Promoting international trade

Issue 200 / February 2013

“I was very honoured to be electedPresident today, the first American inthe role. I am looking forward toworking with you all in the comingyear and know I can rely on thesupport of my fellow Officers,Council members and secretariat.

Gafta published its Forward Plan,with the Annual Report, mapping theway to achieve an ever increasingmembership and additional servicesfor members. In my year as Presidentthere are a number of things I shouldlike to achieve. One is to expand themembership of Gafta in parts of theglobe where we are under-represented,including my own country. I shouldlike to see an increased presence forGafta in the USA.

I should also like to see our combinedAnnual Dinner and Conference beingheld in Geneva, the first Trade andTrends Conference, prove to be anenormous success. The traditionaldinners have been popular locally inthe past, but for an internationalorganisation its annual events have tooffer more. We have an excitingconference programme lined up foryou, as well as our Annual Dinner,and I hope I can count on yourattendance in Geneva on 15th to17th May 2013.

My very pleasant duty today howeveris to thank our Guest of Honour,Patrick Savage, for his time as GaftaPresident. I know first-hand that hehas carried out the role of Presidentwith great effect. He is always verypositive and helpful, and importantlycarries out his duties with goodhumour. It has been a privilege towork with him and I know theCouncil and secretariat feel thesame way.”

he Gafta Council elected Lucien Agniel of AgnielCommodities LLC as the new Gafta President on 24thJanuary 2013. He succeeds Patrick Savage of Medcom (London) Ltd. Mark

Dordery, of Nidera BV, Rotterdam, was elected Deputy President of Gafta. In his speech atthe Council lunch following his election, Lucien said:

T

Gafta published its ForwardPlan, with the Annual Report,mapping the way to achieve anever increasing membership andadditional services for members

Lucien Agniel-New Gafta President

Patrick Savage addressing the AGM

LucienAgniel

””

Mark Dordery, Gafta Deputy President

At the Annual General Meeting, also held on 24thJanuary, the Council’s Report and Accounts wereapproved. These showed a healthy year for Gaftato 30th September 2012 in terms of balance sheetand membership growth. The President reportedthat the past year has not been easy for Gaftamembers with uncertainty over weather andeconomic factors prevailing.

“Given the current climate, both meteorologicaland economic, it is no surprise that there hasbeen an increase in disputes and therefore Gaftaarbitrations. It is in this area, through the standardform contracts and rules, that Gafta demonstratesreal strength and serves itsmembers well.”

Indian Wheat: 2012 Recap

By Angel S Santos,Grain Trader, AgrocorpInternational Pte Ltd,Singapore

ndia emerged on the world export scene after a long hiatus. Successive yearly bumper crops combinedwith overflowing government stocks have given an opportunity for India to be back in the global game… And it could not have been a better year than 2012.

2012 was an interesting year for Indian wheatexports. Wheat production increased to a record93.90M tonnes while consumption remained ataround 76M tonnes. The global wheat market alsofaced immense volatility. Unfavourable weatherconditions in the US and Russia limited globalsupplies and led to very firm wheat markets.Australian production also decreased by around20%, limiting global supply further.

Consequently, we have seen more Indian wheatimports into Asia. Normally US / Australia orientedbuyers, countries such as Indonesia, Thailand,Vietnam, and South Korea bought Indian wheat forboth feed and milling purposes. This has been agreat addition to Indian wheat’s market mix on topof the typical African and Middle Eastern markets.For a time, Indian wheat became the cheapestwheat in the world with about a $40 discountfrom US / Australian / Black Sea wheat. Because ofthese factors, a total of about 3.5M tonnes wasexported out of India in 2012.

There was a lot of involvement from the Indiangovernment on wheat exports last year, with thestate-owned companies, namely PEC, STC andMMTC spearheading tenders almost every week.Changes are evident in how tenders are beinghandled now compared to previous years.

Logistics, for one, have been managed very well.In previous years, it was a nightmare for buyers asvessels normally got piled up in Kandla. In 2012,the government effectively addressed this issue bygiving priority for wheat in rail movement. Privateports have been opened to operate and also

prioritise wheat exports. Now bidders have a widerange of loadports to choose from – Kandla,Mundra, New Mangalore, Vizag, Chennai,Krishnapatnam, Visakhapatnam, Karaikal andKakinada. Good loading rates have been achievedby these ports, considering that Indian wheat isbled in bags onto the vessel holds.

Quality was also very closely monitored to ensurethat Indian wheat lived up to its guaranteedstandards. FCI stocks were thoroughly evaluated inthe warehouses prior to delivery to ports and wererejected if they did not meet export specifications.More grades are also available in this year’s tenders.Machine cleaned wheat with fewer impurities isnow being offered on separate tenders.

More regions are also being encouraged to growwheat by the implementation of a bonus on top ofthe government MSP (minimum support price).Wheat is traditionally grown in Punjab andHaryana regions, yet for the past 6 years MadhyaPradesh wheat production has grown by 35% andis expected to grow further, thanks to the bonusesprovided to farmers.

India seems to have hit the jackpot this newseason but time is of big essence in making theprogramme work in full-throttle. Despite a slightdelay on new crop harvests to late March / April,the time left to dispose of the excess inventories inFCI godowns is still very tight. Wheat production isexpected to be higher than 2012, and the countrytargets to export at least 6M tonnes next season.This should keep Indian wheat prices competitivevis-à-vis traditional origins which are stillstruggling to achieve good production numbers.

