PAGE 1 I Gaftaworld August 2012 Harvest reports from Russia and Ukraine Russia harvest report (Efko-Trade LLC, Rostov-on Don, Russia) In the crop year 2011/12 Russia and the Black Sea region have rebuilt their role as important suppliers of agricultural commodities to the world market. However, starting from April 2012 main grain production areas in the northern hemisphere have been developing under very adverse weather conditions which have cut projected grain yields dramatically and have led to decreasing crop volumes in the USA as well as in Ukraine, Russia and Kazakhstan. Beginning August 2012 Russian crop estimates for total grain output are between 75M and 78M tonnes, including 42-44M tonnes of wheat and 15-16M tonnes of barley. These numbers are well below the 2011 total grain crop of 94M tonnes and have resulted in rapid market and price changes. World wheat prices have jumped more than 50 percent and corn prices more than 45 percent since mid-June. Challenging market developments are requiring farmers, traders and consumers to improve competition practices, to forecast and manage risks as well as to manage logistic costs. Government regulation and interference may of course be a major influential factor. Despite current market circumstances, we believe that Russia has got a wheat exportable surplus of around 7-10M tonnes in the crop year 2012/13 and will remain an active exporting country in the Black Sea region. The region itself will strengthen its role in the long-term supplying world food markets while world grain consumers will further rely on stable Russian grain exports. Ukraine harvest report (Toepfer Group) World grain production prospects have deteriorated with the severe drought in the US and a below-average wheat crop in Russia. Ukraine also suffered from poor growing conditions, as dry and hot autumn weather provided for poor planting conditions for winter grain, and record low temperatures in February have led to substantial winterkill of wheat and barley in the south of the country. However, relatively stable weather conditions in western Ukraine and improving farming practices led to a wheat crop that may turn out to be well above the worst expectations. Harvest results point to a wheat production of 13-14M tonnes. This is below the 22M tonnes harvested in 2011 but well above most analysts estimates in June. The yields reported for barley though are disappointing, confirming USDAs estimate of a crop as low as 6-6.5M tonnes. For the second year in a row, corn will provide for the difference. Farmers planted a record large area of 4.3-4.5M ha. New varieties and modern farming practices are resulting in higher and more stable yields. Thus, despite the less than optimal weather conditions this year, Ukraine should harvest a record corn crop of about 17M to 20M tonnes depending on the rainfall in August. Total grain production should reach 40-44M tonnes. This is well below the 55M tonnes harvested in 2011, but would still be the 6th largest crop in Ukrainian history. Harvest results point to a wheat production of 13-14M tonnes. This is below the 22M tonnes harvested in 2011 but well above most analysts estimates in June. The northern hemisphere harvest has been progressing in recent weeks, following problematic weather conditions for crops in many of the main producing countries. More information on yields and quality will be known very soon, but Gafta members have supplied information on harvest progress to date (early August) in the Black Sea region and Europe. Reports from France, Germany and UK can be found on page 5. C O N T E N T S The Contract The parties entered into a contract to sell FOB Kohsichang 22,000 tonnes of rice, with shipment to take place during April to 7th May 2008. All other terms and conditions of the contract were to be as per Gafta 120. The Facts On 8th May, the day after the expiry of the contractual shipment/delivery period, the Buyers wrote to the Sellers stating they had not booked the carrying vessel as the Sellers had not confirmed that the cargo was ready. As a gesture of goodwill, but without prejudice to their rights, the Buyers said they were ready to extend the delivery period by 21 days, subject to confirmation within two days that the goods were ready. Failing this, they would hold the Sellers in default. Shortly after, the Buyers solicitors wrote to the Sellers to say that despite clear indication that you are in breach of contract, [buyers] hereby give you notice under clause 7 of Gafta Form No 119 that they require the delivery period to be extended by an additional period of 30 days. A response was required within 7 days, otherwise the Sellers would be held in default. Was the Buyers message of 8 May a valid claim for an extension? Clause 7 of Gafta 120 (in common with other Gafta standard form contracts) permits a buyer to unilaterally claim an extension of the delivery period by an additional period not exceeding 21 consecutive days, provided they serve a valid notice. The Court accepted that the notice had to be clear as to both the fact that an extension was being claimed and as to its duration. After analysing the exchanges, the Court agreed with the Gafta Board of Appeal that the Buyers message of 8th May had not validly claimed an extension, for the following reasons: 1. It stated that they were ready to extend the delivery period, not that they were doing so, i.e. it was conditional upon the Sellers response. 2. That this was a proposal was further supported by the reference to it being a gesture of goodwill and without prejudice to our right. 3. If an extension of the delivery period had been claimed, this would have affirmed the contract and there could be no question of the Buyers being able to rely on their "right" with regard to alleged breaches. 4. The Buyers argument that they were referring to the right to treat the Sellers as being in default of the extended delivery period also failed. If the delivery period had effectively been extended, the Sellers could not be treated as being in default in two days time, as even in the absence of confirmation of load readiness, the Sellers would still have had 19 days of the extended delivery period to perform and could not be in default. 5. Buyers were offering the Sellers a choice. 6. The Board of Appeal had come to the same conclusion. 