Market situationCereals

Civil Dialog Group Arable Crops6 July 2016

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Exchange Rates

Euro – US Dollar exchange rate

1.1168

1.1073

1.09

1.10

1.11

1.12

1.13

1.14

1.15

1.16

24/05 31/05 07/06 14/06 21/06 28/06

From the last Committee

1.00

1.05

1.10

1.15

1.20

1.25

1.30

1.35

1.40

Spot, ECB reference

-19%

01/07/20141.3688

Euro and US Dollar – Russian Rouble exchange rate

RUB/USD

64.00

RUB/EUR

71.11

25

35

45

55

65

75

85

95

01/13 04/13 07/13 10/13 01/14 04/14 07/14 10/14 01/15 04/15 07/15 10/15 01/16 04/16

Source: Thomson Reuters

Euro and US Dollar - Ukraine Hryvnia exchange rate

UAH/USD

24.88

UAH/EUR

27.67

7

12

17

22

27

32

37

42

01/13 04/13 07/13 10/13 01/14 04/14 07/14 10/14 01/15 04/15 07/15 10/15 01/16 04/16

Source: Thomson Reuters

Euro and US Dollar – Chinese Renminbi exchange rate

CNY/EUR

7.30

CNY/USD

6.56

5

5.5

6

6.5

7

7.5

8

8.5

9

01/13 04/13 07/13 10/13 01/14 04/14 07/14 10/14 01/15 04/15 07/15 10/15 01/16 04/16

Source: Thomson Reuters

Cereals Forecasts

World cereals: IGC

World Production

World Consumption

373404

366 361336

412450 467 482 (474)

159 172140 125

99120

144 148 160 (158)

1802 1800

1750

1850

1794

2008

2046

20012026 (2015)

17311769

1785

18531817

1934

2008

19842010 (2009)

1400

1450

1500

1550

1600

1650

1700

1750

1800

1850

1900

1950

2000

2050

2100

0

100

200

300

400

500

600

700

800

900

1000

2008 2009 2010 2011 2012 2013 2014(est) 2015(f'cast) 2016(proj.)

Mio tMio t

Source: IGC June report

World

Ending Stocks

of which

8 major exporters

World wheat: IGC

World Production

World Consumption

172

199 193 192170

188201

217 226 (223)

69 77 74 6850 54 63 68 72 (70)

685679

653

695

655

717

730736 729 (722)

645652

657

697

677 699

717 719 720 (717)

550

570

590

610

630

650

670

690

710

730

750

0

100

200

300

400

500

2008 2009 2010 2011 2012 2013 2014(est) 2015(f'cast) 2016(proj.)

Mio t

Mio t

Source: IGC June report

World

Ending Stocks

of which

8 major exporters

IGC: Wheat production forecast

155

5763

30 26 2314 15

0

20

40

60

80

100

120

140

160

180

EU USA Russia Canada Australia Ukraine Kazakhstan Argentina

Mio t

All wheat

Source: IGC June report

2013 2014(est) 2015(f'cast) 2016(proj.)

Wheat imports by selected countries

• Source: IGC (data in million tonnes and July/June); *forecast

• North Africa = Algeria, Egypt, Libya, Morocco and Tunisia

2013/14 2014/15 2015/16* 2016/17*

Algeria 7.4 7.4 7.6 7.5

Egypt 10.1 11.1 11.2 11.5

Morocco 3.9 4.0 4.0 5.1

North Africa 25.2 25.5 26.0 27.3

Saudi Arabia 3.5 3.6 3.1 3.6

World maize: IGCWorld Production

World Consumption

150 148

131 130 131

183

207 204 205 (205)

43 4329 25 21

3144 43 47

800

820830

875

866

998

1018

969

1003 (1003)

784

821

843875

863

950

993

972

1002 (1003)

500

600

700

800

900

1000

0

50

100

150

200

250

300

350

2008 2009 2010 2011 2012 2013 2014(est) 2015(f'cast) 2016(proj.)

