World Grain - February 2015 - 52

FEATURE: GRAIN EXPERTS ANALYZE BLACK SEA

Amaggi, pointed out that the market is
about risk. "You are seeing people becoming more expert, starting to manage
risk better," he said. "We are trading risk
at the end. A low freight doesn't help. A
low freight means a low risk. You see
more people trying to buy into that risk."
Van Steijnen described grain as "not
marginal, but not dictating" in the freight
market. "When we talk about grains, it's
mainly Panamaxes and Supramaxes."
He explained the problems in managing risk, particular the cost of fuel.
"Bunkers are extremely important," he
said. "Hedging has become very impor-

grain production needs to be domestifoods, again here we mention wheat rice
and corn, must be absolutely secured."
"This is the so-called 'Chinese
Chinese rice,'" he said. "The emphament wants to have higher grain self"Simultaneously the government
also put out a new policy, the so-called
'proper imports,'" he said. "This is the
has said clearly written down that proper import is needed in order to food and

There is a huge basis risk. You see huge
spreads between physical and paper.
There is no perfect hedge."

Alain Butler, Senior Advisor, Soft Commodities, at
BNP Paribas, chaired an afternoon session which
looked at the freight market.

a look at the freight market.
"What we need to do is produce more
food, and it is a challenge," he said.
"We need more meat. The feed sector
will carry the burden of demand. The focus for all of us is emerging economies.
The world expects a lot from China."
Bas van Steijnem, director of ICAP
Shipping, expected the freight market to
grow by 4.7% in 2015.
"That growth will be predominantly in
the supramax sector," he said. "I would
love to paint a picture where prices will
go through the roof, but it doesn't look
like freight will do that."
ting the average age at 7.7 years. "This
is not good in terms of scrapping.
Supramaxes are very young. The average is six years."
Erasmus Shipinvest BV said the industry
was not making enough money. "The motive is not there to own the ships," he said.
Alex Haubert, chartering manager of
52

contracts, he said. "You don't know what
your volume will be," van Steijnen said.
"In grains, it is mostly hand to mouth."
The panel was asked about the likely
effect of improvements to the Panama
Canal. "We don't know when it will be
affected," said Haubert. "Eighty percent
has been completed. What we don't
know is the toll dues structure. How
much will it cost?"
Butler explained why agriculture
is so important to China and why
Chinese policy is so important to the
world market.
"Half of the population in China is
rural, so anything that happens regarding agriculture has a big social impact,"
he said. "Any moves in its policies
can impact world demand and trade.
Agriculture and food are really critical.
The government and the state are likely
to play an active role."
The policy of the new government
continues to emphasize the importance of
food security, said Zhu Yufeng, managing
director of Hanfeng Huayu International.
"At the beginning of the year, each
year, the Chinese government will have
a central rural working conference
cy and priorities of the year," he said.

in history."
Having decided that certain imports
are necessary, it's necessary to work out
what is meant by "proper imports."
"There is a lot of debate in the industry on how to interpret this policy," he
said. "I believe it means that when there
is a real demand for imports to supplement a domestic supply shortfall, let's
go ahead and use the imports. China is
a large country but has very limited arable land. On the other side you have an
ever-growing, huge demand base."
He stressed the impracticality of an
for each and every commodity. "The
planting economics will compete with
each other and it will make it impossible
to secure food," he said.
Emily French raised the issue of food
safety. "This is going to be a major challenge for the Chinese government," she
said. "There's never been more opposing demands on the food system."
She also explained that China remains
ucts. "China cannot ever produce enough
soybeans for its own tofu demand," she
said. "The issue for China now is it has to
massively increase yields."
Chris Lyddon is World Grain's European editor. He
may be contacted at: chris.lyddon@ntlworld.com.
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World Grain - February 2015

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