7. The effect of combining these matters in the terms used was to make the extension conditional upon the Sellers confirming the readiness of the cargo. This never happened so there was no valid claim for an extension. With regard to the message sent by the Buyers solicitors, they had made the fatal error of going on to require Sellers to confirm their intention to ship the cargo within 7 days, failing which they would be held in default. The judges conclusion was that it was unclear whether the message claimed an extension regardless of the Sellers requested response. Lessons to be learned The Buyers in this case were seeking to vary the contract rather than claim an extension under Gafta terms. The moral of this tale for the parties seeking to claim an extension is that they should read the contract to make sure that any notice sent is clear, and contains all the ingredients necessary to be effective. Promoting international trade Contracts & Arbitration PAGE 2 I Gaftaworld August 2012 In PEC Limited v Thai Maparn Trading Co Limited [2011] the English Commercial Court gave judgment on an appeal against a Gafta Board of Appeal award, which had considered amongst other things, whether a buyers claim for an extension under a FOB contract was valid. Claims for extensions will be familiar to many Gafta members and the result emphasised yet again the importance of getting such matters right as US$14,520,000 turned on the outcome. By Eurof LLoyd-Lewis, Partner, Marine and International Trade, Clyde & Co When is an extension not an extension? 3 General Produce and Spices 4 RIO+20 5 EU Harvest Reports 6-7 Special Feature: Freight Markets 8 New Brazilian Forest Code 9 Gafta News 10-11 New Members 12 2012 European Commodities Exchange General Produce & Spices International Good Hygiene Practice for Spices Codex is currently working to revise the Code of Hygienic Practice for Spices and Dried Aromatic Plants (1995). The US delegation is taking the lead with an electronic working group of members preparing the draft revision which will be submitted to Codex for general circulation by 10th September 2012. Gafta has observer status within Codex should general produce members wish to send comments for inclusion later in the process. Please inform tradepolicy@gafta.com of your interest in this matter. Amendments to the EU high risk list of food and feed published The latest revision of the EUs high risk list of food and feed imports of non animal origin applies from 1st July 2012. The key changes in Annex 1, which affect nutmeg and mace from Indonesia, yardlong beans from Dominican Republic, capsicum, dried fruit, nutmeg, mace and ginger from India and capsicum from Peru, were detailed in a members circular dated 19th June 2012 (AM/2012/162). Gafta will keep members informed of proposed changes in the next revision expected to take effect on 1st October 2012. Gafta International Pulse Committee Gafta's newly formed International Pulse Committee met on 7th June and discussed issues of importance to the global trade in pulses, the scope of products concerned, prohibitions on exports, import tariffs, global phytosanitary legislation and enforcement. The committee also looked at relevant Gafta contracts 23, 24, 25, 88 and 89 and underlined their preference for mediation over arbitration (see article below). More involvement in this committee from France, Turkey and Argentina would be considered. Please contact tradepolicy@gafta.com should you wish to be involved. EU officially sets limits for Ochratoxin A (OTA) in spices The EU Commission published Regulation 594/2012 setting maximum limits for OTA in certain foodstuffs. This regulation shall enter into force on the twentieth day after publication on 6th July with the exception of maximum limits for spices which shall apply from 1st July 2012. Full details of this regulation, which affects imports of capsicum species, pepper, nutmeg, turmeric, ginger and mixtures of spices, as well as wheat gluten, were given in a members circular dated 6th July (AM/2012/187). Simple Disputes Arbitration Rules No. 126 By Milan Shah, Chairman, Gafta International Pulse Committee Gafta is recognised globally for the pre-eminent contracts and arbitration service it offers the commodities trade. The Gafta No 125 Arbitration Rules are often found to be incorporated by reference into Gafta trading contracts. The rules envisage a three person first tier tribunal and five person appeal board, although this can be varied by the mutual agreement of the parties. Such a process is well suited to the many complex disputes that tend to find their way to arbitration. However, sometimes a less costly and swifter process is required and Gafta has accommodated this for many years by its Gafta No 126 Simple Disputes Arbitration Rules. These rules have several salient features:- a single tier process with no Gafta appeal; a sole Gafta Qualified Arbitrator; 7 business days for each party to lodge claim, defence and reply submissions; an award with brief reasons; a target of 7 days to produce the award from the arbitration or oral hearing date. Such a process can clearly yield substantial cost and time savings to the parties, whilst still drawing on the expertise and experience of Gaftas arbitration panel. Typically, once a simple dispute has been identified, the parties might agree that Gafta No 126 is more appropriate than the contractually agreed Gafta No 125. The arbitration agreement is varied from that in the original contract using a template form found in Gafta No 126. In some trades involving smaller transaction values, such as the containerised trade in pulses or other general produce, it may be prudent to incorporate Gafta No 126 into the trading contract from the outset, so that all disputes follow this process. Gafta offers a range of dispute resolution options to the trading parties, who must choose the most appropriate for their requirements. Gaftaworld August 2012 I PAGE 3 A two year process agreed UN text on trade and food price volatility within the food security section, plus a brief additional section specifically calling for greater trade liberalisation and conclusion of the Doha round. Having represented the World Farmers Organisation through the negotiating process, it was a pleasure to see strong emphasis in the agriculture section on issues that can help farmers address food security and hunger. These include: Reaffirmation of the commitment to present and future generations to enhance access to adequate, safe and nutritious food Increasing access to credit and other financial services, markets and secure land tenure Focusing investment on sustainable agriculture practices, rural infrastructure, storage capacities and related technologies, cooperatives and value chains Enhancing agricultural research extension services and training to improving agricultural productivity and sustainability Empowering farmers, fishers and foresters to choose among diverse methods of achieving sustainable agricultural production Significantly reducing post-harvest and other food losses and waste throughout the food supply chain Enhancing