Managing Editor Agriculture Welcome Address S&P Global ...€¦ · Dry noodles 4% 2015 2016...

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Welcome Address from Platts

Andrei Agapi

Managing Editor Agriculture

S&P Global Platts


Agriculture

Private & Confidential 2

S&P Global Platts introduction


Platts Brent price assessment is the benchmark for >60% of the world’s crude oil

3

More than

230 Platts price assessments are benchmarks that underpin some

1,400

cleared financial contracts offered by Platts exchange partners:

Editorial and market assessments are conducted with complete independence and impartiality


S&P Global Platts Operation Hubs

4

Houston, US: Americas London, UK: EMEA Singapore: Asia-Pacific


APW - Asia-Pacific wheat market update

CME GROUP and S&P GLOBAL PLATTS

Melbourne, Australia - August 2017

Alexis Gan

Editor, Agriculture--Asia

[email protected]

S&P Global Platts

mailto:[email protected]


Agriculture


Agenda

Australia APW wheat price reviews

Supply/production situations

Demand focussing on Indonesia


Agriculture


Platts APW wheat FOB Australia Specifications

Quality: Milling wheat, normalized to APW1: 10.5% min. protein (on 11% moisture basis), max. 12.5% total moisture, min. falling number of 300 seconds Volume: Typical export cargo sizes, normalized to 30,000 mt Timing: Typical spot cargoes, normalized to a loading 60-90 days ahead of publication date Location: WA and SA ports, normalized to Kwinana. EC loading monitored for pricing consistency Unit of measurement: USD/mt



Ample stocks in 2016/17 but volatility not seen in 3 years, weather & currency

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190

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Platts APW

CBOT SRW Second month

Source: S&P Global Platts

$/mt c/bu



APW price up 23% June-July, buoyed by weather and AUD

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APW CBOT

CBOT up by $25/mt from 1 June to 12 July but APW was up $52 during the same period due to new crop worries and strong AUD

Downtrend cushioned by very strong AUD, AUD appreciated 1% overnight from 12 July

APW hit highest price in two

years at $263/mt FOB on July 13


$/mt c/bu



Strong AUD cushioning sharp CBOT corrections after 13 July

0.68

0.7

0.72

0.74

0.76

0.78

0.8

0.82

190

200

210

220

230

240

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APW Wheat FOB Australia $/mt

AUDAUD appreciated 3% from 1-15 June and 5.5% from late June-late July


$/mt /USD


Agriculture


Widening Bid-Offer Gap in Jun-Jul to $15/mt


$/mt


Agriculture


Record Australia production in 2016/17 at 35 M mt Exporters across different states scrambling to offload from Q4 16- Q1 17

Source: CBH

-15

-10

-5

0

5

10

15

20

25

30

$/m

t

Protein spread to APW

AH2

APW

ASW

Source: S&P Global Platts, Market data

Higher production inversely reduced protein • ASW accounted for 40% of the wheat

produced, APW only 28% (down 7-8%) • Discount of ASW to APW widened to

$10-12 in order to get rid of the sheer volume of ASW.

China, Philippine, India and Indonesia secured large volume secured large volumes from Q4 16-Q1 17 owing to big discounts


Agriculture


Yield across Australia wheat belt above 5-year avg, SA & NSW very competitive in exports

-

2,000

4,000

6,000

8,000

10,000

12,000

NSW VIC QSLD SA WA

2016–17 s

2015–16 s

Source: ABARES

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NSW QSLD SA VIC WA

2015/16

2016/17

Export volume except WA mostly higher

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4000

5000

6000

7000

NSW QSLD SA VIC WA

2015/16

2016/17Possible carryout to 2017/18 could be the highest in 10 years :Rabobank

‘000 mt

‘000 mt

‘000 mt



Moving forward...



Australia wheat ending stocks to fall in 2017/18 for the first time in 3 years

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

0

5

10

15

20

25

30

35

40 Wheat Production mmt

Export

% Ending Stocks-to-Use

Source: ABARES

Mil mt



Inelastic demand from APAC buyers for past 3 years ~50% Australia wheat export volume

2016-17 (Oct-May): 15.2 M mt was exported according to traders based on ABS statistics, leaving another 4.8 M mt for the next 3-4 months before new crop or risk very high carry of 12-13 M mt to 2017-18

Source: CBH

mt



Indonesia’s wheat import on the rise How would Australia recapture its market?


