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Market Outlook – Grains and Oilseeds, 16/02/10 Michael Archer Senior Analyst, HGCA.

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Presentation on theme: "Market Outlook – Grains and Oilseeds, 16/02/10 Michael Archer Senior Analyst, HGCA."— Presentation transcript:

1 Market Outlook – Grains and Oilseeds, 16/02/10 Michael Archer Senior Analyst, HGCA

2 Contents 1.Introduction 2.Wheat 3.Feed Grains 4.Oilseeds 5.Summary

3 Prices decline as fundamentals dominate - good N. Hemisphere wheat & US spring crops Source: HGCA

4 Grain demand growth despite recession - and production has responded * Forecast Source: USDA Price Effect

5 BUT: There are underlying feed grain issues - markets more exposed to weather events Source: USDA

6 World wheat market

7 World Supply and Demand for wheat – another year of surplus forecast Source: USDA

8 Main wheat exporters harvest less in 2009/10 - but begin season with greater stock levels * Forecast Source: IGC

9 UK Supply and Demand 000 tonnes 04/05 – 08/09 average 2008/092009/10 Change on 2008/09 (%) Opening Stocks 1,856 1,720 2,75660% Production 15,107 17,227 14,181-18% Imports 1,142 1,305 968-26% Total Supplies 18,105 20,252 17,905-12% Human & Industrial Use 6,530 6,836 6,8891% Animal Feed Use 6,696 6,729 6,506-3% Total Use 13,588 13,973 13,736-2% Exports/ Intervention 2,487 3,523 2,138-39% Closing Stocks (five-year average) 2,030 2,756 2,030-26%

10 Discount to French Quality Exportable Surplus FOREX UK continues to track French wheat market - quality and exportable surplus key drivers KEY: UK follows French market Source: HGCA

11 3 1 UK wheat market - becoming more regionalised? More than 50% cereals 40-50% cereals 20-40% cereals Less than 20% cereals 4 1Ensus, Teesside Due on stream to use some of the 2009 wheat crop 2Vivergo, Hull Under construction & due to produce in summer 2010 3Vireol, Immingham at advanced planning stage 4British Sugar, Wissington Sugar- based bioethanol Source: HGCA 2

12 Next season – early indications, very little data currently available HGCA/Andersons “Early Bird” Autumn planting survey – 2010/11 English wheat area seen up 5.9% First official estimates from Defra December Survey - English data out on March 2 nd, UK data on March 11 th Yields ever more difficult to predict! Drilling went well – dry & moist across most of UK Snow cover provided some protection from very cold weather Strategie Grains - UK 2010 wheat crop = 16.05Mt, up 12% on 09/10

13 World feed grains market

14 Feed grain in 2009/10 - maize deficit, barley surplus * Forecast Source: USDA

15 Maize remains the dominant feed grain - US crop dictating volatility M tonnes07/0808/0909/10 * Production331307328 Feed151133137 Ethanol7793107 Exports624652 STU %12.7%14.8%15.4% US maize balance * Forecast Source: USDA

16 Demand for grain for biofuel grows * Forecast **EC forecast, March 2009 Source: USDA, Strategie Grains, EC

17 Can the EU meet increasing demand? - good land availability: set-aside gone M Hectares2006/072007/082008/092009/10 Soft wheat21.721.923.322.7 Barley13.813.714.514.0 Maize8. Total cereals56.3 59.858.1 Total oilseeds10.510.810.711.1 Set-aside / fallow Of which equiv. EU-15 set-aside EU has sufficient previously set-aside land for biofuel 1.5M ha occupied by sugar beet Yield improvements may also be made e.g. GM maize * Forecast Source: Strategie Grains

18 UK barley balance sheet - massive spring plantings, highest since 2001 M tonnes2007/082008/092009/10 Opening stocks0.800.761.20 Production5.716.14 6.75 Demand H&I Feed 4.80 1.75 2.87 5.03 1.77 3.07 5.11 1.62 3.28 Exports & intervention Cumulative exports to end-November UK Intervention as at Feb 4 th 0.400.8121.99 403,914t 66,133t

19 World oilseeds market

20 European and UK OSR values - still track CBOT prices closely

21 World Oilseed S&D – stocks to use ratio rising for soyabeans but down for softseeds Source: HGCA/ USDA

22 World soyabean S&D – importantly, assuming record SA crops Source: USDA

23 Next season - soyabean & maize price ratio: important when determining future area Source: HGCA

24 EU Rapeseed Balance Sheet – production and usage seen up Mt, Source: Oilworld2007/082008/092009/10 forecast Opening stocks1.290.701.52 Production18.4419.0421.41 Imports0.693.222.40 Crushings18.4620.3322.70 Other use0.851.021.03 Exports0.400.100.15 Ending stocks0.711.511.45 Stocks-to-use ratio4%7%6%

25 UK market, production and trade – output lower but imports up sharply to date Source: HGCA Source: Defra

26 Recap – Implications for 2009/10 and beyond Wheat Record 2008/09 surplus followed by likely 2009/10 surplus Huge competition for exports in 2009/10 plus volatile FOREX Better quality in UK should avoid major discounts, but still a follower Feed grains Tight (e.g. US maize), but EU barley at intervention levels So markets exposed to an unknown supply issue in the future: volatility Bioethanol = changing dynamics??? Oilseeds SA soyabean crop crucial EU OSR market looks relaxed, UK now OSR net-importer

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