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HGCA response to RFA call for Evidence

HGCA response to RFA call for Evidence. Alastair Dickie Director, Crop Marketing, HGCA.

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HGCA response to RFA call for Evidence

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  1. HGCA response to RFA call for Evidence Alastair Dickie Director, Crop Marketing, HGCA

  2. Question 3: What are the relationships between demand for biofuel feedstock, commodity prices, land conversion and food insecurity? How might these be affected in the future by yield improvements and other factors?

  3. World grain demand - demand for world grains is rising(food & fuel) Maize demand growth =15Mt pa (1.9%) Wheat demand growth =5Mt pa (0.8%) Source: USDA

  4. World grain production 2007- maize dominates, wheat at mercy of weather Source: USDA (Jan 08)

  5. World opening grain stocksfuelling volatility and reliance on the 2008 crop Source: USDA (Dec 07)

  6. World wheat production– erosion of yield triggered strong buying Source: IGC (Oct 07)

  7. World market volatility - rally caused by wheat supply events! Intervention Source: HGCA

  8. Wheat shortage, not biofuel demand- high protein wheat at a large premium Source: HGCA.

  9. Trend Analysis- the key markets are just unpredictable Wheat Rice Bean Oil Sugar

  10. Chicago Corn v NY Gasoline - some linkage in price but not always

  11. Chicago Bean oil v NY Diesel- demand leakage gives price influence

  12. Main market influences- mostly non-UK factors • Global Factors • Wheat crops lower in main producing countries • World 2007/08 wheat crop not large enough to replenish stocks • Quality issues in the US and the EU • GM-free feedgrain demand • And here in the UK • 2007 crop 1.6Mt lower than in 2006, at 13.14Mt • Overall quality lower than in 2006 • Just 11% meet high quality bread wheat specifications compared to over 40% in 2006 Source: HGCA.

  13. World Grain Production Costs*- grain & oilseeds respond to economic signals ($/mt) ($/mt) * Estimated Average for France, UK, Canada, USA, Australia, Ukraine, Kazakhstan. Excludes rent and mortgagecharges Source: HGCA & Friends

  14. Back to basics- economics applies to grain markets S Market Drivers: Weather, Transport Costs Trade flows Price P D Q Quantity

  15. Back to basics- demand shift from new / expanded uses S Market Drivers: Asia demand BioFuels Crude Oil Prices P1 Price D2 D1 Q1 Q2 Quantity

  16. Back to basics- prices rise, yield problems, low stocks, new supplies S Market Drivers: Security of u Supply Fuel Prices New Plantings Substitution Sustainability P2 P1 Price D2 D1 Q1 Q2 Quantity

  17. High forward prices for grain & oilseeds - will lead to a global supply response Source: USDA/IGC/HGCA

  18. World Wheat Area strong prices encourage plantings Source: USDA (Dec 07)

  19. Supply response expected in 2008-IGC forecasts record wheat crop of 646Mt IGC estimates 3% increase for world wheat plantings: • EU +6% to 26.3M Ha • Germany +6%; France +5%; UK +13% • FSU +3% to 47.9M Ha • Russia +3%; Ukraine +12% • Canada +14% to 9.8M Ha • USA +5% to 21.7M Ha • Australia +10% to 13.5M Ha

  20. USA is planting more!- but will there be enough maize, beans, or wheat? Source: USDA/ La Salle.

  21. and EU-27 wheat production is rising-area increase to boost output by maybe 17Mt in ‘08 + 3.4Mt Source: Strategie Grains

  22. EU plants more Maize- to address the feedgrain shortage Source: Strategie Grains

  23. HGCA Internal Study- the analysis suggests a lot more wheat Source: HGCA

  24. Fob Vegetable Oil Prices - soft oil demand boosts sun and rape oils 2003/04 2004/05 2005/06 2006/07 Source: Oilworld.

  25. We know that Asia’s Veg Oil Needs are expanding- both China & India are dependent on imports…… China India Source: USDA.

  26. ..but the EU also needs more oil-and is also dependent on imports ‘000 ts Source: Oilworld, www.oilworld.biz.

  27. World Oilseed Production & Stocks - sharp fall in carry-over stocks for next year 2008/09 beginning stocks down by 16Mt * Source: USDA.

  28. UK Household Expenditure - more leisure and motoring %

  29. Raw Material costs are not the issue- developed countries pay for added value

  30. Raw Material costs are not the issue- managing costs is the issue

  31. Food Waste or Food Security - less waste to release resources to tackle climate change

  32. … let’s work together to improve our world Thank you

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