World Grain - June 2015 - 84

FEATURE: CHINA, CURRENCY IMPACTING MARKETS

turned to alternatives such as sorghum.
"China drives global soybean tradworld soybean market has become
more dependent on China."
FACTORS AFFECTING WHEAT MARKETS
Neil Townsend, director of research at the Canadian Wheat Board,
discussed some of the external factors affecting world wheat markets.
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commodities," he said. "Ocean freight
is soft so that's not an inhibiting factor. Most of the demand we have seen
has been fairly predictable."
He described four fs - food, feed,
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"We have seen, particularly in
wheat, a decline in volatility," he said,
although he also noted that the movements of currencies like the euro or
the ruble have triggered price swings
where they were used. "It's very different when you are dealing with other
currencies."
Broader fundamentals do not support high prices, he said of the world's
wheat market. "We haven't got the
farmer to quit farming in any place."
Geopolitical tensions have also
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still actively exporting," he said.
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but there are limits. "There is starting
to be an increasing payoff in terms of
seeds and technology and precision
agriculture," he said. "You still can't
manufacture water."
He commented on Egypt's purchases from France. "You can do a
lot when you give them $100 million
and tell them to spend it on wheat,"
he said.
He also looked at Canadian logistics. "It's amazing what dropping crude
oil prices from $90 to $40 does," he
said. "All of a sudden railroads come
to you."
Farmers in Canada are not necessarily just thinking about how to make
PRQH\³7KH\DUHQRWSUR¿WPD[LPL]ers," he said. "They are tax minimizHUV7KH\DUHWU\LQJWRVKRZQRSUR¿W´
84

Michael Jewison of the USDA's World Agricultural Output Board discusses China's impact on the
global grain and oilseed markets.

He said a weak Canadian dollar might have an effect on planting.
"There may be a bit more of a sticker
shock in trying to buy their new combines and their fertilizer."
NEW EUROPEAN WHEAT CONTRACT
Eric Hasham, senior director,
Agricultural & Alternative Investment
Products, at CME Group, introduced
plans for a new European wheat contract.
"There's been talk about CME looking to launch a new E.U. wheat contract," he said.
He explained that CME does over
a million lots a day in futures and options. "You know you can get out of
these products quickly and easily. The
core client group is the physical players. Why are we launching a new E.U.
contract? Basically because we were
approached."
You need to know exactly what it is
you're trading, he said. There is a need
to limit potential for bottlenecks in
delivery.
"We do our utmost to limit the impact of technical factors," he said. "The
aim is not to go to delivery."

The aim is ensuring convergence between futures and spot. "What we have
done is to bring expertise and best practice in the U.S. and bring them over to
Europe and combine it with physical
practices in Europe."
The contract will remain basis
5RXHQKHVDLG7KHUHZLOOEHHLJKWGHlivery points across France. "It is a fot
(free on truck) contract," he said. "Your
cost of fobbing is included in the price
of the contract."
The proposed quality level is protein
minimum 10.5%; Hagberg minimum
VSHFL¿FZHLJKWPLQLPXP
"We have chosen a base which covers 90% of the market regardless of
crop year and allows you as the market
to decide the premium," he said. "The
FHUWL¿FDWH LV NH\ ,W LV D PXFK PRUH
ÀH[LEOH ZD\ IRU \RX WR PDQDJH GHOLYery. It is a resalable instrument."
The contracts will be listed in
Chicago, he said. They will not be regulated in Europe.
"Is there room for three contacts?
Until we have launched I am not in a
position to tell," he said. "We are very
close. We have more than a handful of
June 2015 / World Grain / www.World-Grain.com

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World Grain - June 2015

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