There are also talks that the government will allowthe private sector to access government stocks forexport. This would no doubt increase the pace ofexports but may create logistical issues laterduring the season.

India’s competitive prices, along with animproving, consistent quality and a regular exportprogramme should be kept in mind by consumers.With all these efforts in place from the Indiangovernment, it won’t be long until India is nolonger considered an “exotic” origin.

Agrocorp International is atrusted partner in international

trade, serving niche markets withglobally sourced commodities.On an annual basis, Agrocorphandles volumes of more than

3M tonnes of commoditiesincluding 1M tonnes of grains toclients in Bangladesh, Sri Lanka,

Indonesia, Vietnam, Malaysia,China and the Middle East. A

highly experienced team oftrading, finance, shipping, and

operations professionals ensurepersonalised service to our trade

partners: customers, suppliers,shipping lines and bankers, with

whom our motto “We Trade withTrust” stands in good stead.

India seems to

have hit the jackpot

this new season but

time is of big

essence in making

the programme work

in full-throttle.””

I

TRADE NEWS 2

South Korea

UAE

BangladeshYemen

Indonesia

Tanzania

Oman

Ethiopia

Thailand

Philippines Others

South Korea 673,872UAE 555,774Bangladesh 550,352Yemen 266,233Indonesia 265,642Tanzania 197,778

Oman 187,679Ethiopia 169,370Thailand 165,610Philippines 92,000Others 448,273

Indian wheat exports 2012 (tonnes)

Despite support from virtually all majorU.S. agriculture groups, Speaker of theHouse John Boehner (R-OH), needed tosee strong support for a Farm Bill fromamong House Republicans. Many newmembers of Congress were skeptical offarm programs and there wasdisagreement in the level of proposed cutsto nutrition programs, $16 billion in theHouse bill vs. $4 billion in the Senate billover 10 years. There were differences inthe revenue components of both bills, withthe Senate bill generally more acceptableto Midwestern corn and soybeanproducers and the House bill preferred bysouthern cotton, rice, and peanut interestsbut those were not the major factors.

Both measures proposed a "plus up" ofFederal crop insurance adding new policiesand funding in exchange for eliminatingseveral existing farm programs, includingdirect payments, and not renewingpermanent disaster relief (See Table 1).

In January 2013 Senate Majority LeaderHarry Reid (D-NV) re-introduced the 2012Senate-passed Farm Bill, in the newCongress. While timing is uncertain, mostexpect the Senate bill to remain similar tothe previous version. The new RankingMember of the Agriculture Committee,Senator Thad Cochran (R-MS) takes overfrom Senator Pat Roberts (R-KS). Mr.Cochran will be more inclined to advocatefor southern crop interests, such as cottonand rice, while also supporting cropinsurance, which Mr. Roberts hassupported and influenced over the years.This could mean movement towards theHouse Agriculture Committee-passedFarm Bill of 2012 that had price lossprovisions acceptable to southernproducers.

Last year, Senate Agriculture CommitteeChairwoman Debbie Stabenow (R-MI)steered the Senate Farm Bill, with Mr.Roberts' help, to passage and will needMr. Cochran's assistance, while HouseAgriculture Committee Ranking MemberCollin Peterson (D-MN) is a strong FarmBill advocate among House Democrats.Still, House timing is contingent on firstaddressing the major budget and fiscalissues, which House AgricultureCommittee Chairman Frank Lucas (R-OK)recently said is necessary before setting atime frame on action.

Uncertainties involve potentialsequestration (automatic cuts), budgetresolutions and the reconciliation process,renewal of a current measure funding mostof the government's operations, and thedebt ceiling, even though it will betemporarily extended. A new budgetbaseline in March also means a differentfunding level for agriculture. Future risksremain for cuts to farm programs andpotentially to widely-supported Federalcrop insurance. (See Table 2 for currentbaseline.)

Although there is sufficient time to enact anew Farm Bill before current law expires,Congress still needs to act fairly quickly.Most expect the Senate to move first, andthe House to move soon afterwards, if notconcurrently. The fiscal and budget situationlooms large, but there is a path forward,even with the significant challenges thatCongress and the nation faces.

The U.S. Farm Bill- Status and Future Perspectives

ith severe drought throughout much of the United States in 2012, coupled with the expiration ofthe Farm Bill on September 30, 2012, there appeared to be momentum last year to approve a newfive-year measure. Many farm state legislators supported the Senate and House bills' main features

of a more insurance-oriented farm safety net that reduced costs and improved responses to farmers' lossexperiences compared to current law. Instead, the existing Farm Bill, enacted in 2007, was renewed throughthe tax package passed by Congress and signed into law by President Barack Obama in early January 2013.

W

3 TRADE UPDATE

Table 1 - Senate and House Farm Bills& Budget Realities

• Proposals for Farm programs now “insurance‐centered”• While crop insurance is not reauthorized by the Farm Bill, it is the major farm program reflecting its importance and cost• Both restructure and enhance risk management programs for commodities• New area-wide group insurance plans would provide more possibilities for producers and insurance companies, in addition to existing individual plans• A tight budget environment from the large U.S. debt and deficit means continued efforts to cut agriculture programs, including crop insurance • Farm programs comprise just 1/4 of one percent of all Federal spending in Federal budget context - see also Table 2

Table 2 - Farm Bill within the FederalBudget (all dollars U.S.)

