 Mil acres) in The 7 th consecutie record. The market has to slow future Seeding! Mil HAs Corn Wheat

9 World Grain Trade Stagnation! Wheat Trade Flat in 2017/18 MMTs Corn Wheat

10 World Market Share By Exporter - Wheat 30% Black Sea EU US 25% 20% 15% 10% 5% 0%

11 Exchange Rates: Highly Important to Ag Markets Other s Ag Productiity

12 US Corporate Taxes Against OECD

13 Russian Farmers Seed 5% More Winter Wheat on Currency Rubles/Bu CME Wheat in Rubles CME Wheat $/Bu Tem 17 Nis 17 Oca 17 Eki 16 Tem 16 Nis 16 Oca 16 Eki 15 Tem 15 Nis 15 Oca 15 Eki 14 Tem 14 Nis 14 Oca 14

14 Russian All Wheat Seeding Since 1990 Mil Hectares

15 Russia: The Dramatic Supply and Demand Change in Just 25 Years!

16 In Russia, Its not only Larger Seeding Its Agronomic! 16

17 South America The new World Feedgrain Powerhouse!

18 Purchasing Power of Wheat Importers in Sharp Decline

19 Egypt s GASC Pays Up on Local wheat Shortages! 19

20 China Changes its Farm Policy on Sliding World Prices and Supply

21 World Corn Market Forces China Farm Policy Change!

22 Chinese Total Grain Stocks Record Large! 6-9 Years to Liquidate? MMTs Wheat Corn

23 Chinese Slowing Feedgrain Imports Who Will Replace China s Demand?

24 World Wheat Situation 2017/18 24

25 Record Large World Wheat Stocks to Start 2017/18 25

26 2017/18 World Wheat Crop at 739 MMTs down 2% 26

27 2017/18 World Wheat Stock/Use Rising on Carryin Supplies 27

28 World Corn FOB Prices Turn Lower!

29 Too Much World Corn Supply!

30 World Corn Reflects No World Trade Growth!

31 World Per Capita Corn Use Slowing

32 World Exporter Corn Stocks Rise; FOB Price to Decline to $140/MT

33 US Farmer in Tightening Financial Grip 33

34 US Combined Corn, Wheat and Soybean End stocks since 1970 MMTs Soybeans Wheat Corn

35 US Farmers Shun Wheat on Negatie Planting Margin 35

36 US Net Farm Income- Unprecedented 4 th year of Decline! $ Bil $140 $120 $100 $80 $60 $40 $20 $

37 New Leadership in the US! -Impact on Ag Markets Unknown!

38 The Trump Factor: No Illegal Central US Votes!

39 North American Wheat Exports Benefit on EU Crop Shortfall

40 Canadian Wheat Area & Yield Declining in 2017 MMTs Area Yield MT/HA 16 4,0 14 3,5 12 3,0 10 2,5 8 2,0 6 1,5 4 1,0 2 0,5 0 0,

41 Canadian Wheat Production MMTs in 2017? MMTs

42 Canadian Wheat Exports- Remaining Strong! MMTs

43 Farm Profitability Mid Range Future Growth in Ukraine 43

44 Australian/Argentine Wheat Outlook

45 Australian Wheat Production & Domestic Use MMTs Production Domestic Use ARC 17 ARC 16 USDA

46 Australian Wheat Export by Month (Int l Trade Year) MMTs 2014/ / /17 2,5 2,0 1,5 1,0 0,5 0,0 Jul Aug Sep Oct No Dec Jan Feb Mar Apr May Jun

47 Quality Spreads Widen; APH/ASW

48 Australian Wheat Exports: 20 MMTs in 17/18 with 26 MMTs Crop MMTs ARC

49 Argentine Wheat/Corn Production and Exports MMTs Wheat Production Corn Production Combined Exports

50 Argentine Wheat Exports MMTs

51 Southern Hemisphere Wheat Production MMTs 60 Australia Argentina Combined Domestic Use

52 Southern Hemisphere Wheat Exports MMTs Australia Argentina

53 How Does Years of Oersupply End?

54 Farm income/supply support (1924 Today) The US Soils Bank in the 1960 s to late 1970 s PIK Program 1983 CRP Program 1986 idled 36 Mil acres Set-aside acres to Participate in Farm Program Freedom to Farm in 1996 Decouple Crop production from Go t Payments Subsidized Reenue Insurance

55 Historical of EU s CAP s/80s Food security Competitieness Sustainability Cohesion Policy Efficiency The Early Years (60s) The Crisis Years (70s/80s) The 1992 REFORM Agenda 2000 CAP REFORM 2003 CAP Health Check 2008 CAP REFORM Post-2013 Price support Productiity Improement Market stabilization Oer production Exploding expenditure International frictions Supply controls Price cuts and compensatory payments Surplus reduction Income and budget stabilization Deepening the reform process Rural deelopment Market orientation Decoupling Cross compliance Consumer concerns Enironment Enlargement Reinforcing 2003 Reform Dairy quotas Greening Targeting End of production constraints Food chain Research & Innoation

56 Eery 7-14 Years a Significant Weather Eent Occurs to Rally World Markets MT/HA 4,5 4 3,5 3 2,

57 Weather Risks are Eleated in 2017!

58 Black Sea Wheat Yield Trends

59 ARC Modeled Weather Odds of Drought- The Hot Spots! 59

60 Long Term; Africa has to Drie Enlarged Grain Demand Unlikely!

61 Thank You