Bunge - Wheat Market update
IAOM – Manila 2012
Bunge Today
Average Net Operating Assets
6%
Net Sales: $59 Billion
12%
Employees: ~35,000
Facilities: ~400
Agribusiness
9%
Key Facts
54%
19%
Sugar & Bionenergy
Food & Ingredients
Fertilizer
Countries of Operations: 30+
Other
Agribusiness
• A global leader in
oilseed processing
• A global leader in grain
and oilseed marketing
Sugar & Bioenergy
Food & Ingredients
• 21 mmt sugarcane milling
capacity producing sugar,
ethanol and electricity
• Leading producer of oils,
margarines & industrial
fats in the Americas
and Europe
• Leader in global trade
and distribution
• Growing oils position
in Asia
• Leading corn and wheat
miller in the Americas
Fertilizer
• Fertilizer operations
in Brazil, Argentina
and the U.S.
• Joint venture with
OCP in Morocco
Bunge Operating Companies
Bunge Limited
White Plains, NY
Bunge Argentina
Buenos Aires
3
Bunge Asia
Singapore
Bunge Brazil
São Paulo
Bunge Europe
Geneva
Bunge Global
Agribusiness
White Plains
Bunge
North America
St. Louis
A few basics for those who don’t know !
Pricing terminology
Price components
Futures ( transparent forward price for a given commodity)
+
Basis ( Cash price or price in relation to futures)
FOB/ FLAT ( Free on board) Price
+
Freight
C&F/FLAT ( Carriage and freight) Price
Futures Markets
US Futures Exchange Markets
• Chicago Board of Trade(CBOT) – SRW/ SWW*
• Kansas City Board of Trade(KCBOT) - HRW
• Minneapolis Grain Exchange (MGEX)– NS/DNS
*Sometimes these are used for other wheat types but remember the
markets are not full hedges(representative) for those!
It is unlikely that CBOT prices will move 1:1 with Aus wheats.
Futures Contract:
commitment to make or take delivery of a specific quantity and quality of a
given commodity at a predetermined place and time in the future
All terms of the contract are standardized and established beforehand
except for the price
All contracts are settled either through
• Liquidation by offsetting purchases or sales
• Delivery of the actual commodity (occurs less than 1% of the time)
Cash Markets
Pricing of cash quantities expressed in relation to
futures, known as “basis” or “premium”
• Cash, Forward, Flat price = futures price + basis
– eg. In December, SWW for January delivery in Portland are priced
$0.35 cents/bu over the March(H) futures contract at $9.10
Cash Price = $9.45/bu or $347 /pmt
• Basis can be over (+) or under (-) futures price
• Represents the relationship between the local market and the
futures market based on:
•
•
•
•
•
Storage
Transportation
Local supply and demand
Quality
Substitute pricing
Fundamental Analysis Methodology – What
we try to do !
Employing supply & demand curve logic to derive directional
price & price range assumptions
Determining the markets’ price equilibriums
Supply
Price
p¹
pe
p2
Demand
Quantity
The issues – US Corn, Russia . E.U. West Aus..
CORN REMAINS VERY TIGHT…………….
And will need to ration to wheat
Wheat is also relatively tight but not as bad as Corn.
The world’s wheat stocks are basically sat in the US….the question is when the
demand reaches there..
Wheat Scorecard – Where are the stocks are and are not!
As the current competing Origins run out of wheat the question will be when
this demand comes to the US??
ORIGIN
Stocks/Use
Comments
28%
35%
32-35%
26-28%
22-25%
25-28%
USDA exports high?
USDA exports high
USDA exports high
Comfortable >20%
USW – ALL
USW – HRS
USW – SRW
USW – HRW
CANADA
AUSTRALIA
Tight <20% - All need to ration eventually
RUSSIA
KAZAK
UKRAINE
EU
ARGENTINA
BRAZIL
Effectively stopped
Effectively stopped
Effectively stopped
Stopping Dec/Jan
Stopping Feb/March
Stopping March
Weekly sales are behind last year and the 5yr average?
USDA 12/13 FORECAST
(32MMT)
When will US Sales pick up as Russian & French pick up?
Will Aus/Can pick up the slack?
USDA 12/13 FORECAST
(32MMT)
WA is defficient in rainfall this season, SA is
also a question-mark..
1. US Drought/Russian
Weather
2. Improved US weather
3. Pre-USDA report/US
weather fund money off the
table
4. USDA report – Tighter US
Corn and Wheats stocks.
5. Range bound but in a
downward channel largely
determined by corn & price
other origin wheat.
2013 – What will tip the scales for wheat
BULL
BEAR
Current competing
origins will all need to
ration
Aus or Can fill the
export gaps before
USW.
1mmt+ US weekly
wheat sales.
Weekly wheat sales
staying sub 700-800k
Official suspension of
Russian exports.
Further rainfall in Aus.
Port Congestion in
Canada pushing
demand to PNW.
Good planting Rains for
US winter crop.
Non-US wheat
continuing to win GASC.
Early frosts in Australia.
Any problems with
global corn.
Any legaslation
limiting/reducing the
Ethanol mandate in the
US.
Macros,what the funds
do.
Macros,what the funds FLAGS
do.
USDA/WASDE report Oct 11 – Acreage forecasts
AUS weather
SAM weather for corn seeding.
Weekly sales Corn & Wheat.
Ethanol margins/Corn demand ( vs Petrol)
17
Thank You
18
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