IGC Conference

2015 International Grains Council Conference Review

by Nathan Kemp,
International Grains
Council, UK

The International
Grains Councils 24th
annual conference,
held in London on 9
June 2015, brought
together some 300
traders, policymakers
and other industry
professionals.
Meeting under the
theme Building on
success, responding
to challenges,
delegates from 48
countries gathered
to assess the recent
shifts in market
fundamentals, which
has seen global
grains and oilseeds
inventories build to
near-record levels,
with prices dropping
to multi-year lows.

74 | Milling and Grain

The International Grains Councils 24th annual conference, held in London on 9 June 2015,
brought together some 300 traders, policymakers and other industry professionals. Meeting
under the theme Building on success, responding to challenges, delegates from 48 countries
gathered to assess the recent shifts in market fundamentals, which has seen global grains and
oilseeds inventories build to near-record levels, with prices dropping to multi-year lows. As well
as being a key forum for the exchange of views, the conference provided a valuable networking
opportunity, bringing together a unique mix of participants from private and public sectors.
The International Grains Council (IGC) is an inter-governmental organisation established in 1949
to help promote stability in the global grains market through information sharing and analysis.
Administered by a London-based Secretariat, the IGC seeks to further international cooperation
in grains trade; to promote expansion, openness and fairness in the grains sector; to contribute to
grain market stability and to enhance world food security.
The conference began with opening remarks by Etsuo Kitahara, Executive Director of the IGC
and continued with four theme-based sessions and two special presentations, which included
briefings from twelve expert speakers and was interspersed with interactive panel discussions.
Setting the scene for the days discussions, Mr Kitahara provided an overview of the current
market situation, highlighting abundant supplies of wheat, maize (corn) and soyabeans. The
IGC Grain and Oilseeds Index (GOI), a trade-weighted index of the worlds main export prices,
available for free public download on the IGCs homepage (www.igc.int), was down by a quarter
over the past year and languishing close to its lowest since July 2010. While price weakness was
broad-based across most cereals and oilseeds, recent declines were driven by a particularly sharp
slump in soyabean prices. Despite seemingly comfortable exportable supplies, the Executive
Director cautioned that a number of macroeconomic, political and environmental uncertainties
needed to be monitored.
Mr Abdolreza Abbassian, Senior Economist (Trade and Markets Division) at the Food and
Agriculture Organization of the United Nations (FAO) updated delegates on the Agricultural
Market Information System (AMIS), an inter-Agency Platform established at the request of
the Agriculture Ministers of the G20 in 2011. As part of efforts to enhance transparency, AMIS
seeks to strengthen collaboration and dialogue among the main wheat, maize, soyabean and rice
producers, exporters and importers. Mr Abbassian, who also serves as the Secretary of AMIS,
outlined the organisations structure and functions, in part carried out by a Secretariat consisting
of ten international and inter-governmental organisations (including the IGC) and highlighted the
regular Market Monitor publication as a particularly useful tool for policymakers.
Summarising the stable market outlook for wheat, he noted that the world stocks-to-use ratio
was at a healthy level and that forecasts between the various main agencies were broadly
similar. Partly reflecting different methodologies, estimates for world maize production and
stocks showed more variation between organisations. However, most forecasters were in general
agreement that maize supplies were also comfortable, even if unknown stock levels in China
provided an extra layer of uncertainty.
Mr Stefan Vogel, Head of Agri Commodity Markets Research at Rabobank provided further
insight into the supply and demand situation. Noting that agricultural commodity prices were
being pressured by record 2014/15 harvests and stocks, he cautioned that the world is now
entering a period of weather market volatility, which may be amplified by an El Nino weather
event this year.
Mr Vogel highlighted the impact of recent movements in currency markets on grains and
oilseeds prices, with gains in the value of the US dollar adding to the recent downside. Given
the relative strength of the dollar, US wheat exporters were finding it particularly hard to
compete, with the EU benefitting accordingly. However, both the EU and US were expected to
face heightened competition from Black Sea exporters during 2015/16, with combined wheat
shipments by Russia, Ukraine and Kazakhstan predicted to increase slightly compared to the