resilience to climate change and natural disasters For agriculture, Rio+20 culminated in the launch of the UN Secretary Generals new Zero Hunger Challenge which caps a long effort to get a focus on food and nutritional security. Ban Ki Moon said: Zero hunger would boost economic growth, reduce poverty and safeguard the environment. It would foster peace and stability. The Zero Hunger Challenge has five main objectives: to achieve 100 per cent access to adequate food all year round; to end malnutrition in pregnancy and early childhood; to make all food systems sustainable; to increase growth in the productivity and income of smallholders, particularly women; and to achieve a zero rate of food waste. Agriculture is unmistakably back at the top of the agenda. Promoting international trade Trade Update PAGE 4 I Gaftaworld August 2012 RIO+20 By Robynne Anderson, Emerging Ag Inc (robynne@emergingag.com) You may have seen the media coverage suggesting Rio+20 just settled and showed no ambition. However, the needs of farmers and the importance of agriculture are well reflected in the final outcomes. UN Secretary-General Ban Ki-Moon, Brazilian President Dilma Rousseff and Under- Secretary-General Muhammad Shaaban at the plenary session of the UN Rio+20 Conference on Sustainable Development Pavilion hosting exhibits on sustainable development during Rio+20 Selected clauses* from Rio Food security and nutrition and sustainable agriculture 115. We reaffirm the important work and inclusive nature of the Committee on World Food Security (CFS), including through its role in facilitating country-initiated assessments on sustainable food production and food security, and we encourage countries to give due consideration to implementing the CFS Voluntary Guidelines on the Responsible Governance of Tenure of Land, Fisheries and Forests in the Context of National Food Security. We take note of the on-going discussions on responsible agricultural investment in the framework of the CFS, as well as the Principles for Responsible Agricultural Investment (PRAI). 116. We stress the need to address the root causes of excessive food price volatility, including its structural causes, at all levels, and the need to manage the risks linked to high and excessively volatile prices in agriculture commodities and their consequences for global food security and nutrition, as well as for smallholder farmers and poor urban dwellers. 117. We underline the importance of timely, accurate and transparent information in helping to address excessive food price volatility, and in this regard takes note of the Agricultural Market Information System hosted by the Food and Agriculture Organization of the United Nations and urges the participating international organizations, private sector actors and Governments to ensure the public dissemination of timely and quality food market information products. 118. We reaffirm that a universal, rules-based, open, non-discriminatory and equitable multilateral trading system will promote agricultural and rural development in developing countries and contribute to world food security. We urge national, regional and international strategies to promote the participation of farmers, especially smallholder farmers, including women, in community, domestic, regional and international markets. Trade 281. We reaffirm that international trade is an engine for development and sustained economic growth, and also reaffirm the critical role that a universal, rules-based, open, non-discriminatory and equitable multilateral trading system, as well as meaningful trade liberalization, can play in stimulating economic growth and development worldwide, thereby benefiting all countries at all stages of development, as they advance towards sustainable development. 282. We urge the Members of the WTO to redouble their efforts to achieve an ambitious, balanced and development-oriented conclusion to the Doha Development Agenda, while respecting the principles of transparency, inclusiveness and consensual decision-making, with a view to strengthen the multilateral trading system. *Some have been abbreviated here Trade News Gaftaworld August 2012 I PAGE 5 Even if harvest is not yet over, we expect a rather bumper 2012 French cereal crop. As far as quality is concerned, the situation is better than feared but not excellent either. After a very cold winter which led to winter wheat and barley acreage losses, there were concerns about the possibilities of a new drought at the start of spring. However, since April the weather has been fine, and expected yields are on the high side. For wheat, yields more than compensated for the lower acreage (affected by winter frosts); France could harvest up to 3M tonnes more than in 2011. For the time being and unsurprisingly, humidity is slightly higher than last year, protein content a bit lower, but nothing really troublesome. We expect spring barley production to be 2M tonnes higher than last year with satisfactory malting quality, and a larger winter barley crop too. The situation for durum wheat is more mixed; production is seen higher but poor quality could affect a significant part of it. There is still some time before the maize harvest, but pollination has occured in good conditions and acreage seems to be up; on the other hand one has to remember that last years summer weather conditions were close to ideal; all in all, we expect at least the same production as in 2011. Overall, the French harvest could be 6M tonnes more, or about 10 % higher, than in 2011. By Francois Luguenot, InVivo Group France harvest report The winter barley harvest in Germany is almost finished. 2012 yields are in line with the long-term average of 6.3 tonnes per hectare, 10% higher compared to 2011. Harvest results show above average quality, with test weights ranging between 60 and 65 kg/hl. The spring barley harvest is around 20% complete. The majority of harvested spring barley will be used for feeding this year. Winter wheat suffered from the cold winter, so that acreage needed to be reseeded. Many farmers switched to feed barley varieties on that acreage. Overall, the barley harvest should range between 9.8M and 10.0M tonnes, compared to 8.7M tonnes in 2011. The 2012 wheat crop should increase to around 23.0M tonnes (22.7M in 2011). By 3rd August, approximately 30% of German winter wheat had been harvested. Wheat yields are slightly above the long-term average of 7.3 tonnes per hectare, but significantly up from the 2011 yields. 