• Total budget authority for all mandatory farm bill programs under current law is $995 billion during FY2013-FY2022 – Source: Congressional Budget Office• Nutrition programs make up 80 percent of the $995 billion • Of this amount, budget authority for farm safety net programs is $153 billion over the 10-year period, including $63 billion for commodity support programs and $90 billion for crop insurance. Disaster programs do not have budget baseline funding in Congress. • Total U.S. budget - approximately $3.6 trillion (Fiscal Year 2012)

by James Callan

James Callan is Founder/CEO of JamesCallan Associates LLC, and a Partner inNorthStar Policy Navigation LLC, twoWashington, DC-area government relationsand consulting firms. Mr. Callan consultsand speaks in America and internationallyon U.S. Federal crop insurance and farmpolicy. Contact: jamescallan@msn.com.

4

An Australian harvest:A season in reviewAcross Australia the 2012-13 harvest is almost complete with more than 20 million metric tonnes (mmt) ofwheat, 6.7mmt of barley and 3.4mmt of canola estimated to have been produced nationally.

n Western Australia (WA), the 2012-13 harvestdelivered around 9.1mmt of grain into the CBHGroup storage and handling system. Theharvest was below the threshold of the state

harvest average for WA of 10mmt and significantlybelow the record 15mmt received in the 2011-12season. However due to the dry nature of theseason overall grain quality profile was improvedcompared to the previous season.

The WA harvest began at a rapid pace but washampered by wet weather from late Novemberthrough to the Christmas period slowing progressconsiderably. Due to the harvest being ahead ofschedule and the high wheat quality, onlyapproximately 7 per cent of the crop wasdowngraded to GP and Feed.

Looking ahead, the unseasonal harvest rains,whilst creating challenging conditions duringharvest, have set the scene for good carryovermoisture for WA’s 2013-14 cropping programs.

Eastern Australia grain production figures havecome in at approximately 10.1mmt for New SouthWales (NSW), 6.2mmt for South Australia (SA),5.8mmt for Victoria (VIC) and 2.2mmt forQueensland (QLD).

With a strong domestic market in Eastern Australiait is difficult to estimate what is being held on-farmwith 2012-13 wheat warehouse receivals beingbelow expectations. However we don’t believethere was more than expected being stored on-farm due to the high cash prices and basis valueson offer during the harvest period.

The harvest period in Eastern Australia was largelyuneventful, compared to the previous two seasons,with a smaller crop and clear weather allowinggrowers to finish quickly. The dry weather alsoresulted in better quality grain being harvestedthan in the previous two seasons.

Wheat

Figure 1: 2011-12 Australian wheat productionby state

The wheat quality profile for 2012-13 harvestremains largely unchanged from previous seasonswith APW accounting for 33 per cent of the crop,followed by AH and ASW both coming in at 25per cent. There have been minimal downgradesto GP and Feed with these grades only making up5 per cent of the total crop.

Barley

Figure 2: 2011-12 Australian barley productionby state

The total Australian barley crop came inapproximately 1.6mmt down compared to lastseason. Quality results varied across Eastern

CBH Group Profile:Owned and controlled by

4,500 Western Australian graingrowers, CBH Group is one of

Australia’s leading grainorganisations with operations

extending along the value chainfrom grain storage, handling,

transport, marketing andshipping to processing. CBH

has around 200 receival pointsthroughout the Western

Australian grain belt, includingfour port terminals.

The CBH Group is Australia’slargest exporter of wheat,

barley and canola and marketsaround 50% of all grain

produced in Western Australia,for export to more than 30

destinations.

CBH Group was namedAustralia's No.1 Co-operativein the top 100 Co-operatives,

Credit Unions and Mutuals listreleased in 2012 by Co-

operatives Australia.Visit thewebsite, www.cbh.com.au, for

more information.

I

Sour

ce: A

ustr

alia

n C

rop

Fore

cast

ers

Sour

ce: A

ustr

alia

n C

rop

Fore

cast

ers

TRADE UPDATE

By Jason Craig,CBH Group,

Western Australia

7,000,000

6,000,000

5,000,000

4,000,000

3,000,000

2,000,000

1,000,000

-WA QLDSA Vic NSW

2,500,000

2,000,000

1,500,000

1,000,000

500,000

-WA QLDSA Vic NSW

Australia, reflecting the many challenginggrowing conditions. While there are areasthat harvested excellent quality maltingbarley through VIC, NSW and SA thequantities are small and variable.

WA barley production exceededexpectations for both quantity and quality.Of particular note were the highpercentages and good quality of barleymaking Malt1 in WA, given the dry growingconditions experienced. However exportablesurpluses of both malting and feed will bereduced significantly year on year.

Canola

Figure 3: 2011-12 Australian canolaproduction by state

The total Australian canola crop exceededinitial estimates, even with below averageyields due to dry growing seasons in WAand NSW. Cropping area being planted tocanola increased year on year at theexpense of other crops such as barley. Thisis a trend that is expected to continue overthe next few years.

Exporting theAustralian harvestAs always after the grain has been

harvested and is instorage we look to thelogistics effort requiredto export the grain toour internationalcustomers. CBHaccumulates from boththe east and west coastof Australia. Clearlywith ownership ofnearly 200 storage andhandling assets in WAthe movement of thecrop to port on timeand at specification tomeet shippingcommitments is somewhat of a smoothprocess for us.

In a further commitment to get grain to portand to our international customers in themost efficient and effective mannerpossible, 2012 saw the CBH Group invest$175 million in its own rail fleetcomprising 22 locomotives and 574purpose-built wagons. CBH now operatesAustralia’s most modern and efficientdedicated grain rail fleet.

