Global Wheat Trade - Challenges & Opportunities Khalid
Husain Khan ITC Limited June 19, 2015
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Agenda Trends : Global Wheat Trade 2015/16 Challenges &
Opportunities Case Study: Australian Wheat Exports Wheat Branding
Indian Context
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Trends - 2015/16 Slow, global supply rebuild Continued,
increased competition for demand Global demand engines idling /
slowing but definitely not out of gas Continued shift to a BUYERs
MARKET Mother Nature remains a dominant influence El Nino (back in
the headlines)
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World wheat production has been on a steady rise Given lack of
investment / research (compared to corn), global wheat yields are
holding steady more influenced by weather and total area
planted
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Slow, global supply rebuild Global daily consumption rates
Stagnant in Wheat CommodityUOM2000/012014/15% IncreaseTrend
CornMMT/day1.672.6559% WheatMMT/day1.601.9321% SoyKMT/day47077665%
CanolaKMT/day10618978% SunflowerKMT/day6311277% Palm
OilKMT/day65166156% Canola OilKMT/day377296% Soy
OilKMT/day7312674%
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Global Wheat Supply Cushion Supply cushion is similar to
previous years but does show a build trend over the past 3
marketing cycles and much above the 2007/08 low.
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Global demand engines idling / slowing Both China and India
have shifted from grain net importer roles to producing, consuming
and working through existing reserves
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World feed sector will carry a greater burden to create demand
Dietary shift & further growth in emerging economies will drive
feed demand in the years ahead Growth in feed wheat demand will be
led outside the US and will face greater competition from corn than
the past few years
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Global Wheat Trade Trade: Global trade is expected be lower
than last year, but, still sizeable at 157 MMT US is likely to be
the single largest exporter, but, its share is likely to be eroded
by competition from other origins Imports: Egypt expected to remain
the largest importer. Algeria as well as Saudi Arabia are expected
to increase import purchase to meet their growing requirement
Exports: Global trade is expected to be 3% lower, intensifying
competition Black-sea exports likely to increase owing to
competitive prices, especially to Africa
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To Summarize Wheat has led global diversification of Suppliers
shift to Buyers market characteristics Multiple origins competing
for world import demand World feed wheat demand has been tepid
given its premium to corn
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CHALLENGES
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Wheat Trade - Challenges Future of the global trade of wheat
will be shaped basis the challenges facing the industry as well as
how those challenges will be confronted: Production: Due to lower
returns, farmers switching to Soya & Corn. 80% of the times
when a crop was grown in US at a financial loss, it involved wheat
Competition: Expansion of production to non-regular wheat supplying
countries Increasing price competitiveness playing a major role in
shaping trade dynamics Supply Chain: Sophistication of supply chain
determines cost competency Issues beyond the control of
intervention such as winter crops, climatic discrepancies, freezing
of ports, etc. limit the scope of exports
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Regulatory Bottle-necks: Any regulatory changes with respect to
taxes, duties, restrictions etc. directly impact the export
capabilities of the country as well as the market dynamics
Disparity due to Self-sufficiency: Another major factor influencing
trade is that in major exporting countries, a significant
proportion of the crop is exported as the domestic requirement is
less vis--vis developing countries where export potential is
limited Wheat Trade - Challenges Total Supply : Opening Stock +
Production + Imports (Figures in MMT) 2014-15 IGC Forecast
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Shifts in Demand Preferences: Reducing consumption trends
Atkins and gluten free diet trends especially in developed
countries Availability of alternatives New alternatives to wheat in
baked goods including amaranth, buckwheat, chia, quinoa, sorghum,
millet, flax, rye, spelt and teff, plus pulses such as pea flour
However, increasingly alternative options for feed-wheat in terms
of coarse grains will impact further the demand for wheat for the
purposes of feed, consequently, trade Wheat Trade - Challenges
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Wheat Trade - Opportunities Productivity: Lower gains in wheat
yields compared to other commodities can be bridged through
research initiatives in creating specialised wheat for specific
purposes Demand: World wheat demand and trade are forecast to grow
as once-poor parts of the globe grow more populous and richer.
Value Addition: Health Foods: Increasing awareness of health foods
in dietary in-take provides avenues for organic wheat High-value
foods: Specialised wheat for Pizzas, burgers, noodles, etc. are
another avenues for tailor made wheat varieties
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Wheat Trade - Opportunities Export Promotion Increased export
promotion and easing of trade policies would eliminate trade
barriers & improve competencies as well as producers bottom
line Marketing Alternate options: Increasing interest in healthful
foods, natural, non-GMO and non-traditional baked goods Increased
offering: Newer products for consumption such as wheat germ, wheat
gluten etc. Example: Increased consumption of corn & derivative
products
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Creating Geographical Niche
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Wheat Trade - Geographical Scope Creating niche for specialized
wheat varieties for specific requirements in destination markets is
the next step for growth for suppliers: Middle East, East and North
Africa: Constitutes for one-third of the world wheat trade with
lower cost, middle protein wheat requirement. Emerging industrial
baking segment is a lucrative target market for exporters Latin
America: Despite a complex maze of tariff and non-tariff measures,
increased consumption makes it attractive for trade servicing Asia:
A diverse range of high quality wheat based products are consumed.
Focus on creating product differentiation basis utility of wheat by
suppliers such as Australia, Canada & USA.
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Case Study: Australian Wheat Exports
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Australias Focused Approach to Exports Main Export Destinations
for Australian Wheat- Indonesia, Japan, South Korea, Vietnam
Noodles- YAN (Indonesia), UDON (Japan), Ramen Required
Characteristics - Chewiness, Bright Colour, Firmness Wheat
Varieties- Australian Noodle Wheat (ANW), Australian Premium White
Noodle (APWN) Bread Required Characteristics - high protein, high
WAbs%, good stability, good extensibility, Wheat Varieties-
Australian Prime Hard (APH), Australian Hard (AH) Sponge Cake
Required Characteristics - low protein, weak medium dough strength,
soft & moist crumb Wheat Varieties- Australian Premium Wheat
(APW), Australian Standard White (ASW), Australian Soft (ASFT)
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Australian Wheat Differentiated for its Quality Asian noodle
sector is dominated by Australian wheat Differentiated Quality Low
screenings (cleanliness) High flour extraction Good starch quality
for noodles Good flour colour and colour stability