2012 wheat quality will also be above the long-term average and much better compared to 2011. The majority of the wheat has reached milling wheat standard. Test weight is above 77- 78 kg/hl so far. The majority has falling numbers between 250 and 350 seconds. Only the protein content is lower, due to the very big kernels harvested this year. Harvest weather so far this year is much better than that in 2011. Much drier weather should support the harvest progress and the wheat harvest should be in full swing in early August. The long-term weather forecast should support the harvest progress. Therefore, no real yield losses are expected over the next few weeks due to unfavourable weather conditions. By Bernhard Chilla, Manager Economics/Research, Viterra Germany GmbH Germany harvest report As we go to press the UK harvest is nowhere near as advanced as many would have expected, or hoped for, with first cuts of winter barley and rapeseed only starting towards the end of July and wheat probably another 7 to 10 days from starting. Indications from early cuts are mixed, and very much area dependent. For winter barley it seems that yields are better than expected given the recent weather but still look to be coming in just below the 5-year average and there are growing concerns about specific weight due to the past few months heavy rainfall across the country. However there are encouraging signs in early nitrogen levels for the malting barley which have been averaging 1.65-1.70. Looking ahead at the expectations for wheat, there are concerns of increased cases of fusarium fungus due to the heavy rains; also, the lower than average sunlight received by the UK during the past few months has meant less photosynthesis for the crop. Many are now expecting a sub 15M tonne crop this season as yields have deteriorated in the last few months, but this should still leave around 1.5M tonnes of wheat for export. As well as lower yields there are concerns on the protein content of the UK wheat crop which has forced some to take coverage of alternative milling wheat origins, with some decent volumes of German milling wheat reported. The rapeseed harvest has only just begun and it looks like the average yield will be in line with expectations at 3.5 tonnes per hectare, but quality is very mixed. By Scott Wellcome, Seaboard Overseas Limited UK harvest report International grain traders have always had a heavy dependence on shipping but there has been a continuous ebb and flow in their ability to influence its cost. During the last three decades we have seen a progressive reduction, from around 35% to less than 15%, in grains share of the major bulk trades, as the growth rate in iron ore and coal movements consistently outpaced that of grain. However, whilst this resulted in a growing influence of the industrial sector in setting the overall level of the dry bulk market, for much of the 1980s and even the 1990s there nonetheless remained a significant degree of correlation between short term freight rate movements and fluctuating volumes of grain shipments, both within and between years. This was because the grain trades continued to be the principal driver of market volatility. However, in the early years of the new millennium, explosive growth of the iron ore trades on the back of rapidly rising Chinese import demand changed the rules of the game because the inflow of the Capesize bulk carriers needed to carry these cargoes was very constrained. This ushered in the era of supercharged freight rates, which rose to previously unthinkable levels. Timecharter rates were stratospheric (figure 1), with extreme consequences for the grain trades. Yet the extreme market tightness driving the boom had nothing to do with any development in the grain trades. Between 2003 and 2008 there was a very high degree of correlation between the Capesize sector, which carries iron ore and coal and the entire sub-Cape fleet, on which the grain trades depend, so the relationship between freight market movements and the grain trades was much weakened within any year, and became to all intents and purposes, non-existent between years. The freight market super cycle peaked in mid-2008, and has been in long-term retreat ever since, as fleet growth has now been consistently outpacing cargo growth for nearly four years. The 12 month moving average of BDI returned to pre-2003 levels in the second half of 2011, and continues to weaken as the fleet surplus grows. The effect of these changes has been to partly realign the ebb and flow of the grain trades within any one year with ocean freight. The correlation between Cape and the sub-Cape sectors has, for the time being, broken down, although the longer term market cycle continues to be driven by the overall balance between the supply of ships and demand side growth. Supply of ships There are three key trends affecting the dry bulk fleet: The Fleet is growing ... rapidly Figure 2, shows how the expansion of the fleet has picked up since 2003, but changed gear since 2008. Initially the expansion was concentrated in the Capesize fleet, but subsequently the sub-Cape fleet has seen a rapid increase in its growth rate. Overall in 2011 the fleet grew by nearly 15% on the previous year, and the trend so far in 2012 is just as robust despite an increase in scrapping. It is important to remember that the impact of fleet growth on freight markets is lagged. While the full force of newbuilding deliveries is working through into the Cape market, supply side pressure is still mounting in the sub-Cape trades. This is good news for the grain trades. The Fleet is diversifying Within each sector of the fleet there is a wide range of ship designs being delivered, with an underlying trend for ships to grow bigger in each category. There are, in effect, two new fleets of ship rapidly emerging: very large ore carriers and a diversified fleet of Post- Promoting international trade Special feature PAGE 6 I Gaftaworld August 2012 Weak markets, high freight: A new era for dry bulk shipping? By Peter Kerr-Dineen, Joint Chairman, Howe Robinson & Co Ltd There has been a close relationship between the grain trades and the ocean freight market for many thousands of years, and looking at the next phase of its development, it seems to me, we stand on the brink of change. 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 250,000 200,000 150,000 100,000 50,000 0 U S $
p e r
