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World Wheat Market in 2014/15
World Wheat Market in 2014/15
Abdolreza Abbassian Senior Economist, FAO
AMIS Secretary [email protected]
Primer Taller Internacional
de Intercambio de Experiencias sobre
6 November 2014
World Wheat Market in 2014/15
Presentation Outline
• Brief review of recent developments in international food prices
• Global supply and demand outlook for wheat in 2014/15
World Wheat Market in 2014/15
Food: Long-term price movements
World Wheat Market in 2014/15
• At 192.3 points, the FAO Food Price Index in October is down marginally from September - lowest level in four years!
• The Index started to decline since March- longest period of continuous falls since the late 1990s
World Wheat Market in 2014/15
• Cereals unchanged from Sept. but down 9% from Oct. 2013. Wheat and maize were up slightly - rice lower.
• Vegetable Oil gained 1%, supported by firmer palm oil quotations
• Dairy lost almost 2% - down over 26% from last year
• Meat fell 1% but still close to historical highs
• Sugar rose more than 4% after steep declines in previous months
World Wheat Market in 2014/15
Cereal supply and demand
At 2 522mt, world cereal production in 2014 would fractionally decline from the 2013 peak Global cereal utilization in 2014/15 to increase by 1.7%. Feed use, to expand by 2.6% Stocks to reach 624.7mt, up 8% from the start of the season and highest in 15 years
World Wheat Market in 2014/15
Global Wheat Market in 2014/15
World Wheat Market in 2014/15
Major Crops: conditions in key producing countries (as of Oct. 28th)
World Wheat Market in 2014/15
Wheat conditions in major producing countries (as of Oct. 28th)
World Wheat Market in 2014/15
World Wheat Supply and Demand
• Global wheat production in 2014 is forecast at 722.6mt, a marginal increase from the 2013 record output
• World wheat inventories are forecast to reach 192.2mt by the end of seasons in 2015, their highest level since 2003
World Wheat Market in 2014/15
Second year of record wheat production
• Record crop thanks to near perfect weather conditions
• But quality not so good due to wet weather at harvesting in North America and Western Europe
Data as of 6 Nov. 2014
World Wheat Market in 2014/15
Milling wheat against feed wheat: quality matters!
Protein
gap
World Wheat Market in 2014/15
Wheat utilization: feed use to increase in 2014/15, mostly in the EU because of large supplies
Wheat stocks: higher stocks this season in nearly all major producers but Canada
Wheat stock-to-use ratio increases to 26.9% in 2014/15 – highest in five years
World Wheat Market in 2014/15
Wheat in Latin America and Caribbean
Production (3-year-average) Chile S&D Balance
Good crop
prospects for
2014 after two
years of below
average
production
A bumper crop
thanks to over
20% expansion in
plantings – 10-
year high
production
Higher
production in
2014due to
increase in
plantings – but
still below 5-
year average
World Wheat Market in 2014/15
Lower wheat imports in 2014/15 (mostly in Egypt, Morocco, Tunisia, Brazil and Mexico)
Argentina, Russia and Ukraine export more but sharp falls in exports expected in the US and EU
Global Wheat Trade
World Wheat Market in 2014/15
Wheat trade in Latin America and Caribbean
Major Importers
(July/June)
Major Exporters (July/June)
World Wheat Market in 2014/15
15
20
25
30
35
40
45
50
55
60
2011 values 2012 values 2013 values 2014 values
US
Wh
eat
Exp
ort
Pric
es
Wh
eat
futu
res (
March
co
ntr
act)
Wheat Historical Volatility (30D)
Wheat Implied Volatility*
Wheat prices: lower and more stable
* Show the level of expected future volatility embedded in the option premiums observed in the CBOT’s options on futures markets.
5
15
25
35
45
55
65
75
85
2008 values 2012 values 2013 values 2014 values
Normal
range
World Wheat Market in 2014/15
Forward Curves: Back to normal (upward sloping or Contango) suggesting ample supply situation this season – buyers to take advantage of cheap wheat & maize nearby availability!
World Wheat Market in 2014/15
CFTC Commitment of Traders - Major Categories Net Length as % of Open Interest (28/10/14)
Managed money decreasing its net short wheat position
Managed money increasing its net long maize position
-40%
-20%
0%
20%
Okt 13 Dez 13 Feb 14 Apr 14 Jun 14 Aug 14 Okt 14
Commercials Swap Positions Managed Money
Sh
ort
(so
ld)
Lon
g (
bo
ug
ht)
Wheat
-40%
-20%
0%
20%
Okt.13 Dez.13 Feb.14 Apr.14 Jun.14 Aug.14 Okt.14
Commercials Swap Positions Managed Money
Maize
World Wheat Market in 2014/15
Beyond the Fundamentals
http://www.amis-outlook.org/indicators/prices/en/
World Wheat Market in 2014/15
Sliding currencies: Ukrainian Hryvnia (UAH) and Russian Rubles(RUB) to USD
40
50
60
70
80
90
100
110
Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14
RUB UAH
-37%
- 23%
January =100
World Wheat Market in 2014/15
Uncertainties ahead • Weather/plantings
– We had exceptionally good weather conditions in 2014 so could a return to “normal” weather result in lower production in 2015?
– Prices are well below previous years, will this affect 2015 plantings as farmers could shift to other (more profitable) crops?
• Geopolitical risks
– How will continued instability in the Middle-East and North Africa affect farm sectors and trade flows?
– Would accessing credits and lending constraints hamper plantings/yields in Ukraine and Russia?
• Economic conditions, exchange rates, oil price, etc.…
– Continued uncertainties over the health of world financial/economic systems
– Past periods of strong dollar corresponded to periods of falling commodity prices- could this trend continue? Impacts on emerging markets?
– Sharp decline in oil prices over the past few months - can all oil exporting countries weather the fall in their oil revenues?
World Wheat Market in 2014/15
• Supply: Good
• Demand: Stable (food, feed and industrial use)
• Trade: Contracting (in spite of lower prices)
• Stocks: Increasing to multi-year highs
• Prices: below last year
2014/15 Market Summary
World Wheat Market in 2014/15
More information in… Biannual Report
Monthly Report
On-line Price and Cereal S&D reports Monthly updates http://www.fao.org/worldfoodsituation