In Eastern Australia, as demonstrated byFigure 4, the storage and handling assetsare not managed by CBH and often thesystem for scheduling transport andshipping slots varies considerably from themodel employed in WA. In order to growour national accumulation profile, tocomplement the supply and quality ofgrain from WA for our customers, CBHrecognises the need to have on-groundassets in the Eastern Australia supply chain.Last year CBH took the first steps todeveloping this network by investing as apartner in the Newcastle Agri-Terminal in

NSW, the first major grain portdevelopment of its kind in NSW for over25 years.

CBH also welcomes recent reforms to theAustralian wheat export legislation whichwill consolidate the transition in Australiangrain marketing from a single seller to amulti-seller platform and provides ourcustomers with much needed certaintyregarding future supply arrangements. Thisis particularly relevant in WA whichremains Australia’s major grain export statewith up to 95% of its annual harvestexported through CBH’s four strategicallylocated ports.

CBH believes this improved legislativeframework will drive further economicefficiencies in the Australian supply chainto ensure Australian grain remainscompetitive in world markets and providesfurther confidence for CBH to continue toinvest in key assets such as the WA rail andNewcastle Agri-Terminal investments.

The 2012/13 harvest saw WA deliver9.1mmt of grain into the CBH storageand handling system

Sour

ce: A

ustr

alia

n C

rop

Fore

cast

ers Figure 4: CBH Group’s accessibility to

Australian storage and handling systems.1,400,000

1,200,000

1,000,000

800,000

600,000

400,000

200,000

-WA NSWSA Vic

5 TRADE UPDATE

All combined, the USDA projects that the worldlost more than 110 MMT’s of grain production dueto poor weather, when compared to its initialforecast offered last May. World grain stocks haveplunged by more than 42 MMTs and world corn,wheat and soy values have soared.

The 2012 weather related grain production losseswere startling to end users and the long discussedtopic of climate change has come to the forefrontin the media as major grain producers like the USendured summer row crop yields that were belowthe trend for the 3rd consecutive year. Everyonein agriculture is wondering if the world is finallyentering the long feared warmer/drier climate thatwas feared and forecast at the start of the century? The surprise of the 2012/13 crop year is that worldpoliticians did not “flinch and bend” under theprospect of rising food costs - and call for theirown “food security” amid the dire weather. Sucha reaction was commonplace in 2010/11 as NorthAfrica endured the Arab Spring and Russia bannedgrain exports for the preservation of its livestockherd ahead of its presidential election. Foodsecurity and the minimization of food inflation ofseveral primary world grain exporters fanned adire fear for the 1.6 billion of the world population

that get by on less than $2/day. All worried lastsummer: “Who was going to be the first to protecttheir own grain supply through trade restrictionsamid the ‘12 weather carnage”?

Traditional and non-traditional grain exporters sawthe acute ‘12 world grain loss as an opportunity tode-stock their own surpluses! Key grain exportersacross the Black Sea region were willing to selltheir grain stocks down to historically low levelsdue to high FOB prices and the lack of forwardpremium in bids to farmers. Why store grain whenthe price today is the same as several monthsforward?

Russia and Ukraine allowed free market principlesto engage and their wheat/feedgrain exports onlyslowed when domestic prices rose above theworld market. Record high wheat and wheat flourprices are the result throughout much of the BlackSea and some key exporting countries may nowdemand large imports.

And for the first time in history, the US will nothold the crown of the world’s largest corn exporteron an individual crop year basis. Brazil looks toexport nearly 24 MMTs of corn in their local2012/13 crop year while the US exports 23 MMTs.Who would have ever imagined just 6 monthsago, that Brazil would export more corn than the

US? Brazil has been willing to destock itscorn supply amid strong global prices

and they have consistentlyundercut US Gulf FOB corn

offers to garner worldfeedgrain market

share. Even the

By Daniel W Basse, President AgResource

6SPECIAL FEATURE

Climate Risk in aDestocking Grain World

y any statistical measure, the world has endured its largest single year ofgrain loss due to adverse weather in history. Latin America witnessed adrought in early 2012, which was followed by the worst Central US

drought in 57 years, and regional droughts in: Russia, Ukraine andWestern Australia. And the UK and Ireland were swamped byexcessive rain and persistent coolness that lowered yield.

Russia and

Ukraine allowed

free market

principles to

engage and their

wheat/feedgrain

exports only slowed

when domestic

prices rose above

the world market

””

B

traditional US corn buying nation of Japan could not look past thecheaper Latin American FOB corn offers.

The EU is now destocking its wheat stores with exports of 18 MMTsand its 2012/13 wheat stock/use ratio is expected to drop to arecord low. Once Black Sea wheat stocks were exhausted in late2012, world wheat importers turned to the EU for its future supply.As a result, the EU will need to import at least 10-12 MMTs ofBrazilian or Ukraine corn to keep its feed stocks adequate. Cashwheat and feed prices are rising across the EU on the tightening ofsupply and at some point domestic prices will have to rise aboveFOB export offers to halt the program.

Lastly, even a major grain consuming nation like India has foundfavor in exporting its excessive wheat stocks in an effort to reducegovernment costs and raise revenue. India is forecast to export arecord large 6.5 MMTs of wheat during the 2012/13 crop year.Heretofore, the most wheat that India has ever exported is 5.6MMTs in the 2003/04 crop year. And some argue that Indian wheatexports could rise to 10 MMTs if world wheat prices keep rising onnew Northern Hemisphere weather threats.