T e TC Avg BCI TC Avg BPI TC Avg BSI TC Avg BHSI Timecharter Stratospheric Figure 1 Special feature Gaftaworld August 2012 I PAGE 7 Panamax ships of between 80,000-120,000 dwt. However there remains blue water between the bigger Post-Panamax ships and the 170,000 dwt Cape designs which underlies the breakdown in correlation between Capes and sub-Cape markets. The Fleet is Modernising Such was the squeeze on markets caused by constricted supply and strong underlying demand in the years since 2003 that scrapping activity was virtually put on hold as all ships which could float were pressed into service, and maintained in service, regardless of their age. However, as tonnage surpluses began to develop in 2011, there has been a quantum leap in demolition across the sectors. At last there is a sufficient flow of newbuildings, and a sufficient surplus of shipping, to permit and spur a sustained programme of scrapping. Demand Perhaps surprisingly, in light of the current problems in the world economy, at least for the time being, we currently expect trade volumes to reach all time highs in 2012 in almost every key sector of dry bulk trade. Overall, in the absence of significant macroeconomic dislocation in the second half of 2012, but not withstanding the generally weak global environment, we are looking for overall volume growth in dry bulk trade of around 7%. Furthermore, market imbalances continue to grow and strong seasonality continues to influence markets within the year. So, despite the difficulties affecting some OECD countries, and a slow down in the rate of expansion of many emerging nations, China included, demand for dry bulk raw material remains robust. Nonetheless, the fleet is currently expanding faster than demand is growing, and the freight markets are weakening as a result. Taking into account all the other factors that impact on the raw data our overall supply:demand balance (prior to scrapping) suggests overall effective fleet growth measured by cargo carrying capacity of 13.7% and adjusted cargo growth of 7.3% leading to a further growth in the fleet surplus of 6.4% for 2012. Consequences for the grain trade There are three obvious consequences stemming from fleet change: 1. The fleet is growing at a faster pace than demand which will result in year on year market weakness. 2. The fleet is diversifying, presenting grain traders with a greatly increased choice of vessel designs and sizes. There is a clear trend towards building bigger ships in all key areas of the fleet, and an increasing emphasis on maximising fuel efficiency. The rapid growth of the Post-Panamax fleet reflects radical change. The grain trades have been cautious in embracing this change but already around 19% of spot market fixtures of these ships are for grain trading. 3. The fleet is modernising. The reduced necessity to charter older vessels will result in insurance savings and enhanced operational efficiency. So far as market changes are concerned, the grain freight markets will no longer be driven to the same extent by developments in the big ship mineral trades but, in a return to the status quo ante, the grain trades will instead increasingly drive the sub-Cape markets because: The correlation between the Cape and the sub-Cape sector is broken In the sub-Cape sector, on a time adjusted basis, the grain trades are the dominant commodity The seasonality of the sub-Cape sector is driven by the grain trades So, on the face of it, this is all as good news for the grain trades as it is bad news for shipowners. But the bad news is that timecharter earnings and freight are two different things and the key difference is oil. While the long-term cycle in timecharter earnings is down, unfortunately the long-term trend in oil and hence bunker prices is up. As a result freight rates are today considerably higher than they were in the past, when timecharter rates were at todays levels. In the future it is perfectly conceivable that freight rates may increase as a result of bunker price changes, even though timecharter hires actually reduce. Going forward, grain traders and freight operators looking for forward cover, need to remember that they currently have much greater exposure in terms of risk to the oil market than they do to the timecharter market. This trend is likely to be further boosted by an assortment of new developments including new sulphur emission regulations and new IMO regulations, which together with market developments, will lead to the rolling out of a new generation of fuel efficient ships ... at a price. The grain trades need to remain abreast of all these developments, and be alert to the implications of what may become a fleet which, in response to adverse markets, steams ever slower. The growing correlation between sub-Cape timecharter cycle and seasonality of grain trades mean grain trades have greater visibility over short-term market movement and should use it to hedge freight risk Be flexible on size of stems to maximise the diverse advantages of a diversifying fleet (including the ability it gives to minimise fuel costs per ton of cargo carried) Recognise that the bunker element in freight is up to twice or more that of timecharter hire element, and adjust your hedging strategies accordingly Be alert to the prospect and consequences of ever slower steaming This article is adapted from a speech given by Peter Kerr-Dineen at the 2012 IGC Conference on 7th June, 2012. Conclusions 1 9 8 5 1 9 8 6 1 9 8 7 1 9 8 8 1 9 8 9 1 9 9 0 1 9 9 1 1 9 9 2 1 9 9 3 1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 * 160 140 120 100 80 60 40 20 0 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2012* Scheduled Deliveries vs YTD BGI M i l l i o n
D w t Handysize Handymix Panamax Post Panamax Capesize VLOC BDI B D I
I n d e x The Fleet is Growing Rapidly Annual Fleet Deliveries vs BCI Figure 2 Taking into account all the other factors that impact on the raw data our overall supply: demand balance......suggests.........further growth in the fleet surplus of 6.4% for 2012. PAGE 8 I Gaftaworld August 2012 The Forest Code will guarantee the maintenance of the forest assets of Brazilian rural properties, with little impact on soy production, an activity that is already developed respecting the requirements related to Areas of Permanent Preservation (APP) and Legal Reserves (RL). These lands that are at the margins of water streams or at the top of mountains are responsible for maintaining biodiversity on the farms and their conservation is totally borne by Brazilian farmers (Figure 1). The private conservation areas, added to the public conservation units and Indians territories, cover 61% of Brazilian territory. Half of these preserved areas is on private properties, which reinforces the importance of the debate on the need to pay for environmental services. This thesis was embraced by ABIOVE long before discussion on the new Forest Code. In our assessment, it is imperative that a mechanism be approved to pay for environmental services. Brazil has improved its environmental governance significantly during the last five years, and this is a guarantee for enforcing the new Code. The governance system includes on-line identification of deforestation and fires by using satellite images; identification