Recent world grain market trendsOpportunities for Mexico

Michel FERRETFranceAgriMer, Paris

10/11 April 2013

Part I : Recent trends

Reminder : « Financialisation » of commodities markets + Price explosion 2007/08 (not addressed here)

Global wheat production vs corn production : and the winner is … cornImpact of the US Farm Bill 1996No visible impact of GMO’s on corn yield

Major shifts in grain acreage in the USA and Latin America Competitors of the USA increase their market share in grain exportsA new way of supporting farmers’s incomes : biofuel policiesWorld prices architecture, as reflected by Chicago (CME) quotations :

Corn is the market driver ….but beware of ….China’s overwhelming part in oilseeds imports : a serious threat to the stability of the grain price architectureInversion of the Corn / SRW price relationship : a new situation Emergence of Black sea producers : a welcome contribution to the world supply situation (wheat, barley, corn) but a major instability factor

Main changes

Global corn and wheat production. Difference 2012 : 195 million tons (Mt)

430

480

530

580

630

680

730

780

830

880

1990

/91

1991

/92

1992

/93

1993

/94

1994

/95

1995

/96

1996

/97

1997

/98

1998

/99

1999

/00

2000

/01

2001

/02

2002

/03

2003

/04

2004

/05

2005

/06

2006

/07

2007

/08

2008

/09

2009

/10

2010

/11

2011

/12

2012

/13

Mt

Wheat

Corn

Linéaire(Corn)

Linéaire(Wheat)

+

• IGC projections for 2017: Corn 981 Mt, wheat 731 Mt. Difference : 250 Mt

USA: Area devoted to corn, soybeans and wheat. Impact of the 1996 Farm Bill

Source: USDA /NASS/Prospective Planting Report 28/03/2013

Monde

20

22

24

26

28

30

32

34

36

38

40

1993

/94

1995

/96

1997

/98

1999

/00

2001

/02

2003

/04

2005

/06

2007

/08

2009

/10

2011

/12

Corn Wheat Soybeans

7,74

3,1

2,66

0,00,71,42,12,83,54,24,95,66,37,07,78,49,19,8

10,5

1993

/94

1995

/96

1997

/98

1999

/00

2001

/02

2003

/04

2005

/06

2007

/08

2009

/10

2011

/12

Corn Wheat Soybeans

Area (Mha) Yield (t/ha)

Corn yields in selected countries

0

1

2

3

4

5

6

7

8

9

10

11

1960

/61

1964

/65

1968

/69

1972

/73

1976

/77

1980

/81

1984

/85

1988

/89

1992

/93

1996

/97

2000

/01

2004

/05

2008

/09

2012

/13

USA

France

Mexico

Corn yield trends (t/ha): no visible impact of GMO’s on corn yields

0

1

2

3

4

5

6

7

8

9

10

11

1960

/61

1964

/65

1968

/69

1972

/73

1976

/77

1980

/81

1984

/85

1988

/89

1992

/93

1996

/97

2000

/01

2004

/05

2008

/09

2012

/13

USA

France

Mexico

Linéaire(USA)

Linéaire(France)

• USA : > 90 % of the corn area planted to GMO varieties ; France 0 %

USA: Corn production, use for ethanol, exports (Mt)

Source: USDA /NASS

252

228

256

300282

268

331307

333 316 314

274

20

55

90

125

160

195

230

265

300

335

2001

/02

2002

/03

2003

/04

2004

/05

2005

/06

2006

/07

2007

/08

2008

/09

2009

/10

2010

/11

2011

/12

2012

/13

Production

Exports

Use for ethanol

• Ethanol: ~ 40 % of corn use / EU: 3,6 % of wheat production, 5,5 % of corn production• US ethanol production: 64 % of world ethanol production

Global ethanol production (2011): 844 Mhl / 66 Mt

USA64%

Brazil25%

Canada2%

Thaïland1%Others

1%

China2%

EU5%

• For reference: Global biodiesel production: 19,4 Mt• EU: 9,6 Mt; USA: 3,2 Mt

USA: Corn supply and demand

1

3

1

2529 16

314274

369

0

50

100

150

200

250

300

350

400

2011

/12

2012

/13

2013

/14

(p)

Carry-in Production

116 116 140

127 114

37

3925

119

3635

38

21

55

16

0

50

100

150

200

250

300

350

400

2011

/12

2012

/13

2013

/14

(p)

Carry-out

Exports

Food use andseeds

Ethanol

Feed use

World corn prices: « ethanol impact »

90

140

190

240

290

340

Argentina Up river

USA Fob Gulf

Brazil fob Paranagua

Brazil: corn and soybeans area

11

12

13

14

15

16

17

2003

/04

2004

/05

2005

/06

2006

/07

2007

/08

2008

/09

2009

/10

2010

/11

2011

/12

2012

/13

Mha

597

Source : IGC

20

21

22

23

24

25

26

27

28

2003

/04

2004

/05

2005

/06

2006

/07

2007

/08

2008

/09

2009

/10

2010

/11

2011

/12

2012

/13

Mha

Corn Soybeans

Argentina: area devoted to cereals and oilseeds

01,5

34,5

67,5

910,5

1213,5

15

2007

/08

2008

/09

2009

/10

2010

/11

2011

/12

2012

/13*

Others

Barley

Sorghum

Corn

Wheat

02468

1012141618202224

2007

/08

2008

/09

2009

/10

2010

/11

2011

/12

2012

/13*

Others

Sunseed

Soybeans

Cereals Oilseeds

Source : USDA

• And the loser is: … wheat

Ukraine: a newcomer, now among the 4 top corn exporters! (Mt)

