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CURRENT GRAIN MARKET SITUATION:
CHALLENGES AND SPECIFICS
Guljahan Kurbanova,
Economist
FAO UN
Regional Office for Europe and Central Asia
Budapest, Hungary
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..........................................................................................October 16-17, 2012, Kiev
OUTLINE
Current Situation
Challenges and Driving Forces
Regional Specifics
Ukraine as a player in the global and
regional markets
Conclusions and recommendations
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МАКРОЭКОНОМИЧЕСКИЕ УСЛОВИЯ
Темпы роста мировой экономики понижены с 2.5 до 2.3 %в 2012 и с 3 до 2.5% в 2013, рост концентрируется в растущих экономиках
Замедление роста численности населения в течение следующих десяти лет
Рост урбанизации и устойчивый рост доходов (Китай, Индия, страны Латинской Aмерики) стимулируют спрос на продовольствие и сельскохозяйственные товары
Aктивизируется участие и конкуреннтоноспособность менее затратных стран (Аргентина, Бразилия, Россия? и Украина)
Долговой кризис Европы, бюджетный дефицит США, проблемы банковского сектора Китая оказывают давление на
а) мировую торговлю
б) продовольственные цены в связи с сокращением производства
в) колебание курса валют
г) цены на нефть
3 *World Bank, www.worldbank.org; IMF, www.imf.org
MACROECONOMIC CONDITIONS
Slowdown of the world economy growth: downward from 2.5 % to
2.3 % in 2012; from 3 to 2.5 % in 2013* with concentration in
emerging markets
Over the next decade world population growth is expected to slow
Increasing trend on urbanization and strong income growth in China,
India and Latin America stimulating demand for food products,
and agricultural commodities
In the export market: expected an expansion of low-cost exporters
such as Argentina, Brazil, Ukraine, and Russia ?
Concern on debt crisis in Europe, budget deficit in the USA,
problems of the banking sector in China
Impact on the world trade
Pressure on food prices due to shortfalls in the production
Exchange rates fluctuation
Energy prices
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*World Bank, www.worldbank.org
IMF, www.imf.org
CURRENT SITUATION: CEREAL MARKET (1)
Global cereal production in 2012: 2.6 % down from the previous year’s record crop, close to the second largest in 2008
Further tighten supplies in 2012/13
Wheat
Demand for wheat is driven by food use (72% of all wheat) and global wheat imports are on increase
Coarse grains
Coarse grain prices are likely to be boosted by increasing demand for feed and ethanol production.
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Current situation: Cereal Market (3)
MAIN TRENDS IN SUPPLY AND DEMAND (1)
Decline of cereal stocks:
cereal stock-to-use ratio: 20.7 % in 2012/13
22.8% in 2011/12
19.2% in 2007/08
wheat stock-to-use ratio: 24.8 % in 2012/13
28.1% in 2011/12
21.9% in 2007/08
coarse grains stock-to-use ratio : 13.1 %in 2012/13
22.1% in 2011/12
rice stock-to-use ratio: 34.5%, or 10 % higher than in 2007/08 (24.5 %)
Wheat export availabilities are anticipated to be sufficient for the reduced world import
requirements (a decline from the Black Sea region to be covered by North America and the
EU.
The world cereal trade contraction is expected by 4.8 percent (291million tonnes) on
account of falling wheat and maize flows:
a weakening of import demand due expanded production in importing countries
high international prices
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MAIN TRENDS IN SUPPLY AND DEMAND (2)
Wheat crops in 2013 are encouraging with wheat planting in the northern hemisphere under generally favorable weather conditions
Stagnation of cereal utilization in 2012/13 on reduced industrial use
The decline in maize consumption due to anticipated contraction in industrial usage of maize
World rice utilization is set to increase by 1.2 percent to 474 million tonnes, resulting in stable per caput food consumption
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FAO FOOD PRICE INDEXES
The FAO Food Price Index:
216 points in September
2012, up 3 points (1.4
percent) from August due to
increase of dairy, meat, and
cereal prices.
