the india maize summit`13

Report
Brands
“Mapping the Market Thought”
Approach for forecasting Maize
Prices
Mr. Nagaraj Meda
Managing Director
TransGraph consulting Pvt.ltd
THE INDIA MAIZE SUMMIT’13
Mar 22nd 2013
Mapping the market thought
We have a great principle of accommodation
which maximizes the utility of various inputs
that are available. That is….
Mapping the market thought
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Slide
India’s Rabi Crop Sowing Details
• Major changes in Rabi crops sowing are:
–
–
–
–
Delayed sowing in majority of the regions
Rice acreage diverted towards other lucrative crops
Increase in acreage under Coarse Cereals due to water scarcity
Among coarse cereals Sorghum accounts higher acreage share and
followed by Maize
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Slide 3
India’s Rabi Maize Production Scenario
India's Rabi Maize Production Projections for
2012-13 (Million tons)
States
A.P.
Bihar
Karnataka
Maharashtra
TN
Others
All India
© TransGraph Consulting Pvt Ltd
2011-12
2012-13 p
2.22
1.29
0.33
0.29
1.04
0.32
5.49
3.17
1.54
0.29
0.29
1.08
0.35
6.31
Slide 4
Andhra Pradesh Rabi Maize Status
• Acreage under maize in AP considerably increased in Telangana region owing
to varied reasons:
• Fall in reservoir levels - shifted irrigated rice towards irrigated maize (2.17
Lakh ha of rice shifted towards other lucrative crops like maize, groundnut and pulses
crops.
• Higher price realization for Kharif maize (Kharif maize price at Nizmabad for
Aug’12 to Dec’12 stood at INR 1400 per quintal
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Slide 5
Coastal AP Maize Sowing Dynamics
• Rabi maize acreage in coastal region increased by 3.74% and major
contribution is from Prakasam and West Godavari.
• Farmers at E. Godavari and Vishak Patnam farmers have increased acreage
under Rice (and reduced maize) due higher rains in the region (31% and 19%
departure respectively).
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Slide 6
Rabi-2012-13 Maize Production Details
• Andhra Pradesh received normal rainfall for the current year.
• With frequent showers, maize yields are likely to increase by 12.50% over last
year towards 7.65 tons per ha.
• In overall, we can expect AP maize production to stand at 3.17 million tons,
which is up by 43% over last year.
• % contribution of AP to India’s total Rabi maize production is likely to
increase by 50%.
© TransGraph Consulting Pvt Ltd
Slide 7
All India Expected commencement of arrivals
• Combined with late Kharif harvest as well as variation in arrival of post
monsoon rains, Rabi maize sowing postponed from its normal date.
• Therefore, peak arrivals are expected to commence from 3rd week of March
or First week of Apr’13.
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Slide 8
Likely flow of Maize to Karnataka and Maharashtra
from AP
Unfavorable Monsoon rains led to• Karnataka Kharif maize production declined by 5.3% due to
decline in harvested acreage and yield rate even though sown
acreage was normal/higher.
• Same in Maharashtra production declined by 2% due to decline
in yield rate as well harvested acreage.
• Therefore, we anticipate there will be higher quantity of maize
from AP towards Karnataka and Maharashtra.
© TransGraph Consulting Pvt Ltd
Slide 9
Indian Maize Export Dynamics
•
•
•
•
•
Indian maize exports for the three quarters of
2012-13 stood at 3.05 million tons and another 0.7
to 0.8 million ton exports are anticipated in 4Q of
2012-13. (around total 3.85 million tons)
Currently, Indian Maize FOB prices quoted at $278290 per ton while US corn is costlier by $20-32 per
ton ($310-316 per ton).
In the last couple week, Indian maize shipments for
a quantity of 94,500 tons happened to the
countries like China, Vietnam, Indonesia etc.
Maize starch exports have took place at price of
INR 25.2 per kg during the week for a quantity of
90tons to Nigeria.
Looking ahead, nearly 4.5-5 million tons of exports
are projected for FY 13-14 owing to higher demand
from S. E Asian countries.