Mio t

Mio t

Source: IGC June report

World

Ending Stocks

of which US

IGC: maize production forecast

355

7663

32 26

0

50

100

150

200

250

300

350

400

USA Brazil EU Argentine Ukraine

Mio t

Maize

Source: IGC June report

2013 2014(est) 2015(f'cast) 2016(proj.)

World barley: IGC

World Production

World Consumption

34

40

27 2622

26 2530

33 (30)

13

18

108

5 6 6 69 (8)

155 150

122

134

129

145

143

148145 (142)

146145

136 135

133141

144

144141

100

110

120

130

140

150

160

0

10

20

30

40

50

60

70

80

90

2008 2009 2010 2011 2012 2013 2014(est) 2015(f'cast) 2016(proj.)

Mio tMio t

Source: IGC June report

World

Ending Stocks

of which EU

Chinese Maize Sector

Maize Production

797 800 820 830 875 866998 1.018 969

152 166 164 177 193 206 218 216 225

World production (million tonnes)of which China

Source: International Grains Council

Maize production in China

• Source: IGC; 2015/16 forecast

• 2015/16 vs 2007/08:

• Area: +36% or +10 M ha

• Yields: + 8.5%

• Production: +47.5% or +72 Mt

• Share of maize in total grain area increased to 34% in 2015 from 24% in 2003 and 18% in 1988.

2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16

Area (M ha) 28.050 29.864 31.180 32.500 33.542 35.030 36.318 37.123 38.117

Yields (t/ha) 5,43 5,56 5,26 5,45 5,75 5,87 6,02 5,81 5,89

Production (Mt) 152.300 165.900 163.970 177.245 192.780 205.614 218.489 215.646 224.580

Maize Consumption

779 784 821 843 875 863950 993 972

153 157 167 175 193 200 202 209 217

World consumption (million tonnes)of which China

Source: International Grains Council

134150 148

131 130 131

183207 204

43 52 50 54 59 6786

98 108

World closing stocks (million tonnes)

of which China

Source: International Grains Council

Maize Stocks vs Consumption

17 19 18 16 15 1519 21 21

2833 30 31 30

33

4347 50

0

10

20

30

40

50

60Stocks-to-use ratio

Source: International Grains Council

China

World

China: import TRQ for maize and wheat

Out-of-quota rate (%) In-quota rate (%) TRQ In-quota imp (2013) In-quota imp (2014)

Wheat 65 1 9,636,000 5.535.000 3.004.000

Maize 65 1 7,200,000 3.266.000 2.599.000

Wheat 90% of TRQ was allocated for state-trading enterprises

Maize 60% of TRQ was allocated for state-trading enterprises

80

130

180

230

280

330

380

430

US$

/to

nn

e

Corn prices: China vs US and Argentina

China Market Price (Heilongjiang)

US Price (FOB 3YC Gulf)

Argentina Price (Feed Up River)

China Support Price

Sources: IGC, Shanghai JC Intelligence, USDA

Chinese Maize Policy

• - Before 2007: China net exporter, since then modest net importer

• - 2008: support price introduced for maize at RMB 1,550 per t

• - 2008-2014: attractive and increasing support price, plus strong demand led to rapid production growth

• - 2013 onwards: imports of maize alternatives surged due to an increasing price gap between domestic and world maize prices • Barley imports up to 4.3 Mt in 2013/14 and 8.9 Mt in 2014/15 from 1-2 Mt

• Sorghum imports up to 3.4 Mt in 2013/14 and 9.6 Mt in 2014/15

• - 2013 onwards: strong increase of maize stocks as production growth exceeded demand growth. (In MY 2015/16 ending stocks to reach 108 Mt; + 84% vs. 59 Mt in 2011/12)

Chinese Maize Policy

• - 2014: maize support price peaked at RMB 2,250 per t (≈ 360 $/t)

• - 2015: 1st cut of support price: -10% to RMB 2,000 (≈ 315 $/t)

• - 2016: elimination of support price for maize, while kept for wheat (2,360 RMB per t; ≈ 360$/t)

• - Government objectives:

• Reduce state maize reserves (tenders on-going)

• More market orientation

• Reduce maize area by around 3.3 Mha in Northern regions by 2020, while increasing soybean area by 40% to 9.3 M ha.