of the owner through Rural Environment Registrations [Cadastro Ambiental Rural (CAR)]; broad legislation with penalties; coordinated inspection; and an increase in the number of conservation units under state control. Non-compliance with the Forest Code and other laws and regulations will lead to severe penalties. Illegal deforestation will be immediately identified, and it is impossible to erase the satellite images that evidence such activities. Serious irregularities will lead to the embargo of properties, which inhibits performing any economic activity, including selling the farm. The national Rural Environment Registration (CAR) and the Environmental Regularisation Program (PRA) are the two important novelties of the Forest Code. CAR will be a powerful tool for the environmental bodies to manage the use and occupation of soil. Before the new Code, some state governments (eg Mato Grosso and Par) had already implemented their rural registration systems. Now the registrations are mandatory for all rural properties at a national level. Monitoring and inspections can be made by satellite images, which together with CAR, will allow total control of the existing forest reserves in Brazilian rural properties. The Code maintains the same strictness as to the size (percentage) of the Legal Reserve areas (80% in the Amazon Biome, 35% in the Cerrado and 20% in the rest of Brazil). The reserve is mandatory in all private Brazilian properties, and its function is to preserve local biodiversity. No amnesty is granted to those that deforested illegally, and although some NGOs are announcing that deforestation will increase, this is not true for the following reasons: for properties whose Legal Reserve areas were irregularly deforested before July 2008, the owner must sign a commitment instrument to a) restore the deforested areas, or b) permit their natural regeneration, or c) compensate (by one of the specified actions). where Legal Reserve areas were irregularly deforested after July 2008, the activities must be suspended and restoration of the Legal Reserve area must be carried out by 25th May 2014. non-compliance with regard to the restoration of Legal Reserves shall imply fines and total embargo of the property. producers shall maintain riparian vegetation with specified margins for rivers, lakes and lagoons. producers shall maintain native vegetation on mountain tops and on slopes with declivity above 45 degrees. There are also strict rules on the restoration of Areas of Permanent Preservation (depending on whether they were opened before or after 2008). During the last five years, with governance improvements, the Amazon Biome deforestation has dropped significantly. In 2010-2011, the lowest rates of deforestation were registered in the last 23 years. The new Forest Code is an important step that must be recognised, as well as the fact that Brazilian rural producers are environmental service providers and must be duly compensated. Brazilian private properties are involved in conservation of the biodiversity and in reducing carbon emissions by maintaining native vegetation and apply the best production practices, such as zero till and integration of cultures. Promoting international trade Trade News New Brazilian Forest Code permits conciliating food production with environmental conservation The new Forest Code (Law 12651 of May 25, 2012) represents an important step forward for Brazilian society and an example for other countries. At a time when there is a need to produce more food in a sustainable way, this legislation provides important tools with respect to organising land use, bringing clear rules and more legal security to the rural producer, after over 15 years of the temporary legislation. By Carlo Lovatelli, President of ABIOVE (Brazilian Association of Vegetable Oil Industries) Areas of Permanent Preservation (APP): along the margins of rivers and hilltops Legal Reserve (RL): native vegetation must be preserved on 20% to 80% depending on the biome Figure 1 - Brazilian farms - Environmental legislation guarantees that large areas of private land are preserved Gafta arbitration service has the advantage of Arbitration Rules No.125 and a comprehensive Gafta Code of Practice. Therefore many procedures are already in place at the start of a case, nevertheless arbitrators still have to intervene and manage the process. Gafta arbitrators see occasions when parties solicitors are engaging in letter wars with their dialogue being sent to the arbitrators for information. In discussion arbitrators took the view that if there was no direct request to them, in those circumstances they could intervene and say they only want to see the correspondence which involves applications to them directly. If a timetable is not followed, or urgent applications made, the arbitrators should be receptive quickly. Work to a timetable with deadlines, preferably fixed dates. In cases of unnecessary delays and repeated extensions of time, when giving an order arbitrators could usefully notify the parties that they expect the deadline to be observed and will be reluctant to extend time in the future. The question of the use of electronic devices during hearings was discussed and while recognising the advantages of this means of communications generally, most arbitrators were of the view that recording hearings and communicating with others outside the hearing room was undesirable. This could be tackled on a case by case basis as the tribunal requires. Note: If Gafta members have any suggestions for future Master Classes we shall be pleased to hear from you. Please email events@gafta.com. Trade Foundation Course Gafta ran a five day Grade 1 Trade Foundation Course at the Royal Holloway University of London in Egham, United Kingdom on 17th to 22nd June 2012. The course was well attended, with 60 delegates from 15 different countries around the world including United Arab Emirates, Netherlands, Hungary and Canada. The speakers came from a range of companies throughout the industry including the SGS Group, FCStone, Reed Smith and NYSE Liffe. There was also a number of Gafta Qualified Arbitrators who contributed greatly to the course. The course offered students a broad introduction to all aspects of the trade and tackled all aspects of the training programme at an introductory level. Over five days participants learnt about the following: Formation of contractual obligations Freight loading, fulfilling contractual obligations Dispute resolution Managing risk The majority of delegates indicated that they enjoyed the course and have planned to meet up again to complete future Gafta courses. For those members with an interest in arbitration the Master Class by David Owen QC on