previous season. After a series of huge maize harvests last year,

2015/16 average yields were forecast to return to normal in most
countries, including the US, which could lead to the first global
deficit in three seasons. However, overall availabilities are set to
stay comfortable and, assuming continued favourable weather,
Rabobank expects further downside to CME futures prices over
the next few months. The world soyabean surplus was extremely
large and with potentially more big crops on the way, 2015/16

stocks might increase even further. The prices forecast for

soyabeans was therefore more bearish than for wheat and maize,
with US futures predicted to weaken over the next few quarters.
With both of the mornings speakers highlighting Chinas
increasing market importance, a presentation by Mr Lu Jingbo,
Vice Administrator of Chinas State Administration of Grain was
particularly well received. Mr Lu observed that since Chinas
accession to the WTO, the country had deepened its connection

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with the international grains market. Overall, grains supply and

demand are broadly balanced, with recent increases in production
more or less in line with gains in consumption. However,
differences do exist between the various food commodities, with
farmers growing only limited amounts of soyabeans for example.
Mr Lu highlighted bumper harvests in recent years, which have
seen maize overtake paddy (rice) as the countrys single biggest
crop. However, he noted that due to inherent restrictions on
natural resources such as farmland and water, it will be difficult
for China to maintain steady increases in future grain production.
While demand for grain has been underpinned by industrialisation
and urbanisation, with notable increases in use for feed and
industrial processing, the rate of expansion has slowed in recent
years.
Mr Lu reiterated the governments on-going commitment to
safeguarding domestic food security, an issue recently elevated as
one of national strategic importance. The national food security
strategy is mainly based on domestic supplies, supplemented by
moderate imports and against the backdrop of a series of support
mechanisms. The recent sharp increase in feedstuffs imports,
76 | Milling and Grain

including of sorghum, barley and

DDG, was attributed to the massive
price gap between internal and external
markets, rather than any shortfalls in
local supplies. Mr Lu acknowledged
that centrally-held maize stocks are at
very high levels and, with research still
being undertaken, the government had
yet to make a decision about whether to
adjust the level of procurement prices.
A second session on environmental
issues marked a slight change in
direction, with two speakers offering
a longer-term perspective on potential
risks to future food security. Dr
Campbell, Director of the CGIAR
Research Programme on Climate
Change, Agriculture and Food Security
cautioned that a 4C warmer world
would potentially have enormous
consequences for agriculture in
Africa, leading to a 20 percent shorter
growing season in some countries. Dr
Campbell argued that climate change
is already impacting food security
and that overall, decreases in crop
yields are more likely than increases,
including in temperate regions. In
order to minimise the effects of global
warming, he warned that agriculture
cannot be excused from emission
targets. While the world faces a number
of huge challenges, Dr Campbell
also highlighted a number of recent
successes, led mainly by technological
advances, as well as some hopes for
the future, including the potential
widespread use of drought tolerant
seeds.
Mr Jeremy Bird, Director General of the International Water
Management Institute, warned of the increasing threats of
unsustainable water use, outlining forecasts that without
investments in water management, the number of food-insecure
people could double by 2050. Overall, some 70 percent of the
worlds water is used of agriculture, 22 percent for industry and
8 percent for domestic use. Recognising the risks of a global
water crisis, improved water management was now clearly on the
global agenda. Mr Bird identified a number of possible solutions,
including better groundwater governance and more efficient use
of surface water. Drawing on data on US water withdrawals, he
demonstrated that increased water consumption is not inevitable
and that effective management measures can make a difference.
In a special presentation of global futures exchanges, Mr Tim
Andriesen, Managing Director, Agricultural Products at CME
Group, Inc. reviewed the changing face of risk management,
focusing closely on the wheat market. Highlighting some
momentous shifts in recent decades, driven mainly by
technological advances, Mr Andriesen noted the changes in
market participants, trading methods and product offerings.