• Soybean production to grow to ≈ 19 Mt by 2020 from ≈ 12 Mt recently

Chinese Maize Policy

• - Likely short-term effects of change in maize policy:

• Lower maize prices on domestic market

• With selling of state reserves and lower prices consumption expectedto increase; however quality is a concern for old gov' stocks

• Decreasing maize production

• Lower import demand for barley and sorghum in particular

- What about wheat ?

• With high support price maintained it remains "too" attractive to grow

• Chinese wheat stocks already high and could reach 90 Mt by end of 2016/17 (nearly 40% of world stocks)

First Forecast of 2016/17 Grain S&D in ChinaNational Grain and Oils Information Centre

7-June-2016 2016/17 forecast (Mt) +/- prev' f'cast (Mt) 2015/16 (Mt) +/- y/y

Wheat production

- imports

130.3

3.0

n/a

n/a

130.2

3.0

+ 0%

+ 0%

Maize production

- imports

218.0

1.0

n/a

n/a

224.5

2.7

- 3%

- 63%

Sorghum production

- imports

3.1

0.6

n/a

n/a

3.1

7.2

+ 3%

-92%

Soybeans production

- imports

12.6

85.0

n/a

n/a

11.6

82.0

+ 9%

+4%

Barley production

- imports

2.1

2.7

n/a

n/a

2.0

7.8

+ 3%

- 65%

Cereals Prices and Market News

Market News (6/07/2016) Russia/Ukraine

- RUS: possibly wheat export tax remains in force for 2016/17. Grain intervention purchases to start in Aug/Sep but limited to the grain deficitregions of RUS, with a target of 2 mt.

- RUS: harvest started with good initial results; total grains output forecast at 106 mt with possible upward revision (up to 110 mt).

- RUS: In a preliminary estimate Rusagrotrans puts entire 2015/16 MY grain exports at 34.47 mt (+11.2% from 31 mt previous year) incl.:• 24.9 mt of wheat (+ 2.9 mt from the record of 2014/15),

• 4.57 mt of maize (+ 0.7 mt y/y)

• 4.28 mt of barley (- 1 mt y/y)

- UKR: Ag.Ministry: 2015/16 grain exports reached a record of 39.4 mt, (+13% from 34.8 mt previous year) incl.:

17.35 mt wheat, 17.4 mt maize and 4.41 mt barley

Market News (6-07-2016)USDA Acreage Report – 30 06 2016

Estimates for areas planted in the USA

Maize planted area +7% from 2015; 3rd highest since 1944

Soybean planted area +1% from 2015; at a new record high

All wheat area down 7% from 2015

Market News (6-07-2016)U.S. Grain export inspections w/e 23/06/2016

• Market Year = June/May* for wheat and September/August for maize, sorghum and soybeans; www.ams.usda.gov/mnreports/wa_gr101.txt

Commodity MY 2015/16 MY 2014/15 Change

Maize 33 875 356 35 928 039 - 5.7 %

Sorghum 7 487 350 7 530 167 - 0.6 %

Soybeans 44 248 867 47 886 763 - 7.6 %

Wheat* 1 704 580 1 239 638 + 37.5 %

Market News (6-07-2016)

- USA: USDA Crop Progress report w/e 26 06: Winter wheat harvest 45% complete (33% last year, 41% 5Y ave)

Maize rating: 75% good-excellent (68% last year)

Winter wheat rating: 62% G/E (41%)

- Argentina: (Ag. Ministry) maize harvest 51% (66% last year) complete, soybeans harvest 96% complete (99%), while wheat planting 59% done (62%). Ag. Min. forecasts 2015/16 maize harvest at 37.9 Mt (+12% y/y), while 2016 wheat area is put at 5.3 M ha (+22%).

- China: tenders for the sale of state maize reserves continued and around 9.5 Mt has been sold so far with average prices in the range of 240-260 $/t mostly.

