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AMIS Inception Meeting

15-16 September 2011

Food and Agriculture Organization of the United Nations

Trade and Markets Division

Rome, Italy

World Market Trends and Outlook

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Presentation Overview

Review of markets in 2010/11

FAO food price indices

Global cereal market outlook for 2011/12

Outlook for soybeans in 2011/12

Price developments

Summary

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2010/11: A Turbulent Season

2011/12: Calmer?

175

225

275

325

375

425

Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

Wheat Maize Barley

US$/MT, fob

FAO IGG

•Floods in Pakistan

•Rains in Canada and USA

•Rains and Floods in Australia

•Political Tensions

•Oil price surge

•Declining Dollar

•Winter wheat – uncertain growing conditions in US & China

USDA October 2010

maize output cuts

USDA March 2011

planting/stocks

forecasts

USDA maize

planted acreage

estimates

USDA maize

yield

projections

Announcement by

Russia of lifting the

ban from July

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World Price Trends

http://www.fao.org/worldfoodsituation/wfs-home/en/

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FAO Food Price IndexNominal & Real

http://www.fao.org/worldfoodsituation/wfs-home/en/

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Cereal Markets in 2011/12: Still Tight!

http://www.fao.org/worldfoodsituation/wfs-home/en/

Total cereal utilization in 2011/12 is

forecast to increase by 1.4 percent,

almost matching anticipated 2011

production. As a result, global cereal

inventories by the close of seasons in

2012 are likely to remain close to their

already low opening levels. Only rice

stocks are expected to increase

significantly, supported by record

production.

Wheat inventories are likely to decline to

their lowest level since 2009 and world

stocks of coarse grains are also forecast

to plunge, with maize inventories falling

to 124 million tonnes, their lowest level

since 2007. Given the tight global supply

and demand balance for coarse grains, its

stocks-to-use ratio is forecast to fall to a

historical low of 13.4 percent.

Cereals

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World grain cereal production up 3% in 2011

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Rice Production and Stocks

Rice stocks

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World rice inventories to increase further

Rice

•The 2011 market outlook indicates global rice

production may grow to a new record in 2011,

supported by excellent crop outcomes in all the

major producing countries. As a result, the 2010/11

season is likely to end with increasing world stock

levels.

•Nonetheless, policy restraints in key market

players, in a highly uncertain environment, and

concerns over the situations in other cereal markets,

have prevented international rice prices from falling

in the course of the year.

•Furthermore, recent moves in Thailand to support

producer prices well above prevailing market levels

have put additional pressure for world prices to rise,

a tendency that may be dampened somewhat by the

recent decision in India to allow additional exports

of up 4 million tonnes.

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Rice Trade

Thousand Tonnes 2007 2008 2009 2010 2011(milled equivalent)

WORLD 32035 29910 29617 31432 33206

PHILIPPINES 1843 2433 1775 2379 1200

NIGERIA 1900 2000 1900 2000 2000

EU 27 1167 1339 1242 1098 1200

IRAN 1100 1000 1300 1100 1200

MALAYSIA 796 1136 1087 931 1200

OTHER COUNTRIES 25229 22002 22313 23924 26406

Rice ExportsRice Imports

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World Utilization Exceeding Production

Wheat Coarse Grains

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Wheat productionWheat stocks

Little change in wheat stocks-to-use ratio despite

recovery in CIS production

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Wheat importsWheat exports

A sharp increase in world wheat trade

Wheat trade to expand by 4% (5mt between) 2010/11 and 2011/12 to

130mt mostly to compensate for a likely decline in maize trade

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Coarse grain stocks

Coarse grain inventories down sharply with all

stock-to-use ratios pointing to historical lows

US maize stocks

Stocks as a percentage of total Disappearance of Major Exporters also fall to

historical low of 7.3% in 2011/12. This compares to 9.3% in 2010/11 and 12% in

2008/09.

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•Feed use of maize in the United States to

stagnate in 2011/12 while maize usage for

ethanol could also come to a standstill for the

first time in a decade.

•High maize prices and reduction in the US

ethanol subsidies (i.e. the US Senate recent

decision to eliminate the $0.45/gal tax credit

-VEETC - and the $0.54/gal import tariff on

ethanol imports) may result in lower maize

for ethanol production - especially if oil

prices fall below $90

Global coarse grain utilization largely unchanged in

2011/12

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CBOT Maize July futures above wheat

Exception?

•Wheat (feed) becoming more

competitive as maize becoming

more expensive. May see more

maize demand rationing this

season

• Possible reduction in maize

exports from the USA to be

compensated by a sharp (+3mt to

8.7mt) jump in maize exports from

Ukraine and larger supplies of

wheat as substitute

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CBOT Maize December futures above wheat

Trade sources: “Currently Australian feed wheat sells at USD60

discount to the US maize!”

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Soybean markets possibly tightening in 2011/12

Global stocks and stock-to-use ratioGlobal production and disappearance

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Global soybean production expected to drop

Global oilcrop productionWorld soybean production

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Trade in soybeans likely to expand

ExportsImports

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CBOT wheat futures(December delivery)

Grain prices remain high and above last year

CBOT maize futures(December delivery)

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Rice Export prices

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Soybean prices remain firm

Futures (CBOT November)Spot prices (Aug. 2004-Aug. 2011)

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Good wheat production outlook thanks to strong recovery in the CIS and excellent crop prospects also in Australia. But more wheat will be used for feed and this will lead to lower inventories. Prices are likely to remain firm but below their recent peaks.

Supply and demand balance for coarse grains is tight mostly because of the maize situation in the United States where late plantings and hot summer hampered yields. Inventories are reduced and maize stocks in particular will fall further, to an exceptionally low level. But high prices are dampening feed demand and continued strengthening of Dollar and economic slowdown may also put downward pressure on prices.

Rice supplies remain ample and inventories are increasing but international prices have risen in recent weeks; partly because of a spill over from other cereals and partly due to policy developments in Thailand. The recent announcement by India to allow more exports could help dampen prices.

Global soybean markets are expected to be tight in 2011/12 given lower production prospects in the United States while plantings in Argentina and Brazil could be lower than expected. Given the anticipated strong demand, stocks are seen to decline and prices to remain firm.

Summary

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The final outcome of 2011 harvests. Lower maize production?

South America 2012 soy crop (Brazil, Argentina): What about plantings and La Niña?

Demand prospects in uncertain markets. Developments in livestock, dairy, and energy markets. Contractions in feed and/or biofuels?

Export policies, especially among leading Asian rice exporters

The uncertainty in global financial markets and Dollar!

....there are many uncertainties ahead

Price-adjusted major currencies US Dollar

Index: April 2009 to September 2011

Until recently , the US Dollar fell against

major currencies. The decline gave

significant support to international

commodity prices.

More in: November Food Outlook (to be released on 3 November)