Thankfully, the world did follow a path of self-preservation andfood security in 2012! The destocking by major world grainexporters has prevented an even steeper rally in world grain prices.The destocking by the Black Sea, EU, Brazil and even India hasallowed importers to meet their grain needs without substantialdemand rationing or diminishment of trade. Based on shipments todate, 2012/13 world wheat and corn trade are down onlymarginally from last year, which is robust when compared to theforecast from USDA for a record decline of 50 MMTs of trade on ablended crop year basis. The graphic reflects this destocking oftraditional exporters with wheat and corn stocks at their 2nd lowestlevel since 1999.

If 2013 Northern Hemisphere weather is normal, the destockingdecisions made by the Russian, Ukrainian and even Brazilian

politicians will be seen as fortuitous. The US has witnessed aplateau in its consumption of corn for the production of ethanol,while China has been able to elevate its corn yields to records toproduce consecutive years of hefty harvests.

The world may return to a scenario where normal weather in itsmajor exporting countries will dramatically lift 2013 grainproduction and stocks, and a weaker price profile will be theresult. The need for ever expanding grain seeding to meet the sharprise in world demand will have reverted back to the trend of a plus1.6-2.1%, which existed prior to the world bio energy “love affair”that lasted from 2005 to 2012.

However, the destocking of inventory by the world’s primary worldgrain exporters dramatically raises the weather risks for world grainconsumers in 2013/14 as the supply cushion of prior years hasbeen exhausted. Any new crop supply dislocation due to drought,floods or extreme temperatures will have an immediate anddramatic influence on price.

AgResource has no way of knowing how kind Mother Nature willbe in the March-September Northern Hemisphere growing season?World soil moisture levels are at their lowest as of January 1st thatwe can find going back to 1988. The message is that there areplenty of dry areas that could reduce yield and cause worry forconsumers. And the Atlantic Ocean is reflecting considerablewarmth while the Pacific remains in a cool phase with La Ninaagain starting to form. History reflects that a warm Atlantic andcool Pacific ocean temperature profile was evident during the DustBowl days of the 1930’s when North America suffered through aspell of successive droughts. The same general pattern also existedin the 1950’s which is another decade of widespread drought andreduced world grain production.

However, just because these climate signals are in existence todaydoes not guarantee that a 2nd year of drought will strike the US (oranother major grain producing nation). The statistical risks areelevated and end users and politicians should be on the alert forthe potential of supply dislocation. If the US or another major grainexporting country endures adverse weather, the talk of climatechange due to human activities will dramatically rise within theprofile of politics and the media.

AgResource sees the 2013/14 crop year as extremely important forsetting future year price trends with a sizeable price range projecteddepending on the outcome of this year’s Northern Hemispheregrowing season. With any weather adversity across the US, EU,Russia or China, grain and oilseed prices could soar amid reducedstocks and the acute need for demand rationing. Wheat pricescould rise back to $400-500/MT and corn back to $360-400/MTwith any perceived or realized loss of crop. The destocking in thecurrent crop year argues that politicians would have no choice but tobe protective of their own countries’ grain to prevent food inflation.

If Mother Nature is kind and the upcoming Northern Hemisphere isnormal, world grain prices could decline to levels not seen inseveral years as the ag-flation bull story temporarily ends.

Strangely, the grain markets are back to the good old days (beforethe bull market started back in 2006) with prices hinging upon thekindness or wrath of Mother Nature. No longer is expandingbiofuel demand driving grain valuations ever upwards. However,climate worry does heighten future supply risks. There is no roomfor error with 2012/13 traditional exporter grain stocks exhaustedand destocked. 2013 Northern Hemisphere weather and yieldtrends will direct world grain prices for at least 18 months.Considerable market volatility will exist from March into July whenthe final chapters of 2013 Northern Hemisphere yield are written.The world grain markets are at a crossroads with the importance/riskof Mother Nature never greater due to old crop destocking.

7 SPECIAL FEATURE

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

80

70

60

50

40

30

20

10

0

MMTsSelected Exporter Grain Stocks

Argentine WheatAustralian WheatSouth American CornEU WheatFSU-12 Wheat

Grade 2 Course, “Formation andFulfilment of Contractual Obligations”VILNIUS, LITHUANIA - 13-15 MARCH, 2013

Forthcoming Gafta courses

A 3-day course has been organised inVilnius, Lithuania on 13th to 15th March2013. This is a Grade 2 course designed toteach participants the essential rights of theparties in a trade, and the duties incumbentupon them when agreeing to specificcontract terms. The course will bedelivered in English, with full simultaneoustranslation into Russian. Key areas coveredwill include:

• contract formation and key terms• description, condition and quality terms in the contract• the importance of payment terms including letters of credit• impediments to trade and dealing with exceptional circumstances• the principles of marine insurance and the Gafta Insurance Rules no. 72

Registration for this course, for which 25 CPD points will be awarded for full attendance, isavailable on the Gafta website. Please contact training@gafta.com for more information.

Gafta's worldwide Continuing Professional Development Programme (CPDP) is a comprehensive training programme withcourses to suit individuals at every level within member companies. Details on three courses due to take place inLithuania, Dubai and UK in the next few months are given here, but please refer to the Gafta website for the full list ofplanned courses ahead in 2013.

Grade 3 Course,“Hedging the Risk”DUBAI, UAE8-9 APRIL, 2013

This 2-day course on risk management, tobe held in Dubai, United Arab Emirateswill include discussions on dealing withcontractual obligations and risks whicharise, both in the goods and in thecontracts. It will finish with a detailedconsideration of the benefits of usingfutures and options and a discussion ofchallenges in the world futures market.