Agriculture

Private &Confidential 18

Indonesia wheat consumption at a glance, 20% uptrend for food

Source: APTINDO & USDA

Instant noodle

36%

Wet noodle 18%

Biscuits, snacks, etc

16%

Bread 26%

Dry noodles 4%

2015 2016

Population 258.16 million 261.11 million

Wheat consumption

22 kg/capita 23 kg/capita

Total wheat consumption

7.45 M mt 10.5 M mt

Source: Australia Export Grain Innovation Centre

• Indonesia flour milling industry is highly competitive, with 32 flour mills and excess operating capacities (total installed capacities at 11.4 million mt/year).

• Wheat flour produced mostly for domestic consumption (~ 90-95%) as depreciated IDR in 2015 reduced import attractiveness, after ADD for flour import lapsed in 2014.


Agriculture


Prices matters more for Indonesia Buyers sourcing for cheapest origins for blending after high wheat prices in 2013

Source: APTINDO & USDA

• CAGR over 2012-2015 for wheat import at 12%, driven by changes in food consumption patterns (westernized and convenience food), & cheaper than other food such as rice vs instant noodle.

• In 2016, nearly 20% of the wheat imported goes to feed industry as ample feed wheat increased its competitiveness against other raw materials (corn) for feed sectors.

• Depreciated Indonesia rupiah against

US dollars (Sept 2013 and Sept 2015), led to higher operating costs in 2015-2016 increasing price sensitivities of wheat.

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2,000

4,000

6,000

8,000

10,000

12,000

2012 2013 2014 2015 2016

Other

Russia

Ukraine

US

Canada

Australia

‘000 mt


Agriculture

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Black Sea

Australia

Feed wheat imports soar

Import controls introduced


Observed Black sea transactions into Indonesia on the rise


‘000 mt Black Sea (Ukraine & Russia) wheat to Indonesia increased by ~18% in Q1 2017 (totaling 527,456 mt vs 490, 297 mt in Q1 2016.


Agriculture


Black Sea competitiveness into SE Asia $15/mt minimal spread to APW to switch (feed) and $25 for food for 2015/16

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Jul-15 Oct-15 Jan-16 May-16 Aug-16 Nov-16 Mar-17 Jun-17 Sep-17

UKR 11.5% discount to APW

Buyers turned to Black Sea wheat amid higher Australia wheat prices owing to logistic delay and Indian demand

$/mt



Agriculture


Black Sea competitiveness into SE Asia This season, $25-30 minimal spread to APW (feed) and $50-60 for food

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Jul-15 Oct-15 Jan-16 May-16 Aug-16 Nov-16 Mar-17 Jun-17 Sep-17

UKR 11.5% discount to APW

-$25-30

-$50

Dryness & AUD pushed up APW export prices, spread widened to $50-60/mt in June-July

$/mt



Agriculture

180

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Oct-15 Jan-16 May-16 Aug-16 Nov-16 Mar-17 Jun-17 Sep-17

HRW 11.5%

SWW 10.5%

DNS 14%


US wheat values spiked over supply concerns for HRW and spring wheat


$/mt


Agriculture

150

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400

10 11 12 13 14 15 16 17

Price CFR SE Asia ($/mt)

Protein % (dry basis)

ASW UKR 11.5 US SWW 10.5

APW RUS 12.5 AH2

HRW 11.5 CWRS 2 13.5 DNS 14

APH2


Could Australia recapture market shares in 2017-18?



Agriculture


Australia, Canada and Black Sea wheat - important in Indonesia flour consumption

Australia 39%

Argentine 13%

Canada 14%

Ukraine 12%

France 7%

Others 15%

Q1 2016: 3.75 million mt

Australia 58%

Canada 13%

Russia 10%

United States

6%

Ukraine 6%

Others 7%

Q1 2017 : 3.28 million mt

Source : Indonesia Statistic unit (BPS)


Agriculture


Platts APW - additional metrics

Australian deal volume in Calendar Year 2016

7.1 mil mt

Percentage of Australian deals where both counterparties are known (2016)

55%

Percentage of Australian wheat exports captured (2016)

38%

Average bid-offer gap (since launch)

$5.17/mt

Average price delta to actual transactions (after normalization)

$1.16/mt

Indonesia 21%

South Korea 14%

India 12% Philippines

11%

Japan 9%

Vietnam 6%

SEA 6%

Thailand 5%

Middle East 8%

New Zealand

3%

China 2% Singapore

2%

Papua New Guinea

1%

Captured Australian deals per destination

(*This is Platts-observed transaction data – not the full actual trade flow)




Assessment Process


Agriculture


S&P Global Platts Grains Methodology A live document containing all the specifications and assessment processes

Details the specific

dimensions of our assessments

Published on-line & updated

regularly

Backbone of Platts’ prices https://www.platts.cn/IM.Platts.Content/MethodologyRefe

rences/MethodologySpecs/grains-methodology.pdf

https://www.platts.cn/IM.Platts.Content/MethodologyReferences/MethodologySpecs/grains-methodology.pdf





Agriculture


Assessment Do’s


Agriculture


Assessment Dont’s


Agriculture


Editorial Judgement – An essential element

• Essential for qualitative data integration

• Allows editors to the quality of price points • Allows for integration of other elements impacting grains

prices. Foreign exchange, freight rates.

• Allows for a more accurate normalization process of related prices


How to find our information

Emailed PDF 4 Weeks Free Trial http://trial.platts.com/grains-report-offer

32

Mobile App (iOS) – « Platts Grains » on iTunes https://itunes.apple.com/gb/app/platts-daily-

grains/id1219254861?mt=8

http://trial.platts.com/grains-report-offer





https://itunes.apple.com/gb/app/platts-daily-grains/id1219254861?mt=8









Thank You! Q&A


Black Sea Update AGIC GTA 1 August 2017

Andrei Agapi


S&P Global Platts


Agriculture


Agenda

Market Update

Why is the Black Sea region important ?

Spot price update

GASC factor

Harvest and logistics

Black Sea Wheat index

Q&A



Black Sea wheat update


Agriculture


Black Sea Region wheat exports

Export Volumes in 2017-18 MY: Black Sea Wheat exports 90% higher than US 97% higher than EU 160% higher than AU 10% Compound Annual Growth Rate

*Excluding Romania & Bulgaria wheat exports to third countries **Russia, Ukraine, Romania & Bulgaria to third countries

34

40

48

53 49

0

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40

50

60

2013-14 2014-15 2015-16 2016-17 2017-18

EU-26*

US

Black Sea**

Linear (Black Sea**)

Source: S&P Global Platts, USDA

Mil mt

62%

28%

8%

2% Russia Ukraine Romania Bulgaria


Agriculture


Weather rally: Rise and Fall ?

$150

$155

$160

$165

$170

$175

$180

$185

$190

$195

$200

1-Jun 8-Jun 15-Jun 22-Jun 29-Jun 6-Jul 13-Jul 20-Jul

CBOT SRW Sep '17

FOB Black Sea 12.5%

Weather related worries in US helped Black Sea price increase

Correction on CBOT not affecting Black Sea prices

Bullish factors: o Egypt Demand o VAT crackdown o Port logistics o Delayed harvest

Source: S&P Global Platts, ProphetX DTN

/mt


Agriculture


Egypt’s GASC - Origins

Ukraine 8%

Russia 63%

Romania 26%

France 3%

• Black Sea Region is the main supplier with 97% sales = 2.26 million mt committed before September 10

• Majority of the sales are made from Russia – FOB Novorossiisk: 96.5% of total volume

• Logistical squeeze in Novo and surrounding infrastructure



Agriculture


Egypt’s GASC purchases well ahead last years

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7,000

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

2016-17

2015-16

2017-18

‘000 mt



Agriculture


Russia: Harvest progress

Mil Ha

Source: Russian Ministry of Agriculture


Agriculture


Russia: Delayed harvest = delayed exports

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

MY 2014/15

MY 2015/16

MY 2016/17

MY 2017/18

Source: Russian Ministry of Agriculture

Mil mt

1-26 July ‘17



Black Sea wheat index


Agriculture


FOB Black Sea Wheat Index

Based on physical trades, bids and offers Platts’ usual observed bid-offer range of $2-5/mt Observed wheat trades occur on average within $0.33/mt of the index


Agriculture


Platts FOB Black Sea wheat (Russia, 12.5%)

Quality: Russian Milling wheat, normalized to “paper spec” 12.5% protein Volume: Handy to Panamax, normalized to 25,000 mt Timing: Loading 28-42 days ahead of publication date Location: Russian Deep Sea ports, normalized to Novorossiisk Unit of measurement: USD/mt


Thank you!

46

Questions & Answers


CORN - Asia-Pacific Outlook

CME GROUP and S&P GLOBAL PLATTS

Melbourne, Australia - August 2017

Samar Niazi

Pricing Specialist, Editor Agriculture,

S&P Global Platts



Asian corn market


Agriculture


Asian markets - Short-term trend

- Brazilian corn currently the cheapest FOB origin. Japanese & Korean concentrating upon Brazil origin.

- Argentine corn crop delay into ports and less competitive against Brazil. Logistics issues and strikes delaying buying and loading in Argentina.

- South Korean millers bought cheapest corn in 2017

buying 1.135 million mt during 15-27 June, for delivery in Sep-Oct-Nov.

- Lowest deal transacted at $177.50/mt CFR South Korea 2 port – KOCOPIA (27 June)

- Japanese buyers buy 12-14 Brazil cargoes FOB Santos/Tubarao during 2H July for August-September demand


Agriculture


Asian markets - Short-term trend

- Vietnamese feed millers hit hard since April-May, by lower hog prices and China border shutdown.

- Trading activity at standstill. Domestic distributors sitting on corn and soybean meal stocks, asking for shipment deferrals on May-August cargoes.

- 3 parcels traded in last week – Prices as low as $173.50-174.50/mt CFR South Vietnam, Aug-Sep shipment.

- Indonesian feed millers use domestic feed

components, especially corn, which causes reduced livestock margins, since feed price is government controlled.

https://www.google.com.sg/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&ved=0ahUKEwiZsojDpt_TAhWKMY8KHdTGDxUQjRwIBw&url=https://en.wikipedia.org/wiki/Livestock&psig=AFQjCNEbYgcEKWRwt20ow12AWjNvzPq70A&ust=1494298652982626


Agriculture


Platts Corn CFR South Korea – launched 22 Aug

?

https://www.google.com.sg/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiisvqyqKvVAhWFpZQKHWGpAs4QjRwIBw&url=https://pixabay.com/en/south-africa-flag-national-flag-162425/&psig=AFQjCNFZVs6OE_GsnEZ-44CYWNPZRWXQDw&ust=1501308511654889


Agriculture


CFR South Korea Corn – A global destination for corn

$/mt


170

175

180

185

190

195

200

22-Aug-16 22-Sep-16 22-Oct-16 22-Nov-16 22-Dec-16 22-Jan-17 22-Feb-17 22-Mar-17 22-Apr-17 22-May-17 22-Jun-17 22-Jul-17


Agriculture


Reconstructing replacement value

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250.00

13-Sep-16 13-Oct-16 13-Nov-16 13-Dec-16 13-Jan-17 13-Feb-17 13-Mar-17 13-Apr-17 13-May-17 13-Jun-17 13-Jul-17

Origination to South Korea freight(USD/mt)FOB basis at origin (USD/mt)

CBOT Corn (USD/mt)

$/mt


Agriculture


Actual CFR price at a discount to replacement

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100.00

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250.00


Origination to South Korea freight(USD/mt)FOB basis at origin (USD/mt)

CBOT Corn (USD/mt)

$/mt


Agriculture


Discount vs replacement value

Average discount to replacement: $3.41/mt

$174.00

$179.00

$184.00

$189.00

$194.00

$199.00


Replacement Value

Platts Corn CFR South Korea

$/mt


Agriculture


CFR South Korea Corn Index Vs. Deals

175

180

185

190

195

200

22-Aug-16 22-Sep-16 22-Oct-16 22-Nov-16 22-Dec-16 22-Jan-17 22-Feb-17 22-Mar-17 22-Apr-17 22-May-17 22-Jun-17

Platts Corn CFR SouthKorea

Deals (normalized)

$/mt

Average accuracy transactions vs Index

99.88%


Agriculture


Bids, offers and deals

$170.00

$175.00

$180.00

$185.00

$190.00

$195.00

$200.00

$205.00

$210.00



Best Bid

Deals (normalized)

Best Offer

Average delta transactions vs Index

$0.218/mt

$/mt


Agriculture

Correlation v CBOT

Correlation vs CBOT front-month +0.425

Correlation vs CBOT front-month prior day +0.191 170

175

180

185

190

195

200

300.00

320.00

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360.00

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420.00


CBOT (c/bu)


$/mt $/mt


Agriculture


Korean corn deal capture

Corn transaction volumes observed into S. Korea

0

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400

600

800

1000

1200

1400

Captured 73%

Not captured

27%

Share of Korean market captured (mil mt annualised - 2016/17)

Yes 94%

No 6%

Both counterparties known?

In ‘000 MT


Agriculture


Platts Corn Daily Heards The Platts daily email round up of the Asian corn market



Advantages of Indexation


Agriculture


CFR South Korea Corn Index

- Measuring the true value of CFR South Korea corn on a daily basis, against a well-defined methodology.

- Provides a daily price reference for buyers and sellers instead of waiting for tender transacted price.

- Spot market: Spot indexing minimizes flat price risk for buyers and sellers. Always getting the “market price”.

- On the spot market, indexation protects against big moves in the market.

http://www.google.com.sg/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjn_8yOqd_TAhXMPo8KHdyVCJ8QjRwIBw&url=http://maxpixel.freegreatpicture.com/Inspiration-Innovation-Idea-Thought-Imagination-2123970&psig=AFQjCNGqEYTjL66fBN_APBrFJmot797DIA&ust=1494299350438188


Index-linked contracts on physical cargoes?

Frame agreements (long-term contracts) Index-linked spot transactions (floating price)

63

Some benefits: - New trading strategies that allow better

control of price risk - Can help reduce likelihood of defaults - Removes price tension between buyer-seller - For end-users, helps secure continuous

supply, regardless of market scenarios (drought, etc…)


Agriculture


CFR South Korea Corn Index compared to CBOT

- Price is multi-origin, depends upon most competitive origin on any given day.

- Accounts for freight fluctuations.

- “True” CFR South Korea price – based on actual CFR transactions, bids and offers collected from traders and millers.

- Provides a complimentary Asian price to CBOT pricing.

- Physical price – not moved by fund trading activity.

- Acts as a close proxy for Japan and Taiwan markets after incorporating freight differentials.

https://www.google.com.sg/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwiU_s7xid7TAhXKMY8KHRnyDBgQjRwIBw&url=https://foodmapper.wordpress.com/page/4/&psig=AFQjCNE0Je2YfZKmo7cr8PHOiti11-zU3w&ust=1494256628547003


Agriculture


Peeking into the future – Swap Contract?

- Australian APW wheat and Black Sea wheat assessments have led to swaps contract demand.

- So far, 7 trading firms and 1 miller have expressed appetite for a Korean corn derivative contract

- Buyers and sellers could hedge risk on a futures contract using the CFR South Korea price assessed daily, which is 99.88% correlated to physical transaction values

- Would be a “clean hedge” for Japan, South Korean and Taiwan, or about 30 million mt of corn

https://www.google.com.sg/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjlpMnRqt_TAhVMrY8KHZsQDGYQjRwIBw&url=https://commons.wikimedia.org/wiki/File:NY_stock_exchange_traders_floor_LC-U9-10548-6.jpg&psig=AFQjCNExHcihIu_RFUAhHsm2D513grmIFw&ust=1494299762213645


Introducing our Asia team


Platts Editorial – Asia

Samar Niazi

Editor, Corn


Alexis Gan

Editor, Wheat

Platts Commercial – Asia

Frances Tho

Business Development Manager, Singapore/Australia

Platts Commercial – Asia

Atin Kapur

Sales Manager, Oceania and India


Daisy Tseng

Editor, Sugar & Corn


Fay (Xiaojuan) Gao

Associate Editor, Ethanol


Afternoon Tea


Wrap Up Andrei Agapi


S&P Global Platts

Managing Editor Agriculture Welcome Address S&P Global ...€¦ · Dry noodles 4% 2015 2016...

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Transcript of Managing Editor Agriculture Welcome Address S&P Global ...€¦ · Dry noodles 4% 2015 2016...