0

3

6

9

12

15

18

21

24

27

1999

/00

2011

/11

2001

/02

2002

/03

2003

/04

2004

/05

2005

/06

2006

/07

2007

/08

2008

/09

2009

/10

2010

/11

2011

/12

2012

/13

Wheat Corn Barley

Source : IGC

Top world exporters, corn and soybeans

Source: USDA

5,07,09,0

11,013,015,017,019,021,023,025,027,029,031,033,035,037,039,041,043,0

2000

/01

2002

/03

2004

/05

2006

/07

2008

/09

2010

/11

2012

/13

USA Brazil Argentina

Corn (Mt) Soybeans (Mt)

05

101520253035404550556065

2000

/01

2002

/03

2004

/05

2006

/07

2008

/09

2010

/11

2012

/13

USA Brazil Argentina Ukraine

Structure of world soybean imports: a dangerous situation

0

10

20

30

40

50

60

70

2001

/02

2002

/03

2003

/04

2004

/05

2005

/06

2006

/07

2007

/08

2008

/09

2009

/10

2010

/11

2011

/12

2012

/13

China EU Mex.

• Soybean imports by China: in 2012/13 63 % of the world imports ! • Priority given in China to the growing of corn• Growing Chinese interest in Canadian canola

USA: Corn, wheat and soybeans prices in Chicago ($/t)

Source: IGC

120165210255300345390435480525570615660

02/0

7/20

07

02/1

0/20

07

02/0

1/20

08

02/0

4/20

08

02/0

7/20

08

02/1

0/20

08

02/0

1/20

0902

/04/

2009

02/0

7/20

09

02/1

0/20

09

02/0

1/20

10

02/0

4/20

1002

/07/

2010

02/1

0/20

10

02/0

1/20

11

02/0

4/20

11

02/0

7/20

11

02/1

0/20

11

02/0

1/20

12

02/0

4/20

1202

/07/

2012

02/1

0/20

12

02/0

1/20

13

02/0

4/20

13

US Soybeans

US YC

US SRW

Part II : Opportunities for Mexico

2 examples

Opportunities for Mexican beer exports

Why?Beer production in Mexico expandingExcellent image in Europe

How?Mexico-EU trade agreement negociations?

Global beer production (Mt)

-

10 000 000

20 000 000

30 000 000

40 000 000

50 000 000

60 000 000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Allemagne

Brésil

Chine

Russie

Mexique

Etats-Unis

• China, Brazil and Mexico : the new driving force in beer production

Source : FAO

Opportunities for Mexican durum exports

Durum consumption increasing in the Maghreb countriesMexico among the top 4 durum exportersA new « grain landscape » in North America after the removal of the CWB’s marketing monopolyUSA : the « shale oil / gas rush » : a new paradigm, in many respects :

World energy balanceGeopoliticsDurum wheat production!

Durum wheat consumption in Maghreb countries

0

1

2

3

4

5

1999

/00

2000

/01

2001

/02

2002

/03

2003

/04

2004

/05

2005

/06

2006

/07

2007

/08

2008

/09

2009

/10

2010

/11

2011

/12

2012

/13

Mt

Morocco

Tunisia

Algeria

Linéaire(Algeria)

Linéaire(Morocco)

Linéaire(Tunisia)

+

Source : IGC /FranceAgriMer

Mexico: Durum wheat production and exports (Mt)

2,1

1,1

0

0,5

1

1,5

2

2,5

2001

/02

2002

/03

2003

/04

2004

/05

2005

/06

2006

/07

2007

/08

2008

/09

2009

/10

2010

/11

2011

/12

2012

/13

Production Exports Linéaire (Exports)

• World market in durum wheat : ~7,5 Mt • Mexico’s market share : ~15 %• USA : ~10 % ; Canada : 45-55 %Source : IGC

USA: Durum wheat production: North Dakota, the main producing state

Source : USDA - NASS, January 2013

0

500

1 000

1 500

2 000

2 500

3 000

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

1 00

0 t

US total

NorthDakota

Montana

California

Arizona

• North Dakota : 40-50 % of US durum wheat production

The « Bakken formation » (shale gas and oil)

• North Dakota’s Durum wheat area : located in the north-western corner of the State

• Trend : increasing . North Dakota is already the 2nd producer state in the USA, behind Texas (2 millions barrels/day), ahead of Alaska

Gas flaring in North Dakota

• Currently : 8 000 wells, potentially 40 000 ?• Will there still be room for durum production ?

Concerning grain markets : Dependency, yes, but…Diversification of potential suppliers

More competition, better procurement prices ?

Some interesting export opportunities

Conclusion:« Potencia alimentaria o impotencia dependiente ? »