Topics to be covered• Knowing your position• Monitoring and measuring of risk exposure / types / use of models - Methods of hedging risk - Currency arbitrage (managing currency risk) - Country risk - Commodity risk• Benefits of futures with regards to managing risk• Challenges of the futures market – lack of correlation between futures and physical prices• Options – uses, risks, benefits, detriments• Legal issues to consider

A booking form and on-line registrationare available on the Gafta website. Pleasecontact training@gafta.com for moreinformation on this course.

J C FAGES, Louis Dreyfus Commodities Suisse SA, SWITZERLAND

G J VAN NOORTWIJK, Agribrokers International, THE NETHERLANDS

B VOYATZIS, Agroinvest SA, GREECE

J R BOERJAN, SGS Group Management Ltd, SWITZERLAND

J CRAIG, CBH Grain Pty Ltd, AUSTRALIA

K DAVIES, Glencore Grain UK Ltd, UK

Gafta Council elects six new membersSix new members were elected to the Gafta Council at the AGM:

Some time off is given on Thursday 18th April for a visit to nearby Windsor. A short exam willbe set on Friday 19th April. The course brochure and booking details are available on theGafta website, or please contact training@gafta.com to discuss any queries with the secretariat.

• formation of contractual obligations• freight loading• fulfilling contractual obligations

• dispute resolution• managing risk

Gafta’s annual Trade Foundation Course will be held at the Royal Holloway University ofLondon in Egham, United Kingdom on 14th to 19th April 2013. This offers students a broadintroduction to all aspects of the trade. Designed either for employees of members new to thetrade or those who need to broaden their knowledge, this course tackles all aspects of Gafta’straining programme at an introductory level. Over the five days participants will learn aboutthe following:

GAFTA NEWS 8

Grade 1 TradeFoundation CourseEGHAM, UK14-19 APRIL, 2013

Nathalie Lazzarotto,Cargill, Geneva, SwitzerlandNathalie started working in the grain business atCargill in 1995 on the execution desk for soybeanmeal. Prior to joining Cargill she completed auniversity degree in psychology in Geneva. In1999 she was given the opportunity to lead thevegetable oil execution team and then in 2001was offered the position of setting up and leadingthe execution team in charge of all commoditiessuch as grain, oilseeds and vegetable oils going tothe Middle East and the north Africa region. Herdepartment works closely with letters of credit

which Nathalie has now been handling for morethan 15 years, and she has also executed manydifferent Gafta contract forms. She was born andbrought up in Geneva and speaks English andFrench fluently.

“On a global level I am currently involved in trainingson contracts terms and conditions and make myselfavailable to questions on contracts within the tradeexecution global team I work in,” said Nathalie. “Ireally enjoyed the Gafta Grade 2 courses whichwere really beneficial to me. I am really lookingforward to bringing my expertise to another levelof sharing through the world of arbitration.”

Eytan Chainere,Shemen Industries Ltd, Jerusalem, IsraelEytan Chainere, who was born and raised in Paris,France, studied in Baltimore, USA, and is nowmarried and living in Jerusalem. He has workedfor Shemen Industries Ltd, the largest and oldestoilseeds crushing and refining company in Israelfor 14 years, as Vice-President, and is responsiblefor having developed its trading, purchasing andrisk management departments.

He has considerable experience in physical and

futures trading, contract negotiations and execution,charter party negotiations and fixing, riskmanagement and the management of arbitrations.

“The Gafta courses have enriched my knowledgeand more importantly emphasised the importanceof understanding and redacting meticulously andin detail commercial contracts in accordance withthe agreed terms,” Eytan told Gaftaworld. “I feelgreat opportunity and responsibility as a youngGafta arbitrator to help promote and encouragefair trade for many years and generations to come.”

Gavin Snodgrass,Nyon, SwitzerlandGavin’s trading experience in grains, oilseeds,proteins, pulses and vegetable oils started inLondon in the 1970s. He then went to the USAand later moved to Canada. He spent 17 yearswith a Canadian company ending up as ManagingDirector of Xcan Grain Europe. For the pastdecade he has been managing trading businessesand consulting for companies in the abovecommodities. His extensive international tradingexperience covers the FSU and CIS countries, EU,

Central Europe, Middle East, North Africa, SouthAfrica, Argentina, India, Mexico, USA, Canadaand Australia. He is now based in Geneva wherehe has been for the last five years.

“Having recently qualified as a Gafta Arbitratorfulfils one of my ambitions,” said Gavin. “TheGafta DLP, CPDP courses and qualification aretruly excellent; they provide training for newmembers of our business as well as experiencedpeople. I look forward to applying my professionalknowledge to arbitration matters in future."

Philip Noyce,Peter Brown Associates, UKPhilip started in commodity trading in 1993 withDalgety Agriculture before moving to Soufflet in2000 where he was involved in trading and execution.After a subsequent move to Bartholomews AgriFoods, he now runs a dispute resolution business(www.disputeresolve.co.uk) which gives advice on,but is not limited to, Gafta, FOSFA and AIC contracts.He is a member of the Chartered Institute ofArbitrators. “The law and the commercial trade donot always go hand in hand so a view is oftenrequired which can help avoid disputes and save

companies substantial time and money pursuingor defending claims,” Philip told Gaftaworld.

