Pannonia Ethanol - Innovation Day 2015 Market Outlook & the Hungarian Paradigm
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Transcript of Pannonia Ethanol - Innovation Day 2015 Market Outlook & the Hungarian Paradigm
Jaime Nolan Miralles Senior Commodity Risk Manager
INTLFCStone Ltd.
PANNONIA ETHANOL – INNOVATION DAY 2015
MARKET OUTLOOK & THE HUNGARIAN PARADIGM
International Assets Holding Corporation | www.intlassets.com
Hungarian Corn
Corn yield and output has been hurt by dryness and heat stress.Output at am estimated 6.5Mmt falls below the ten year average of 7.2Mmt and sharply lower than last years record 9.3Mmt output
4.5mmt 10 year average output
7.2mmt 10 year average output
Hungarian Wheat
Hungarian wheat output of 5.2mmt is on a par with last years output and is the third largest output the last ten years. 700kt over the 10 year average.
What do we store and what do we sell?
HUNGARIAN WHEAT & MAIZE SUPPLY
Ethanol Sector providing leading role to Hungarian producer
Ethanol sector provides demand engine in domestic Hungarian maize market
Tighter maize S&D Shifts feed demand to Wheat
Creating sustainable demand in Hungary over the next ten yearsCreating strong & reliable counterpartiesKey partners in your success
HUNGARIAN –DOMESTIC DEMAND
Just under 50% of output moves to export market
54% of output moves to export market
EXPORT MARKET – KEY PRICE DRIVER
Danube market trades into N EU and Constanza
Constanza trades off Odessa/Ukraine
Ukraine trades off US and South American corn market…chasing demand
PHYSICAL GLOBAL CORN PRICE
Matif correlation with Hungarian maize of 96%
What happens on Matif impacts our local Hungarian maize price
HUNGARIAN MAIZE VS. MATIF CORN
Correlation with Matif Wheat of almost 90%As Hungarian ethanol/feed & export growSo too will this relationship between both
markets
HUNGARIAN WHEAT VS. CHICAGO WHEAT
Heavy EU & Global Supply, weighs on
market price
EU Corn – tight supply, competes
with global abundance as we move into harvest
SO WHERE ARE WE TODAY – EU WHEAT?
Wheat is in hands of leading exporters!Second largest wheat production in last ten years
WHY ARE WHEAT PRICES LOW … AGAIN?
USDA EU wheat balance sheets (mmt)
Beginning stocks Production Imports Feed
non-feed
Total domestic Exports
End stocks
Stocks:use ratio
Alt. 15/16 13.5 154.0 5.5 57.0 69.0 126.0 31.0 16.0 10.2%
USDA 15/16 13.0 154.1 6.0 57.0 68.9 125.9 32.5 14.8 9.3% USDA 14/15 9.9 156.5 6.0 54.5 69.4 123.9 35.4 13.0 8.2% 13/14 10.8 144.4 4.0 49.5 67.6 117.1 32.0 10.1 6.8%
12/13 13.8 133.8 5.3 51.0 68.5 119.5 22.6 10.8 7.6% 11/12 12.1 138.2 7.4 57.5 69.7 127.2 16.7 13.8 9.6% 10/11 16.7 136.7 4.6 52.5 70.3 122.8 23.1 12.1 8.3%
09/10 19.5 139.7 5.4 57.0 68.6 125.6 22.3 16.7 11.3% 08/09 12.9 151.9 7.7 60.5 67.1 127.6 25.4 19.5 12.7% 07/08 14.9 120.8 6.8 52.4 64.8 117.2 12.4 12.9 9.9%
06/07 24.0 125.7 5.2 60.2 66.0 126.2 13.9 14.9 10.6% 05/06 28.266 132.9 6.8 63.2 65.0 128.2 15.7 24.0 16.7%
Where does history
suggest fair value is for EU wheat?
WHY ARE WHEAT PRICES LOW … AGAIN?
Third consecutive Bumper year for Global corn productionBut EU maize output falls sharply – Divergence from global market
MAIZE STORY – A LITTLE DIFFERENT
In fact EU wheat, barley and maize production will be down 22MMT v last season (but third largest after 2014 and 2008)
MAIZE STORY – PERSPECTIVE
But with recent share prices collapse and slowing growth how sustainable is this demand?
MAIZE – INSATIABLE CHINESE DEMAND
Despite heavy supply values remain supported
Weak Euro leaves EU trading lowerInto international market
WHEAT – THE FX DRIVER IN PRICE
Will growers plant? Europe – 2016 futures price of €184, above average: Probably
WHAT CAN BRING BACK BETTER PRICES?
Will growers plant? Ukraine/Russia – 2016 futures price at near record highs = Yes
Will growers plant? Brazil – 2016 futures price at near record highs = Yes
Weakest economies to be engines of supply growth:
There are three growers in the world today due to extreme currency values:
1.The grower with cheap inputs receiving low prices (US)
2.The grower with average costs and average prices (EU, Canada)prices
3.The grower with high input costs and high prices (Ukraine, Russia, Brazil, Argentina)
WHAT CAN BRING BACK BETTER PRICES?
Work with your partners to create certainty and profitability
Remove price volatility & secure margins
Forward contract and reduce downside price risk
Continue to Innovate and pioneer in grain production
Set the benchmark for international market
Create quality, quantity, reliability and sustainability
Development and investment – key to success
HOW DO WE SECURE MARGINS/INCREASE PROFIT?