– Projected higher Rabi maize output in India
– Prevailing global tight supply condition for corn
– Globally, nearly 13% decline in carryover stocks for
2012-13
– Declined US production for 2012-13
– Nearly 6% decline in global wheat output
© TransGraph Consulting Pvt Ltd
Slide 10
Global Happenings
Drought in US
Decline in sown and harvested
US corn crop
Last year S. American corn
affected by drought and lower
stocks with them
Tight Supplies of Corn globally
Higher prices for soymeal and
feed demand
Estimates for higher corn
production from South America
Higher Prices for US Corn
(High of 845 cents/bu on
Declined demand from ethanol producer on
lack of margin due to higher corn prices
10th
Aug’12 )
Shift of livestock/poultry feed
users to wheat rations
Lack of export demand due to higher
prices and tough competition with
South America and Ukraine
Current US corn export price $310-315 per ton
Improving weather
condition in US
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Estimates for higher corn
production from US in 2013-14
Medium term Price
Impact
Slide 11
US Corn Situation
• Tight US Corn supply in “old crop” 2012-13
• Large US Corn crop estimates for 2013-14
Attributes
Planted Area (mil acre)
Harvested Area (mil acre)
Yield (bu/Ac)
Beginning stocks (mil ton)
Production (mil ton)
Imports (mil ton)
Total Supply (mil ton)
Feed, Residual
Food, Seed
Ethanol
Total Domestic use (mil ton)
Exports (mil ton)
Total use (mil ton)
End Stocks (mil ton)
Avg. farm price ($/bu)
2011-12
2012-13 E 2013-14 F
%change
91.9
97.2
96.5
-1
84
87.4
88.8
2
147.2
123.4
163.6
33
28.6
25
16
-36
313
273
367
35
0.7
2.5
0.6
-75
342.2
300.5
384.5
28
115.1
112.7
136.7
21
163
149
154.7
4
126.9
113.9
118.4
4
278.1
261.7
291.4
11
39.1
22.8
38
67
317.9
284.5
329.4
16
25
16
53.6
235
6.22
7.2
4.8
-33
• S. America is likely to be price driver for 2013
© TransGraph Consulting Pvt Ltd
Slide
Country-wise Corn Market Dynamics
• Competition for corn exports is only expected to increase, as Brazil
begins exporting more corn and Ukraine continues its exports.
• Argentina and Brazil corn production to stand at 27.5 mil ton (+27%
y/y) and 72.5 mil ton (+0.7% y/y) respectively.
• Argentina and Brazil are anticipated to hit the markets based on
weather/ moisture content of the grains and logistics status.
• Ukraine has exported near 10 million tons of corn in the 2012/2013
marketing year.
• Global total grains supply (production+ carry in stocks) for 2012-13 is
decline by 3% y/y to 2146.3 million tons.
• Higher food (+0.7%) and decline in industrial (-2.3% y/y) and feed
consumption (-2.65% y/y), in total these put ending stocks down by
11% y/y.
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Slide 13
CBOT Corn Futures Trend
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Slide 14
CBOT Futures Forward Curve
CBOT Futures Forward Curve indicates lower prices for Sep’13 contracts which
are near 590 cents/bushel against 729 cents/bushel of current price and same
indicates current market expectations of higher production for 2013-14 season
© TransGraph Consulting Pvt Ltd
Slide 15
Global Corn:
CME Corn Futures., Cents/bushel
© TransGraph Consulting Pvt Ltd
Slide 16
Maize Nizamabad Spot, INR/Qtl.
© TransGraph Consulting Pvt Ltd
Slide 17
Price Outlook- Maize
Market & current
price
JFM’2013
AMJ ’13
JAS ’13
OND’13
JFM’14
Maize/ Corn
High
1360
1350
1400
1300
1400
(INR 1320/qtl) as on
21st Mar’13
Low
1250
1300
1350
1200
1300
Avg.