“I became an arbitrator with AIC determiningdisputes involving UK domestic contracts and itwas natural progression to become accreditedwith Gafta as an arbitrator after completing theGafta Trade Diploma. I would thoroughlyrecommend the Distance Learning Programme asit increases the breadth of knowledge of the tradeincluding contracts, shipping and the internationalsale of goods. It is taught by a highly respectedteam with strong support through telephone andweb tutorials with assignments and examinations.”

Four new Gafta Qualified Arbitratorse are pleased to announce four more successful graduates of the Gafta Trade Diploma.All are now Gafta Qualified Arbitrators. Congratulations to the following:W

9 GAFTA NEWS

EU financial services regulationAmendment to MiFID and implementingrules will affect Gafta members

he volatility of commodity prices and the regulation of commodity derivatives markets have becomeimportant issues on the international economic policy agenda. Nicolas Sarkozy, the then FrenchPresident, in a speech on the subject in June 2011 when France held both the EU Presidency and the

Presidency of the G20 group of leading nations set out the challenge posed by finite resources, whetherprecious metals, energy or farming land:

“With scarcity of raw materials comes the risk ofparalysis of economic activity, societalbreakdown, war and hunger.”’

He commented on the volatility of agriculturalcommodity prices that:

“..it is unacceptable for volatility to be due to therecent financialisation of the world’s agriculturalcommodity markets”’

M. Sarkozy’s conclusion was that G20 countriesshould adopt common principles of regulation andoversight for commodity derivatives markets,involving greater transparency, control and regulation:

“We should extend regulation to all productsexchanged on the commodity derivatives markets,to all players involved and to all the tools used inthe process”’

The G20 subsequently broadly endorsed thepolicy agenda for commodity derivatives marketsset out by M. Sarkozy. The EU is now trying toimplement that agenda, as well as making otherchanges to the wider framework of financialservices regulation, through revisions to theMarkets in Financial Instruments Directive (MiFID).

The European Commission (EC) proposed a set ofrevisions to MiFID in October 2011. Negotiations,involving EU Member States and the EuropeanParliament, to agree the revisions are unlikely tobe completed before the middle of this year. The EC proposed widening the scope ofcommodities forward contracts that are treated asfinancial instruments under MiFID. Forwardcontracts in commodities are currently onlytreated as financial instruments in limitedcircumstances. The EC proposed treating forwardcontracts arranged by voice brokers as financialinstruments but it seems likely that not all suchcontracts will be treated as financial instruments.This is a key decision given the consequenceswhich will flow from it in terms of position limits,position reporting and the scope of firms requiredto be authorised.

Provisions are being introduced to MiFID tocontrol the size of positions that can be taken incommodity derivative contracts that are financialinstruments, and to require greater transparency

about those positions. There will be limits on thesize of open interest that a person can have in oneof the contracts traded on exchanges and othertrading venues. There will, however, beexemptions from these limits for non-financialservices firms who enter into positions to hedgetheir commercial risk.

Members of exchanges and other trading venueswill have to report to the trading venues the size ofpositions they and their clients hold in eachcommodity derivative contract. It has yet to bedetermined whether these reports will have to bemade in real time or at the end of each tradingday. Trading venues will then publish weeklyaggregated information, split by various categoriesof participant, on current open positions in eachcontract traded on their markets.

Firms whose main business is buying and sellingcommodities and/or commodity derivatives arecurrently exempt from authorisation as financialservices firms under MiFID. This broad exemptionis being removed. In future a firm buying andselling commodity derivatives will only be exemptwhere that activity is ‘ancillary’ to the mainbusiness of its group. Where firms are required tobe authorised, they will be subject to a range ofother requirements including reportingtransactions in financial instruments to regulators,clearing all their derivatives contracts that arefinancial instruments through a centralcounterparty clearing house and – potentially –capital requirements.

The European Securities and Markets Authority(ESMA) will then draft implementing rules fillingout the detail of the requirements in theframework legislation. ESMA’s commodityderivatives taskforce is already undertakingpreparatory work. The date for implementation ofthe MiFID revisions has yet to be settled but couldbe in 2015.

Engaging with ESMA on the implementing ruleswill be vital to ensure the practicality of theobligations under MiFID. If firms have queriesabout MiFID then they can approach StephenHanks (stephen.hanks@fsa.gov.uk) or Ted Morris(ted.morris@fsa.gov.uk) at the UK’s FinancialServices Authority.

..it is

unacceptable

for volatility to be

due to the recent

financialisation

of the world’s

agricultural

commodity

markets.

Nicolas Sarkozy”

”

T

By Stephen Hanks,Markets Division,Financial ServicesAuthority, UK

GAFTA NEWS 10

Stephen Hanks and Ted Morriscame to the UK Raw Materials

Committee meeting at Gaftaoffices on 11th December 2012

to explain the progress of theMiFID amendments.

New Members

Diary Dates

11 NEW MEMBERS

Category A

Vina CommoditiesCorporationUnit 03-11, Level 03, Sofitel Plaza,01Thanh Nien Rd, Hanoi, VietnamT: +84 4 3972 8699F: +84 4 3972 8689E: vp@vinacommodities.comwww.vinacommodities.comC: Mr. Tran Van Toan

Category B

AYC AgroBabalik Mah. Yapici Is Merkezi C Blok No 186, Selcuklu Konya 42060, TurkeyT: +90 332 320 1930 F: +90 332 320 1930E: ayc@aycagro.comwww.aycagro.comC: Mr. Ahmet Yasin Ciftci

Category C

S.A.GE.M. Koper d.o.oAnkaranska Cesta 7 Koper 6000, SloveniaT: +386 5662 6666F: +386 5662 6660E: info@sagem.siC: Mr. Matjaz Tomsic