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Kicking off the afternoon session on trade and logistics, Mr

Mohamed Belabdi, General Manager of the OAIC gave a
run-down of the latest developments in Algerias grain sector.
Recognising that drought is the main climatic constraint for grain
production in his country; he outlined a number of measures,
which could set Algeria on the path to self-sufficiency in durum
wheat. As part of efforts to boost production by around 30
percent, the government will take measures to reduce the amount
of fallow land, increase irrigation and use more higher yielding,
certified seeds. A new storage infrastructure programme also aims
to increase silo capacity. Shifts in diet away from the traditional
durum-based flat breads
to European style
baguettes had resulted in
recent gains in demand
for imports of common
wheat, a variety not
ideally suited to Algerias
climatic conditions.
A perspective on the
world freight market
was provided by Mr Guy
Campbell, Chairman of
The Baltic Exchange.
After presenting an
overview of The Baltic
Exchange, its coverage
and main roles, Mr
Campbell reviewed
the latest market
developments, pointing
out that the oversupply
seen during the past four
to five years which, in his
opinion would take a few
more years yet to work
through.
The day concluded with a
panel session on the Black
Sea region. Mr Andrey
Sizov, founder and Senior
President of SovEcon Ltd.
provided a comprehensive
overview of the latest
situation and outlook
for Russia. Reminding
participants of its huge
geographical area and the fact that farmers produce both winterand spring-sown crops, Mr Sizov described how crop conditions
can show great variance between regions. Although crop
prospects for winter wheat had shown some recent improvement,
with satellite imagery confirming increased vegetative mass,
observations from the fields confirmed that the autumn and winter
drought had caused some long-lasting damage.
Nevertheless, with winter and spring crops both expected to be
larger than average, 2015/16 output was forecast at 97.0m t, down
8 percent year on year, but still large enough to support increased
domestic demand and an export programme of some 27.0m t. Mr
Sizov also took time to examine the new wheat export duties,

78 | Milling and Grain

which are due to come into force on 1 July 2015. While export
duties for some cheaper, lower quality wheat varieties may be
fairly negligible, the floating tax could see result in prohibitively
high levies for hard wheat and durum exports. Moreover, with the
new duties also highly dependent on the rouble/dollar exchange
rate, Mr Sizov warned that the move would potentially serve to
discourage forward contract deals and result in traders trying to
impose additional currency risks on farmers.
Mr Sergey Feofilov, founder and Director of UkrAgroConsult,
first of all reminded the audience of the fundamental shift in
regional grain supplies. After being large importers of wheat
and maize through much
of the 1970s and 1980s
(as part of the USSR),
Ukraine, Russia and
Kazakhstan had since
become very significant
exporters. Ukraines
own transformation from
importer to exporter had
in part been facilitated
through cheap resources,
including land, labour and
finances. However, the
recent economic crises
and currency devaluation
was proving problematic
for the countrys
agricultural sector. While
the weaker hryvnia was
promoting a short term
boost in export demand,
with 2014/15 shipments
seen at record levels, the
associated higher input
costs could prove even
more challenging next
year.
The day was rounded off
by a presentation by Mr
Evgeniy Gan, President
of the Union of Grain
Processors and Bakers
of Kazakhstan, who
provided an overview of
the food security situation
in Central Asia. Bread
remained the regions number one staple food, with per caput
consumption at already high levels. Although Kazakhstan is
now a large net exporter of wheat, Mr Gan drew attention to an
unusually high level of imports from Russia in 2014, estimated
at between 0.5m-0.7m t, driven mainly by pricing differentials.
Kazakhstans grain exports are currently limited by logistical
constraints, with the countrys best farmland distant from Black
Sea ports. Consequently, the most potential for export expansion
is seen via land transport to China and sea shipment via Iran.
If logistical problems can be solved and exports increased, Mr
Gan predicted that local output could easily rise from its current
level.