Friday 6th July, was an excellent opportunity to hear his approach to case management in an increasingly globalised field, which is also increasingly competitive with much higher stakes for parties and more sophisticated arguments for arbitrators to address. Commercial judges see their role as managing a case successfully and likewise an effective arbitration needs good case management which must be fair. Arbitrators, when making orders, have to see that they are reasonable for parties to comply with and in 'fairness' give enough reasons for their actions. Arbitration Master Class led by David Owen QC The third International Grains Conference, held by the Russian Grain Union in conjunction with Gafta, the IGC and the International Industrial Academy, will take place on 20th to 22nd November 2012 at the International Industrial Academy in Moscow, Russia. A full agenda of topics for discussion has been prepared. These topics include developments in the world grain markets as well as in-depth discussion on the future for the Russian grain sector. Innovations in technology and new tools with regard to the financing of production and trade will also be discussed as well as risk management for grain businesses. Associated with the Conference will be a trade exhibition for manufacturers of equipment and products of grain processing. Registration for the Conference is available on the website of the Russian Grain Union: www.grun.ru Third International Grains Conference: Grain Industry in the 21st Century 20-22 November, 2012 - Moscow, Russia David Owen QC Gafta News Gaftaworld August 2012 I PAGE 9 Delegates at the June Trade Foundation Course Category A Acembex - Comercio E Servicos, Lda Rua Manuel Pinto de Azevedo, 272 3o andar, 4100-320 Porto, Portugal T: +351 22615 6000 F: +351 22615 6099 E: info@acembex.pt www.acembex.pt Contact: Mr. Brian Smith Agro Resources S.A.M. 57 Rue Grimaldi, Le Panorama Bloc A-B 98000, Monaco T: +377 9325 7950 F: +377 9325 7958 E: info@agroresources.mc Contact: Mr. Zameer Zahr AgroTrace S.A. Geneva Business Center 12, av. des Morgines 1213 Petit-Lancy (GE), Switzerland T: +41 22 870 9880 F: +41 22 870 0006 E: info@agrotrace.eu www.agrotrace.eu Contact: Mr. Jochen Koester Agrozan Commodities DMCC Suite 1206, Saba Tower - 1 Jumeirah Lakes Towers, PO Box 191418 Dubai, United Arab Emirates T: +971 4 449 4020 F: +971 4 449 4021 E: m.asim@agrozan.com Contact: Mr. Okan Ozan Ozturk East Grain FZCO Office 910 and 911, Le Solarium Dubai Silicon Oasis, Dubai United Arab Emirates T: +971 4 326 7272 F: +971 4 326 7373 E: cfo@eastgrain.ae Contact: Mr. Abubakar Said Salim Bakhresa La Cooperative Agricole COPAG BP 1001, 83 200 Ait Iazza Taroudant, Morocco T: +212 528 559 900 - 09 F: +212 528 536 284 E: elhaij@copag.ma Contact: Mr. Mohamed El Haij MOI International (Singapore) Pte Ltd 5 International Business Park #05-00 Mewah Building 609914, Singapore T: +65 6829 5091 E: cedriclin@mewahgroup.com www.mewahgroup.com Contact: Mr. Cedric Lin Shunda National Food Authority (NFA) Sugar Regulatory Bldg. North Avenue, Diliman Quezon City, Philippines T: +632 9200652 F: +632 9200651 E: afcasino@gmail.com www.afa.gov.ph Contact: Mr. Carlito G. Co Phoenix Commodities Pvt. Ltd. Akara Building, 24 De Castro Street, Road Town, Tortola, British Virgin Islands T: +662 266 7240 F: +662 266 7247 E: ramendar@pclworld.net Contact: Mr. Gaurav Dhawan Private Joint Stock Company Technological Agricultural Company United (PJSC TAKO) Lesi Ukrainky 15A, App. 7 Kiev 01133, Ukraine T: +38 067 407 6959 F: +38 044 238 6119 E: office@taco.ua www.taco.ua Contact: Mr. Yury Puchinkin Soyuz Commodities S.A. Boulevard de Grancy, 1 Lausanne 1006, Switzerland T: +41 21 321 6000 F: +41 21 321 6010 E: pb@soyuzcom.ch Contact: Mr. Peter Biermann Tampieri S.p.A. Via Granarolo 177/3, Faenza Ravenna 48018, Italy T: +390 546 645411 F: +390 546 46763 E: tampieri@tampieri.com www.tampieri.com Contact: Mr. Adriano Tampieri Category B ACT Ltd. 65, G.M. Dimitrov bldv. entr. B Ap. 16, Sofia, 1700, Bulgaria T: +359 2 416 2293 F: +359 2 418 4683 E: office@eisiti.eu www.eisiti.eu Contact: Mr. Stefan Petrov Urilski HB Agrotrade SA 84, route de Frontenex 1208 Geneva, Switzerland T: +41 22 707 1919 F: +41 22 736 7384 E: h.b.agrotrade@deckpoint.ch Contact: Mr. Hassan S. Boubess Mega Grain Trading Co. (P) Ltd. 403A, Prabhat Kiran Building, Rajindra Place, N. Delhi, 110008, India T: +91 11 2571 9897 F: +91 11 4506 2162 E: ndhawan@megagrain.com Contact: Mr. Neeraj Dhawan Teekay International/Teekay and Dannyy International Villa 148, El Merage City, New Cairo, El Tagamoaa, El Khames, Egypt T: +201 223 127929 F: +20 22 240 3826 E: Teekay@link.net Contact: Mr. Atef Tadros Category C Alfa International Inspection and Surveying Services Ltd. Sti. Camiserif Mahallesi 5244 , Sokak No: 4, Akdeniz, Mersin, Turkey T: +90 324 238 6382 F: +90 324 238 6392 E: info@alfasurvey.com www.alfasurvey.com Contact: Mr. Mete Onal Alfred H. Knight-Ukraine Limited 2/4 Voikova Street, 73001 Kherson, Ukraine T: +380 552 424390 F: +380 552 424390 E: ahk.ukraine@ahkgroup.com www.ahkgroup.com Contact: Mr.Vitalii Gaponenko Dalcontrol Sp. z o.o. ul. Rotterdamska 4, 81-337 Gdynia, Poland T: +48 785 882 861 F: +48 58 627 4870 E: dalcontrol@02.pl www.dalcontrol.pl Contact: Mr. Kamil Wegrecki Eurocontrol Inspection JSC 109/25 Le Quoc Hung St. Ward 12, Dist 4 Ho Chi Minh City, Vietnam T: +84 8 3943 3729 F: +84 8 3943 5759 E: euc@eurocontrol.com.vn www.eurocontrol.com.vn Contact: Mr. Nguyen Hoai Tam Luxcontrol GmbH Sternstrasse 108, Hamburg, 20357, Germany T: +49 40 378 6710 F: +49 40 3786 7199 E: info@luxcontrol.de www.luxcontrol.de Contact: Mrs. Elna Bonnemann Private Enterprise GSP-Services 3/7, Vitse-admirala Zhukova lane off. 4, Odessa, 65026, Ukraine T: +380 4873 42099 F: +380 4823 71408 E: office@gsp-ukraine.com www.gsp.ua Contact: Mr.Vadim Brusentsov Promoting international trade New Members PAGE 10 I Gaftaworld August 2012 Portugal Philippines British Virgin Islands Ukraine Switzerland Italy Bulgaria Switzerland Monaco Switzerland UAE UAE Morocco Singapore India Egypt Turkey Ukraine Poland Vietnam Germany Ukraine Tankoil Group 43, Victor Ammanweel Str. Somouha, Alexandria, Egypt T: +203 427 5600 F: +203 426 2226 E: ayman.tatawy@tankoilgroup.com www.tankoilgroup.com Contact: Mr. Ayman El Tatawy Category D Mr Anthony Hall-Jones Dormston Manor, Inkberrow Worcester WR7 4JT, UK T: +44 1386 792 223 F: +44 1386 793 643 E: tonyhalljones@gmail.com Category E Mr Raymond Pilling P.O. Box 3208, Blantyre Malawi, Southern Africa T: +265 160 9017 F: +44 872 110 4453 E: admin@rg-associates.co.za www.rg-associates.co.za Category F FSBI Leningrad Interregional Veterinary Laboratory Moskovskoe shosse, d.15 Saint Petersburg 196158, Russia T: +7 921 