Market News (6-07-2016)

- Morocco: import duty on soft wheat was raised from 30% to 65% during 15/06-15/08 2016.

- Morocco: due to severe drought 2016 grain harvest to fall by 70% to 3.4 Mt (incl. 1.9 Mt wheat, 0.9 Mt durum and 0.6 Mt barley)

- Egypt: amendment to national law announced in order to accept wheat imports with an ergot fungus content of up to 0.05%.

- CME will launch an EU futures wheat contract in September 2016. The contract will be euro denominated and physical delivery possible in France.

- Euronext plans to launch nitrogen fertiliser futures for the European market during the autumn, which will be based on urea ammonium nitrate solution and physically deliverable in Rouen.

World cereal prices ($/t)

150

170

190

210

230

250

270

290

310

$ /

to

nn

e

Wheat - Black Sea Milling $ 181

Wheat - US SRW Gulf $ 186

Wheat - FR Cl. 1 Rouen $ 177

Maize - FR Bordeaux $ 192

Maize - US 3YC Gulf $ 184

Barley-FR Dlvd Rouen feed $ 153

CME maize: open interest and

positions of traders

- 300

- 200

- 100

0

100

200

300

400

500

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Th

ou

sa

nd

s o

f c

on

tra

cts

(o

f 1

27

me

tric

to

nn

es

)

Millio

ns

of

co

ntr

ac

ts (

12

7 m

etr

ic t

on

ne

s)

CORN - CHICAGO BOARD OF TRADE

Open Interest Managed money - Net position

Last value: 2016-06-21

CME maize futures

152

155

161

150

155

160

165

170

175

180

0

100

200

300

400

500

600

700

800

15/06/16 19/06/16 23/06/16 27/06/16

$/t

Daily

tra

ded v

olu

me (

1000 c

ontr

acts

of 127 to

nnes)

Chicago (CME) Maize futures

Last 14 days

125

150

175

200

225

250

0

160

320

480

640

800

960

12/12 06/13 12/13 06/14 12/14 06/15 12/15 06/16

$/t

Daily

tra

ded v

olu

me (

1000 c

ontr

acts

of 127 to

nnes)

Chicago (CME) Maize futures

Daily volume

JUL 2016 (R)

DEC 2016 (R)

JUL 2017 (R)

EU maize futures

177

172

182

170

175

180

185

190

0

1

2

3

4

5

15/06/16 21/06/16 27/06/16

€/t

Daily

tra

ded v

olu

me (

1000 c

ontr

acts

of 50 to

nnes)

Euronext - NYSE (MATIF, Paris) maize futures

Last 14 daysLast 14 daysLast 14 daysLast 14 daysLast 14 daysLast 14 daysLast 14 daysLast 14 daysLast 14 daysLast 14 daysLast 14 daysLast 14 daysLast 14 daysLast 14 daysLast 14 daysLast 14 days

120

140

160

180

200

220

0

2

4

6

8

10

08/14 11/14 02/15 05/15 08/15 11/15 02/16 05/16

€/t

Daily

tra

ded v

olu

me (

1000 c

ontr

acts

of 50 to

nnes)

Euronext - NYSE (MATIF, Paris) maize futures

Daily Volume

AUG 2016 (R)

JAN 2017 (R)

AUG 2017 (R)

Conclusions

- Wheat: harvest started in Northern Hemisphere with good initial results. Growing conditions mostly favourable in the North and also improved in Australia. Export competition will further intensify with lower BS and US prices. Quality is a growing concern for the new crop.

- Maize: improved weather outlook in US weighed on prices. 2015/16 Brazilian crop down 10% from 2014/15 record.

- China: maize tenders succesful so far; barley and sorghum imports are forecast to decrease in 2016/17.

- Egypt: ergot fungus tolerance issue finally resolved

Thank you for your attention!

Balance sheet updates & market presentation available:

http://ec.europa.eu/agriculture/cereals/balance-sheets/index_en.htm

Cereals dashboard available:

http://ec.europa.eu/agriculture/dashboards/index_en.htm

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