With over 850 delegates and 70+ industry experts, the Global Grain Geneva Conference 2023 addressed critical aspects such as trade risks, logistics challenges, and sustainability considerations. From in-depth analyses of the global grain market to discussions on Black Sea grain challenges and Brazil’s outlook, the conference shaped the industry’s trajectory, emphasizing collaboration and innovative solutions.
The recently concluded 22nd Fastmarkets Global Grain Geneva Conference-2023, held from November 7-9 in Geneva, emerged as a pivotal event that brought together industry leaders, experts, and industry associations to delve into critical global grain and oilseeds trade aspects.
With a robust attendance of over 850 delegates representing key regions such as Europe, the Black Sea, MENA, and South and North America, the event provided a platform for meaningful discussions on emerging trade risks, logistics challenges, and sustainability considerations. The conference featured 70+ distinguished global industry experts as speakers, contributing their insights and expertise.
Over the course of three dynamic days, the conference showcased 9 standalone presentations and 12 panel discussions, exploring key themes including grain trade and milling, oilseeds&vegetable oil trade, logistics, legal aspects, and risk management. Notably, the conference dedicated substantial focus to managing risks in agricultural commodities trade, resonating deeply with attendees. the agenda included a dedicated briefing on ‘Women in Agri Trade’, highlighting the significance of gender equality in the commodities trade.
DYNAMICS OF THE GLOBAL GRAIN MARKET
In the opening session of the Conference, Alexander Karavaytsev, a Senior Economist at the International Grain Council, delivered a thorough analysis of the global grain market, offering valuable insights into the trends and dynamics shaping the industry. His well-prepared presentation touched upon crucial aspects that are influencing the global grain landscape. Karavaytsev began by emphasizing a persistent trend in the global grain market—demand surpassing production for the seventh consecutive year. This ongoing imbalance is anticipated to result in a potential decline in world grain stocks to a nine-year low, primarily driven by tighter wheat inventories. Despite generally softer prices, he pointed out that global grain consumption is on track to reach new highs, with a projected 2% increase. This surge encompasses various sectors, including feed, food, and industrial uses. However, Karavaytsev cautioned about potential downside risks to consumption, including global recessionary fears, geopolitical volatility, a robust US dollar, and concerns related to animal diseases. The grain prices, though currently below last year’s levels, have exhibited a slowed downtrend due to weather-related uncertainties in crop production. Notably, volatility in the market remains elevated.
Delving specifically into the wheat market, Karavaytsev highlighted several bullish factors driving the dynamics of this particular grain. These factors include the Black Sea conflict, uncertainties surrounding crops in Argentina and Australia, quality issues in certain producing regions, speculation about India’s imports, and shifts in demand from rice. The presentation also addressed the trajectory of global wheat stocks, predicting a decline to a five-year low after peaking in the previous year. Notably, the EU and Russia are expected to experience significant drawdowns, while the US faces long-term declines.
Furthermore, Karavaytsev highlighted specific observations in key wheat-producing regions. For instance, Russia, benefiting from ample supplies and a weak currency, maintains competitive wheat prices. However, an unofficial floor price appears to limit offers in public tenders. Romania was discussed as a competitor with Russia in numerous African/Asian wheat markets, leveraging a freight advantage, while Australia’s wheat prices, initially influenced by El Nino-linked uncertainties, have retreated due to better-than-expected early harvest results.
The presentation also addressed challenges faced by millers in sourcing high-quality supplies at reasonable prices due to localized wheat quality issues. Despite these challenges, an uptrend in consumption is anticipated, contingent on macroeconomic conditions in developing countries.
One of the most standout sessions of the conference was the millers’ panel, which provided valuable discussions on key topics related to the grain and milling industry. Moderated by Swithun Still, the panel delved into the significant developments in the wheat supply and demand dynamics for 2023, as well as emerging trends in the milling industry. Markus Poelzl from Bühler offered a comprehensive overview of the evolving landscape within the milling industry. This insight shed light on the transformations that are shaping the future of milling. Malak Al Akiely and Mehdi Zerzeri shared their projections for the Middle East and North Africa, regions that hold a pivotal role in the world’s wheat import market. Their insights provided valuable context on the global wheat trade. Additionally, Dr. Eren Günhan Ulusoy explained how Turkey increased its flour exports since the early 2000s and became the world flour export champion. He highlighted the dynamic nature of Turkey’s flour export destinations, noting that many countries are investing in their milling capacity. This shift could potentially lead to changes in the global flour trade landscape. However, Ulusoy also expressed the belief that the flour trade will continue to be an integral part of the industry.
CHALLENGES AND OPPORTUNITIES IN THE BLACK SEA GRAIN MARKET
To gain deeper insights into the pressing issues surrounding Ukrainian grain exports, we turned our attention to a pivotal session at the Global Grain Geneva conference. This discussion featured an esteemed panel of experts, including Volodymyr Korchun, Cezar Gheorghe, Zlatina Doneva, and Andrei Roubailo and was skillfully moderated by Ivanna Dorichenko. During the session, various alternative transportation routes for Ukrainian grain to reach global markets were thoroughly examined, and a comprehensive overview of the current situation was provided.
Cezar Gheorghe, Founder of Agricolumn and Counselor of the Agriculture Ministry of Romania, highlighted Constanta port as the most reliable and predictable hub in the Black Sea, capable of handling substantial volumes of grains and oilseeds. Emphasizing the Black Sea as a free sea, he stressed the importance of ensuring free access for all countries, refuting the notion that it is a Russian lake.
Constanta port, with a potential capacity of 28-30 million tons, hinges on smooth cooperation among all involved parties. Gheorghe warned that without such collaboration, the logistical challenges witnessed in 2023 would persist, negatively impacting farmers who bear the full burden of logistic costs, leading to a reduction in grain prices. He advocated for strategic pre-planning, accommodation of Ukrainian goods in Romanian territories, including silos and flat warehouses, and meticulous execution until export.
Discussing the demise of the Grain Corridor, Gheorghe anticipated challenges for the new grain corridor created by Ukraine, particularly concerning the unpredictable nature of the Black Sea. He highlighted the continued risk of Russian attacks on critical infrastructure in Odessa, Pivnyi, and Chornomorsk.
Gheorghe shed light on the disruption caused by Romania’s import of 5 million tons of Ukrainian commodities between March 15, 2022, and October 1, 2023. This importation impacted the Romanian market, leaving 5 million tons of domestic goods stranded in farmers’ shelters, unable to reach Constanta due to Ukrainian commodities. The resultant delays, coupled with expensive logistics, created a significant disruption in the market.
Despite these challenges, Gheorghe expressed hope for positive changes. He acknowledged the lessons learned over the past two years and Ukraine’s efforts to bring order to its market, combatting issues such as VAT and tax evasion. Looking ahead to 2024, he called for collaboration among all parties, including Romania and Ukraine, to avoid misunderstandings that could lead to protective measures by countries sharing a common border with Ukraine. Gheorghe’s remarks highlighted the complexities of the Black Sea region and the imperative for cooperative efforts to overcome challenges and foster a more stable grain market.
ADAPTATION IN UKRAINE’S GRAIN SECTOR
During the conference, Masha Belikova, a grain market analyst at Fasmarkets, also provided a comprehensive overview of the challenges and opportunities unfolding in the Black Sea grains market, particularly focusing on the dynamics within the Ukrainian agriculture sector for the 2023/24 season. Belikova began by painting a concerning picture for Ukrainian agriculture, emphasizing that the current situation appears more challenging compared to the previous year. The costs of production have not witnessed a significant year-on-year decrease, and logistic costs remain stable or, in some cases, higher. She traced this scenario back to the full-scale war that began on February 24, 2022, and continued until July 2022, during which prices reached record highs. This allowed Ukrainian exporters to stay competitive in international markets despite escalating logistic costs.
However, for the 2023/24 season, world prices have sharply declined, reaching levels seen in 2020 or even reverting to 2019’s levels, pre-COVID-19. To remain competitive in this changed landscape, trade had to adapt by purchasing at lower prices, resulting in reduced income for producers. In some regions, purchasing prices for grains even fell below the costs of production, raising concerns for the upcoming planting season
Belikova highlighted the significance of the humanitarian corridor, managed by the Ukrainian government and defense forces, in restoring normalcy to trade and improving domestic prices. Initially met with skepticism within the trade community, the corridor’s announcement on August 10 was viewed with caution. Some companies, while opposing any Russian involvement in the grain deal, were also skeptical about the humanitarian corridor’s effectiveness, citing uncertainties around insurance, safety guarantees, and the potential need for an agreement with Russia. Despite this skepticism, the first vessels left Ukrainian ports on August 16, with over 156 vessels using the corridor since then. The reopening of the corridor has led to a drop in freight rates, providing some relief. However, trade remains confined to spot trading on a delivered basis due to risk aversion, with buyers seeking guarantees of loading before committing to purchases. This cautious approach complicates export trade, requiring every step of the process to function smoothly to avoid disruptions.
Belikova also noted a decline in insurance rates since the corridor’s reopening, reaching as low as 1.5-2%, particularly for companies regularly operating in Ukrainian Black Sea ports. “Despite consistent Russian attacks on port infrastructure and attempts to disrupt the corridor by deploying mines, the market is increasingly confident that the humanitarian corridor will persist, allowing companies to plan trade and potentially restart forward trading,” Masha commented. “This development could be beneficial for domestic producers, providing them with a more predictable and stable environment for their operations”.
CURRENT LANDSCAPE OF INVESTMENTS IN THE GRAIN INDUSTRY
Vito Martielli, Senior Grains and Oilseeds Analyst at Rabobank, delivered an insightful presentation on the dynamics of investment in the grain industry. He highlighted the continuing trend of investment in innovations. Here are some highlights from Martielli’s presentation:
• Investment in innovations is still attracting money. The global agrifood tech sector has raised 196 billion USD globally since 2012. The US continues to dominate the industry. Asia still has a much bigger agrifood tech sector than Europe.
• Investment appetites and targets can change quickly (5-10 years ago all the investment was outside of the North American market and in the past three years that has turned around).
• The ABCs of the global grain trade consolidate their position globally.
• Commodity prices portend lower revenues and profits for grain companies in the next few years.
• Investment into the agriculture sector is still happening and coming from every imaginable quarter.
• Demand is high for investment in infrastructure, e.g. Brazil, U.S. waterways, Danube corridor.
• Grain and oilseed companies will continue to expand across the whole supply chain, e.g. processing, food ingredients and value added.
In the EU;
• Grains production will stagnate while oilseeds and pulses will increase. EU law on deforestation-free products to impact trade flows and business models in the supply chain.
• The potential for investments in value-added segments such as alternative proteins, starches, and vegetable oil applications is significant.
• In the medium term in a post-war scenario, it will be necessary to rebuild Ukraine’s agribusiness. This involves demining land, restoring port capacities, and enhancing local processing to facilitate the export of value-added products.
• In Africa, more investments are needed in the grain and oilseed supply chain. Investments will be required to expand and improve the quality of port logistics and storage infrastructure.
WEATHER PATTERNS AND RISKS
In her presentation ‘The World in 10’ slides, Natalja Skuratovic, Senior Account Executive at EarthDaily Agro, gave an overview of the global weather patterns and risks for agriculture and looked for connections to the commodity markets’ reaction in terms of securing supply. The main takeaway insights were:
• Prolonged rains have impeded the winter grains sowing campaign in Western Europe which might affect production.
• El Niño already making itself felt in the main soybean-producing area of Brazil Mato Grosso, where it is currently very dry while in other areas of Brazil and Argentina precipitation is sufficient.
• Recent rains in Argentina arrived in time for corn and soybean plantings but late for wheat.
• Winter sowing happened in rather dry conditions in parts of Ukraine and Southern Russia.
Beyond the immediate concern of weather’s impact on crops, she urged a comprehensive examination of crucial market elements. Notably, she drew attention to the substantial US corn spec short and noteworthy Chicago wheat spec short, cautioning against overlooking their potential ramifications.