The FAO Cereal Price Index: 262 points in September, up 2 points (1 percent) from August as small gains in wheat and rice offset a decline in maize. It is up 7 percent y/y basis;
4 percent below the peak of 274 points registered in April 2008.
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CEREAL PRICES: CIS & WORLD *
Wheat: $/t- 372
Change: (1 mth, 1 yr) +3%
+13%
Peak: March 2008 - $482
Maize: $/t -323
Change: (1 mth, 1 yr) -2%,
+8%
Peak: July 2012- $ 330
Rice: $/t 602
Change: (1 mth 1 yr) +3%
-3%
Peak: May 2008- $963 10
Source: GIEWS Global Food Price Monitor, October 2012
REGIONAL CEREAL PRODUCTION
CIS plus Georgia: a decline around 24-25 %: Russia’s wheat output is down some 30 % from 2011
Ukraine - a decrease of about 33 % from 2011
Kazakhstan’s cereal output is to be just half of last year’s good level
EU: the aggregate output is down by 2.6 % (in some central and southeastern countries)
In the other Asian sub-regions: record crops have been gathered in the Far East, namely, China and India;
in the Near East – mixed results: good crops in Afghanistan and the Islamic Republic of Iran; outputs were down elsewhere ( dry conditions and/or civil disturbances)
In North Africa the 2012 harvest results mixed: production recovered in Algeria, sharply reduced in Morocco due to dry conditions
In South America: the aggregate wheat production is forecast 12 % down from the previous year and below average
In Oceania, prospects for the wheat crop: mixed in Australia; overall output is forecast down by about 24 % from last year’s record crop
In the United States, this year’s wheat production – up by 13.4% to an above-average level of 61.7 million tonnes. In Canada, output is up above average and almost 7 % higher than in 2011.
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VOLATILITY: PRODUCTION, YIELDS, AND EXPORTS IN THE
SELECTED COUNTRIES OF THE REGION
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0
10000
20000
30000
40000
50000
60000
Production
Yields
Export
Ukraine
0
5 000
10 000
15 000
20 000
25 000
30 000
Produciton
Yields
Exports
0
20 000
40 000
60 000
80 000
100 000
120 000
Production
Yields
Exports
0
5 000
10 000
15 000
20 000
25 000
30 000
Kazakhstan
Russia
Ukraine
Russia
UKRAINE: KEY FACTORS OF PRODUCTION AND EXPORT
Favorable factors for production and export
Agricultural machinery fleet replaced
Agrochemical technology improved
Micronutrient fertilizers along with traditional mineral fertilizers used
New innovation technologies implemented (No-till or zero-till technology)
Private investments in infrastructure
Problems
Strong dependency on weather conditions
Agricultural producers are not able to forecast due to risks of uncertainty
application of innovation technologies not fully used by all farmers and regions
crop insurance system is still weak
political decision limiting the sale of the produced products
quality of wheat or maize
Logistics
Geography of wheat export by regions
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26%, Africa
46%, Asia
20% EU
1% CIS 7%.
others
Africa
Asia
EU-27
CIS
Others
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CHALLENGES AND OPPORTUNITY
1. Challenges
Uncertainty and volatility of yields and production
Contradictions between short term and long term
policies and excessive state interventions
Disorganized market
2. Opportunities
higher prices can increase cereal production and
improve an access…
Strong demand outside
if policy actions do not create
market distortions
PRIORITY TARGETS FOR REGIONAL CEREAL
MARKETS
Notification on trade policy changes in advance
Development of regional market information and knowledge sharing system
Provision of stable export by:
Setting up joint infrastructural facility
Developing routes (especially for grain) for the reduction of the costs
Creating joint market place for grain trade based on transparency and mutual agreed rules (partnership)
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Transparency and Rational Policies.
Challenges
Role of
government
International
Considerations
Role of Producers
and Traders
Market trends
and
information
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THANK YOU FOR ATTENTION!