Global Grain comes to Chicago

by Arvin Donley
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The Global Grain Conference, a popular annual event in Europe and Asia, made its first appearance in North America June 19-21 in Chicago, Illinois, U.S., and attracted nearly 250 delegates from around the world.

Held at the J.W. Marriott in downtown Chicago, located next to the Chicago Board of Trade, the conference addressed topics such as: managing risk in global grain markets; world grain outlook for 2013-14 and beyond; analyzing trends in the global oilseed markets; grain transportation outlook; and analysis of important production and export markets such as Brazil, China and the Black Sea region.

Richard Feltes, a delegate from RJ O’Brien, described the event as “a top-tier meeting with seasoned speakers conveying cutting-edge insights.”

Charles Gould, conference manager, said he was delighted that delegates from more than 15 countries attended the event, which has an international focus.

“We look forward to growing this event next year and we see it as an important part of our growing portfolio.”


David Lehman, managing director of commodity research and product development, CME Group, Chicago, opened the conference with a keynote address on managing risk in global grain markets.

He said high frequency trading and the increasing speed of electronic trading has been beneficial to the grain market, even though some in the industry are not entirely comfortable with it.

“The fact is the markets are safer than ever. High frequency trading has provided increasing liquidity in the markets, reduced volatility and helped make global grain trade more efficient,” he said.

Lehman told the audience that high frequency trading is heavily regulated to ensure proper protection.

“We’ve spent $40 million per year policing these markets in addition to what the government does just to make sure these are credible markets,” he said.

He said markets should embrace technology that promotes faster and safer trading of agricultural commodities and expansion of grain contracts.

“In the last decade we have seen demand increases in places like China and India,” he said. “With global demand continuing to grow, we need to make sure markets have the technology and tools in place to ensure an effective market for all participants, no matter who they are, where they are located and how much they trade. We must continue to expand our product offerings.”

Lehman also discussed the significance of CME’s acquisition of the Kansas City Board of Trade (KCBT). The first day of pit trading for KCBT wheat on the floor of CME’s Chicago Board of Trade was July 1.

“Having both exchanges under one roof allows us to improve synergies,” Lehman said. “The response of traders to this merger has been extremely positive.”


The dynamic grain and oilseed market in South America, and Brazil in particular, were discussed at length during the conference, with multiple speakers addressing the importance of this region to the global market.

Anderson Galvao, chief executive officer of Celeres, during his presentation on trends in the global oilseeds market, noted that out of the projected total global oilseed production for 2013-14 crop season, South America is expected to account for 35% of that total. But that percentage is even higher if looking only at soybeans, with 55% of global soybean production concentrated in South America.

“I won’t be surprised if in five years time South America represents 60% of global oilseed production,” Galvao said.

He said the use of crop biotechnology has played a major role in South America’s growing dominance in the oilseeds sector over the past 10 years. Today, biotech soybeans account for 92% of the total soybean crop in Brazil, which may overtake the U.S. this year as the world’s top soybean producing country.

“With this technology shift, Brazil has seen soybean production go in a 10-year span from 51 million tonnes to 81 million tonnes this crop season,” he said. “We had been expecting close to 86 million tonnes but we had some weather issues.”

Galvao said Brazil’s position in the global soybean market will only strengthen over the next decade.

“In the next two to three years there will be a huge increase in soybean yield in Brazil, and over the next 10 years there will be a dramatic change in how Brazilian soybeans and corn will be transported toward ports,” he said.

He said this year total exports of soybeans, corn and sugar is expected to reach 100 million tonnes, increase to 121 million tonnes by 2015 and jump all the way to 151 million tonnes by 2021.

“We are running close to capacity, which is why we are seeing new companies and investors invest in ports, rail terminals and storage facilities,” he said.

Dale Durchholz, senior market analyst for AgriVisor, was also bullish on Brazil’s prospects as a superpower in soybean/corn production and trade in the future — assuming it is able to solve its transportation logistics problems. The biggest problem, he said, is that the rail and river barge systems are not nearly as efficient as in the U.S, therefore most grain is moved by truck on sub-standard roads.

“They have some political problems, but in terms of agriculture they are going to be an increasingly major player,” he said. “Going forward the real key is can they get the logistics in place to get grains and oilseeds out the country in an efficient manner? I think it’s going to get it solved over the next few years.”

The second biggest oilseeds producer in South America is Argentina. But unlike Brazil, which has vast amounts of arable land still untapped, Argentina is reaching its limit for planted area. Galvao said there are several million hectares available in the northern part of the country, but the weather is very unstable in that region which leads to higher production costs and higher volatility.

He noted that Colombia may become a bigger player in South American agriculture.

“It’s famous for its coffee, but Brazilian sugar mills and soybean farmers are rushing to Colombia to buy farmland,” said Galvao, noting that there is about 10 to 14 million hectares of prime farmland available in that country.

“In five to 10 years, Colombia may be an important player in South American agriculture,” he said.


The conference also focused on developments in the Black Sea region, which has expanded grain production and exports dramatically over the last decade.

Shawn McCambridge, grains analyst, Jefferies Bache LLC, who gave a presentation on recent developments in the Black Sea region and their impact on the global grain markets, said the Former Soviet Union countries have seen corn production rise 220% in the last 10 years while exports are up 1,300% during that time period, with 19 million tonnes projected to be exported this year.

“They are serious players,” McCambridge said. “They are exporting 30 million tonnes of wheat annually as well.”

He said Ukraine has been the leader in the region in terms of switching acreage over to corn.

“Ukraine has an agreement with China this year to supply 2 to 3 million tonnes of corn,” he said. “It has also been able to work into markets in southern Europe. Ukraine, with its geographic proximity to very large markets, supports further growth in corn production in the Black Sea region.”

Russia, 10 years ago, produced 3.3 million tonnes of corn and this year is projected to produce 9.5 million. Exports during that time have risen from 44,000 tonnes to 2.5 million.

The other major grain producer in the region, Kazakhstan, will likely remain primarily a wheat producer, with most of its exports going to neighboring countries. It has several major disadvantages in comparison to Ukraine and Russia.

“The problem with Kazakhstan is it is landlocked, so it depends on transit through southern Russia in order to get through to the Black Sea ports,” he said. “There are also political tensions that exist in that region.”

Despite the progress in the agricultural sector in these countries, the Black Sea region still must overcome numerous challenges to reach its full potential as a grain producer and supplier.

The main grain producing countries in the region are still making a slow transition from a government controlled economy to a free market. Investors are also hesitant to pour money into the region’s agricultural industry due to political uncertainties.

“Investments are being made, but there’s still a fair amount of distrust that exists because of the uncertainty from a political standpoint and a question about where these countries are going long term,” he said. “The Black Sea region is going to continue to grow, but at a slower pace than a lot of people would like to see.

“Port facilities are being upgraded, grain storage facilities are being updated and new facilities are being built, but there’s still a long way to go.”

In terms of world wheat exports, McCambridge said the Black Sea region will continue to gain market share from traditional exporters such as the U.S., with Russia being the leader in increased production potential in the region.

Although the quantity of grain produced in the region is increasing, the quality doesn’t measure up to many of the other major grain exporters.

“The quality of grain being moved out of the area is not up to the standards seen in other regions, but it is attracting value because it is a good blending stock,” he said.

For more information about future Global Grain conferences visit: