6/14/2016

1

The Changing Landscape of

World Wheat Trade Alan Tracy

President

International Grains Council Meeting

June 14, 2016

London

Wheat Matters!

Most planted grain:

219+ million hectares

Most traded grain:

164+ MMT traded annually

of the world’s calorie consumption.

of protein for poorest half of the world.

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Farmers Produce More Corn…

0

200

400

600

800

1,000

1,200

2012/13 2013/14 2014/15 2015/16 2016/17

Mil

lio

n M

etr

ic T

on

s (M

MT

)

Corn Soybeans Rice WheatSource: USDA PS&D-May 10, 2016

…But Harvest More

Wheat Area

0

50,000

100,000

150,000

200,000

250,000

2012/13 2013/14 2014/15 2015/16 2016/17

1,0

00 H

ecta

res

Corn Soybeans Rice Wheat

Source: USDA PS&D-May 10, 2016

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Wheat Leads Trade

Sources: USDA PS&D-May 10, 2016 & UN COMTRADE

0

20

40

60

80

100

120

140

160

180

2011 2012 2013 2014 2015*

Mil

lio

n M

etr

ic T

on

s (M

MT

)

Wheat Volume Corn Volume Soybeans Volume

Real Food for Real People

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World Wheat Production Leaders

0

20

40

60

80

100

120

140

China India U.S. Russia France Canada Germany Pakistan Australia Ukraine

Mil

lio

n M

etr

ic T

on

s (M

MT

)

5-Year Average (2011 – 2015)

Sources: USDA May 10, 2016 PS&D, Strategie Grains

Wheat Export Volume Leaders

Source: UN COMTRADE

-

5.0

10.0

15.0

20.0

25.0

30.0

U.S. Canada France Australia Russia Germany Ukraine Argentina Kazakhstan India

Mil

lio

n M

etr

ic T

on

s (M

MT

)

5-Year Average Export Volume (2011 – 2015)

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The Big Shift…

Russia Changed from a Net Importer…

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…to a Major Net Exporter

A Volatile Rise in Russian

Wheat Exports

Source: USDA PS&D

14.9

24.5

0

5

10

15

20

25

30

Mill

ion

Me

tric

To

ns

(MM

T)

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7

Russia’s Rise Impacts U.S.

Wheat Export Direction

EGT Terminal, Longview, Washington

U.S. Wheat Trade Flow 1985 – 1990

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U.S. Wheat Trade Flow 2011-2015

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

1,000 MT

10 MMT in LOST U.S. Sales

11 MMT

1 MMT

Shifted 10 MMT from Middle East, North Africa, Indian Sub-Continent…

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9

0

5,000

10,000

15,000

20,000

25,000

Latin America East and South Asia

1,000 MT

10 MMT in GAINED U.S. Sales

12 MMT

22 MMT

… to Latin America and Asia

New Markets Support Top

Value Exporter

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10

Generating More Revenue per MT

Hard Red Winter $16.80/MT over a basket of origins

Based on IGC data – MY 2016

Soft Red Winter $20.36/MT over French

Soft White $29.18/MT over French soft

Hard Red Spring $7.27/MT over

CWRS

Low-Protein Soft White Earns High Premiums

Jan. 21, 2016 – South Korea Purchase

Premium = $119.62!

8.5 max SW:

$351.71/MT FOB

10.5 max SW:

$232.09/MT FOB

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Wheat Export Value Leaders

$0

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

U.S. Canada Australia France Russia Germany Ukraine Argentina Kazakhstan India

Bil

lio

n U

S$

5-Year Average Export Value (2011 – 2015)

Source: UN COMTRADE

Canadian Volume Pushed 2016 Total Value

$6.2

$5.6

$4.4 $4.3

$3.9

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

Canada U.S. Australia France Russia

Bil

lio

n $

US

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Policy Has Also

Shifted the Landscape…

…instead of export subsidies, the

biggest market distortion today comes from

domestic price supports.

Who’s Distorting Global

Grain Markets?

Source: DTB Associates – Agricultural Subsidies in Key Developing Countries; 2014

*U.S. loan rate

Wheat Support Price Levels

383.97

231.85

350.9

231.12

108.03 111.43

China India Turkey Brazil U.S.* EU

Do

llars

per

Met

ric

Ton

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Wheat Support Prices

Soar Above Market Value

Support Price Levels

Country Wheat Corn Long-grain Rice

China $384 $361 $438

India $232 $217 $332

Brazil $231 $128 $224

Turkey $351 $310 $648

Thailand NA NA $450

U.S. $108 $77 $128

Sources: DTB Associates – Agricultural Subsidies in Key Developing Countries; 2014 Agricultural Act of 2014

WTO Maximum Limit

And Soar Above WTO Limits

Source: DTB Associates – Agricultural Subsidies in Key Developing Countries; 2014

0

10

20

30

40

50

60

70

80

90

100

China India Brazil Turkey

Wh

eat

Sup

po

rt a

s %

of

Val

ue

of

Pro

du

ctio

n

6/14/2016

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Aggregate Measure of Support, Billion U.S. Dollars

*Support below de minimis level

And Soar Above AMS Limits

Country Wheat Corn Rice Other Total AMS Limit

China $15.4 - $18.4 $20.6 - $54.4 $12.4 - $37.0 NA $48.4 - $109.8 $0

India $12.1 - $15.8 $2.5 - $3.8 $13.3 - $28.2 $33.0 $36.1 - $93.4 $0

Brazil $0.8 0* $0.6 NA $1.4 $0.912

Thailand NA $0.5 $1.4 - $10.1 NA $1.9 - $10.6 $0.634

Turkey $5.7 $1.0 $0.3 NA $7.0 $0

U.S. $1.3 0* 0* $5.6 $6.9 $19.1

EU $1.9 0* 0* $4.0 $5.9 $72.4

Sources: DTB Associates – Agricultural Subsidies in Key Developing Countries; 2014 U.S. WTO Notification on Domestic Support in MY 2013 (most recent year available) EU WTO Notification on Domestic Support in 2012/13 (most recent year available)

U.S. Farmers Feel the Pinch

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Over $1 Billion Less Revenue

Exports Down Over 2 Million Tons

U.S. Farmers Feel the Pinch

China Support Policies Hurt

All Wheat Exporters

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Importer Subsidies

Do Distort Markets…

China Drastically Changes the Global Stocks Picture

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

MM

T

WASDE Ending Stocks

China Rest of World

0.15

0.20

0.25

0.30

0.35

0.40

Rat

io

World Stocks to Use Ratio

With China Without China

Surveying the Changing

Landscape…

• Black Sea production and trade has dramatically changed trade patterns

• U.S. wheat demand shifted to Asia and Latin America

Wheat Still Matters!

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Surveying the Changing

Landscape…

A WTO challenge

may be needed

Domestic support from China, others is now the biggest

distortion of production and trade for wheat

The U.S. Wheat Store is Always… OPEN!

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Thank You!

Alan Tracy President