Universal SuperintendenceCo. Ltd.Plot No. 53 Off Kilwa RoadTemeke Municipality, P.O. Box 50167Dar Es Salaam, TanzaniaT: +255 22 285 0367F: +255 22 285 0321E: admin@uscltd.co.tzwws.uscltd.co.tzC: Mr. Francis Julius Ntapala

Category E

Mr Gavin SnodgrassAvenue Viollier 8Nyon 1260,SwitzerlandT: ++41 22 361 1452E: gavinsnodgrass@ymail.com

Category J

Axiven Pest Control- Apolimantiki S.A.73 Chimaras Str.Athens 14343, GreeceT: +30 210 2027960F: +30 210 2016199E: ypapadatos@axiven.comwww.axivenpestcontrol.comC: Mr. Yiannis Papadatos

Global EnvironmentalServices SRLVia Firenze 07, VittoriaSicilia 97019, ItalyT: +39 932 866556F: +39 932 803151E: uffici@gessrl.netwww.gesC: Mr. Vincenzo Carpenzano

Progressive FumigationCorporationOffice # 214, 2nd FloorAbdullah Square, New ChalliKarachi, PakistanT: +92 324 20869F: +92 324 27600E: progfum@yahoo.comwww.progfum.comC: Mr. Asfar Ahtesham

18-20 February - Contracts and DisputeResolution Mixed Grade 1 and 2, Budapest, Hungary

1 March - DLP - Module 1– Introduction to Contracts

13-15 March - Formation and Fulfilmentof Contractual Obligations Grade 2,Vilnius, Lithuania

18 March - Examination – Gafta TradeDiploma, Gafta Maritime ArbitratorsExam, and Gafta SuperintendentsCourse Examination

8-9 April - Hedging the Risk- Grade 3, Dubai, UAE

14-19 April - Trade Foundation CourseGrade 1, Egham, United Kingdom

15 April - DLP - Module 6 – Problemsand How to Resolve Them

29 April - DLP - Module 2– Fulfilling Contractual Obligations

13 May - DLP – Module 3– Payment and Risk

27 May - DLP – Module 3– International Carriage of Goods by Sea

3-5 June - Shipping the GoodsGrade 2, Geneva, Switzerland

10 June - DLP – Module 1– Introduction to Contracts

10 June - Arbitration - Grade 3London, UK

17 June - Examination – Gafta TradeDiploma, Gafta Maritime ArbitratorsExam, and Gafta SuperintendentsCourse Examination

2 September - DLP – Module 2– Fulfilling Contractual Obligations

2 September - DLP – Module 2– Payment and Risk

2 September - DLP – Module 2 – What todo in Exceptional Circumstances

15-17 May - Gafta Trade and TrendsConference, Geneva, Switzerland

16 May - Gafta Conference Dinner,Geneva, Switzerland

Gafta Trade andTrends ConferenceGeneva, Switzerland, 15-17 May, 2013

Dr Glauber hasbeen chiefagriculturaladviser for theUSA at the WorldTradeOrganisation forsome years andhe served aseconomic adviserat the so-calledBlair Houseagreementsleading to thecompletion of theUruguay Roundnegotiations. He is the author of numerousstudies on crop insurance, disaster policy and USfarm policy. He has also served as senior staffeconomist for agriculture, natural resources andtrade at the President's Council of EconomicAdvisers and as an economist at the EconomicResearch Service, USDA.

Another confirmed speaker at the Conference isPiers Corbyn, the leading pioneer of reliable andapplicable long-range weather forecasting - usingsolar-lunar magnetic techniques. He is Founder& Managing Director of WeatherAction longrange weather and climate forecasters whichapplies his techniques to forecast weatherdevelopments and extreme weather events ofimportance to the energy, agriculture, insurance,retail, holiday, sport and other commercialactivity from months ahead across the world.

In 2012 Piers predicted all the key features ofboth the very poor summer in north-west Europe,and the extreme heat and hailstorms in USAsummer months.

Details of sponsorship and advertisingopportunities at the Conference are on theGafta website, or please contactevents@gafta.com for more information.Registration is now open onthe Gafta website.

afta is pleased to confirm that Dr Joseph Glauber, USDA Chief Economist,will be the keynote speaker at the Trade and Trends Conference, to be held atthe Grand Hotel Kempinski in Geneva on 15th to 17th May, 2013. Dr Glauber

is responsible for USDA’s agricultural forecasts and projections and for advising theSecretary of Agriculture on economic implications of alternative programs, regulations,and legislative proposals. He is responsible for the Office of the Chief Economist, theWorld Agricultural Outlook Board, the Office of Risk Assessment and Cost-Benefit analysis,the Global Change Program Office, and the Office of Energy Policy and New Uses.

G

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

Gafta Dinner, 16th May, 2013The Trade and Trends Conference will incorporate the 2013 Gafta Dinner, to be held at thehistorically important Bâtiment des Forces Motrices building on Thursday 16th May, 2013 -the old water pump station for Geneva - now a wonderful venue on the bank of the RiverRhone. This venue will provide the perfect opportunity for all participants at the Conferenceto meet and discuss business prospects in a comfortable environment within one of the mostimportant cities in the world for global grain trade operations.

Bâtiment des Forces Motrices

GAFTA EVENTS 12

Conference and Dinner

Member ParticipantsGBP895.00 CHF1,350.00

Non-Member ParticipantsGBP1,195.00 CHF1,800.00

Dr Glauber