869 5041 E: general@vetlab.spb.ru Contact: Mr. Zhanna Bargman Category G Budtechengineering LTD 2a, Morekhodnaya Str. Nikolayev, Ukraine T: +380 512 580753 F: +380 512 769875 E: btiltdmanaget@gmail.com www.bti-ukraine.com Contact: Mr. Denis Kovalchuk Dale Stevens LLP St. Mary Abchurch House, 123 Cannon Street London EC4N 5AU, UK T: +44 207 929 3897 F: +44 207 929 3170 E: law@dalestevens.com Contact: Mr. Michael Dale Davies Battersby St Michael's Rectory, St Michael's Alley, Cornhill, London EC3V 9DS, UK T: +44 207 621 1090 F: +44 207 621 1040 E: patrick@daviesbattersby.com www.daviesbattersby.com Contact: Mr. Patrick Battersby Penlaw SELARL 23 rue d'Anjou, Paris 75008, France T: +331 4451 5970 F: +331 4451 5971 E: h.page@penlaw.fr Contact: Mr. Henry Page Category J Agrica Ukraine Ltd. 73-B, Rizhskaya str, of 32 Kiev, 04060, Ukraine T: +380 503 120272 E: 3120272@gmail.com Contact: Mr. Sergiy Moroz Bul Agro Control 1 Ltd. 29 Str. Nezavisinost BH. A Ap 2 Dobrich, Bulgaria T: +359 886 902414 F: +359 586 02752 E: bulagrocontrol1@abv.bg www.bulagrocontrol.bg Contact: Mr. Daniel Vasilev Fumicom Ukraine Ltd. 82-A, Turgenevskaya str., of. 42 Kiev 04050, Ukraine T: +380 5064 17929 E: fumicom.limited@gmail.com Contact: Ms. Tatyana Moroz PE Vermex 1, Bazovaya str. 67806 u.t.c. Avangard Ovidiopol district Odessa Region, Ukraine T: +38 048 738 4938 F: +38 048 738 4939 E: office@vermex.com.ua Contact: Mr. Sergiy Sergeyev SGS Romania SA 38, Calea Seriban Voda Bucharest, 040212, Romania T: +40 213 354683 F: +40 213 354619 E: claudiu.iancu@sgs.com www.sgs.com Contact: Mr. Claudiu Iancu STOMI Limited Liability Company Office 37, 94/1 Sorokarichia zhovtnya, Kiev 03040, Ukraine T: +38 044 599 9923 F: +38 044 2530033 E: os_vv@ukr.net Contact: Mr. Valery Osmiekhin V.E.T.A. LLC off. 28, 3/5 Uspensky Lane 65045 Odessa, Ukraine T: +38 048 716 5906 F: +38 048 716 5906 E: office@veta.biz Category K GEDCO 1033 Bay Street, Suite 212 Toronto, Ontario M5S 3A5, Canada T: +1 416 961 1777 F: +1 416 961 3936 E: gedco@gedco.ca Contact: Ms. Reda Iman New Members Gaftaworld August 2012 I PAGE 11 Egypt Ukraine Bulgaria Ukraine Ukraine Romania Ukraine Ukraine Canada UK Malawi Russia Ukraine UK UK France Gafta moves office in Geneva Since early June, Gafta has relocated its Geneva office. We are now situated beside the Kempinski Hotel and have meeting rooms and wi-fi facilities available to members. Our new address is: 8, Rue de la Cloche, 1201 Geneva, Switzerland T: +41 (0) 22 732 45 77 F: +41 (0) 22 732 45 79 Email: Geneva@gafta.com Russias government ratifies WTO accession protocol Following ratification of the accession protocol by its President, Russia is due to become a fully fledged member of the WTO on 22nd August. Meanwhile, in Washington, USA, trade officials are pressing for the urgent approval of permanent normal trade relations with Russia (by lifting an out of date provision on the application of import tariffs for Russian goods) to avoid any potential complications on Russias accession to the WTO. According to a World Bank study, the boost to growth that Russia may expect from joining the WTO could be 3.3 percent over the medium term and as much as 11 percent in the long run. Some further details on the agricultural provisions relating to Russias WTO accession were in an article in the February 2012 edition of Gaftaworld. PAGE 12 I Gaftaworld August 2012 Exchange Day - Friday 5th October, 2012 The European Commodity Exchange will be held at the Edinburgh International Conference Centre (EICC) on Friday 5th October 2012. The ECE is an essential annual event for the grain trade, providing a face to face opportunity to meet all interests in the grain trade; bringing people together and getting them talking. Tickets are priced at a rate of GBP 185.00 (plus VAT) Exchange Day Lunch Whilst networking during the Exchange Day, take some time out to relax and have lunch at the Sheraton Grand Hotel, located next door to the EICC. Lunch includes wine, beer and soft drinks. Tickets GBP 55.00 (plus VAT) To book any of the above, please contact us at ece2012@gafta.com Registered in England & Wales with liability limited by guarantee under Company no. 1006456 I VAT Registration No. GB 243 8967 24 9 Lincoln's Inn Fields I London I WC2A 3BP I United Kingdom I T: +44 (0) 20 7814 9666 I F: +44 (0) 20 7814 8383 I E: post@gafta.com I W: gafta.com The Grain and Feed Trade Association Promoting international trade Join us in Edinburgh for the 2012 European Commodities Exchange Edinburgh, the capital of Scotland is situated on Scotlands East Coast on the south side of the Firth Of Forth. Home of the Scottish Parliament, Edinburgh is enriched with culture, fine architecture and hosts one of the most prestigious universities in the United Kingdom, The University of Edinburgh. Gala Dinner On 4th October the Gala Dinner will be held in the Grand Gallery at the National Museum of Scotland. A Welcome Reception will be hosted within the Hawthornden Court and the Kingdom of the Scots where guests can relax with a drink and canaps whilst exploring the cultural and political history of Scotland. An exciting evening amongst unique Scottish history is planned in this venue, with traditional Scottish entertainment including the Red Hot Chilli Pipers, a string duo and a harp. To end the evenings festivities, each table of guests will be presented with a bottle of 150 year old Scottish Malt Whisky to enjoy. Tickets GBP 140.00 (plus VAT) Social Tours Accompanying Persons Whilst visiting Edinburgh for the ECE, you must explore the city and its culture. Various tours have been arranged, including: Edinburgh City Tour a half day panoramic tour of the city. Fully guided, you will visit the historic Old Town including the famous Edinburgh Castle. The tour will continue to the Palace of Holyrood House, the official residence in Scotland of Her Majesty The Queen. Price GBP 65.00 (plus VAT). Advertising and Sponsorship Raise the profile of your company by taking sponsorship at the Gala Dinner or even the Exchange Day itself. These are just a few other alternatives:- Cocktail Party / Gala Dinner / Entertainment Sponsor / Coffee Area If you prefer to advertise, then the Exchange Directory would be the perfect solution. Both Whole and Half page adverts are on offer and prices start from GBP500.00 (plus VAT). Exhibition Booths and Meeting Desks A few exhibition booths are still available at the 2012 European Commodities Exchange day. As standard all booths will include basic fixtures and fittings. Any other size, equipment or service is available by request only. During the Exchange day there will be on offer a limited number of Business desks. These can be purchased using the on-line system at a rate of GBP450.00 (plus VAT).