1300
1325
1375
1275
1350
© TransGraph Consulting Pvt Ltd
Slide 18
Maize Risk Environment
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Slide 19
Price Risk
Industry pain
point
Price Risk
Challenge
• Challenge to deal
with unanticipated
price changes
• Difficulty in
securing long term
contracts
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Impact
Impact on entire
value chain
• Farmers’ income
• Sharp Changes in
acreages
• P&L impact for
businesses
• Supply adjustment
to prices
How to address?
Can mitigate risk by
proper use of hedging
mechanism:
Physical and financial
hedging
Long term tie ups
Slide 20
Volatility in Maize Prices
Maize Price Volatility (%Daily)
4.00
3.50
NCDEX Futures Cont.
Nizamabad Spot Market
CBOT Corn
3.00
2.50
2.00
1.50
1.00
0.50
Powered by TransRisk
0.00
3/1/2011
9/5/2011
© TransGraph Consulting Pvt Ltd
12/9/2011
16/01/2012
21/05/2012
24/09/2012
28/01/2013
Slide 21
Maize Price Avar
Daily Avar for Maize Price (USD/ton )
80
NCDEX Futures Cont.
70
Nizamabad Spot Market
CBOT Corn
60
50
40
30
20
10
Powered by TransRisk
0
3/1/2011
9/5/2011
© TransGraph Consulting Pvt Ltd
12/9/2011
16/01/2012
21/05/2012
24/09/2012
28/01/2013
Slide 22
Basis – NCDEX Future prices – Nizamabad spot
• Basis turns positive before new arrivals begin to markets
• Making strategies for purchase and sale by tracking basis movement
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Slide 23
Futures spread between contracts
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Slide 24
Production Risk
Pain Point
Production
Risk
Challenge
• Weather
• Input availability &
prices of inputs
• Competitive crops
and price realization
• Crop holding Size
• Quality damage
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Impact
Impact at each point
in value chain
• Volatility in
supplies
• Lack of quality
material
availability
• Price volatility
• Crop diversion
• Shift to
alternatives
How to address?
Timely Decision making:
Irrigation; improved early
warning systems; &
adoption of better
agronomic practices;
Contract Farming;
Warehousing;
Weather Insurance;
Buffer stocks/reserves.
Slide 25
Demand side Risk
Pain Point
Demand side
Risk
Challenge
• Changing habits of
end consumers Faster adoption
• Availability of
Alternatives and
price fluctuations
• Export market
behavior for Maize
and products
Impact
How to address?
• Impact on
revenues
• Time taken to
adjust to new set
of demands /
markets
Analysis /updated
market demand
dynamics and staying
ahead of the curve
Demand for industrial products- Starches, LG, Polyols (like Sorbitol, Mannitol) – increasing
in double digits along with rising FMCG sector growth.
© TransGraph Consulting Pvt Ltd
Slide 26
Global Environment
Pain Point
Global
Environment
Impact
• Diverged impact
• Increasingly, Indian
for trading
and global prices
companies and
more correlated
domestic
• Global shortfalls
consuming
leading to sharp rise
industries
in domestic prices
© TransGraph Consulting Pvt Ltd
Challenge
How to address?
• More value addition at
domestic level and
improving the overall
domestic Maize economy
Slide 27
Policy Risk
Industry pain
point
Policy risk
Challenge
Impact
• Impact on
planning
• Unexpected
infrastructure
Government
establishment/c
intervention
apital
• Ex. Export ban
• State-wise different tax • Impact on
traders- likely
structures/policies,
sudden loss of
impacting logistics
export/import
opportunity
© TransGraph Consulting Pvt Ltd
How to address?
• Very little alternatives
available
• Unison of all the
stakeholders for
commonly acceptable
policies
• Approach towards a
more free-market
maize-economy
Slide 28
Critical Risk Drivers for Industry
Critical pain points for stake holders in Maize Value Chain:
1
2
3
4
5
6
7
Production-supply side concerns
Market-demand side concerns
Enabling Environment-policy interventions
Price Fluctuations
Volatility
Budget Deviation
Global Environment
© TransGraph Consulting Pvt Ltd
Slide 29
Thanking you for your attention.
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