13 Feb 2020

Forward curves are an important instrument in supply and demand analysis. They are constructed by drawing a line along the sequence of futures contract price quotations, typically proceeding forward for about 18 to 24 months from the spot or nearby futures month at fixed monthly intervals.

Forward curves displaying successively higher price quotations over time – called contango – are upward sloping. These indicate a surplus supply situation relative to demand and relay a “buy“ or “hold” signal to participants along the commodity supply chain. Forward curves displaying successively lower price quotations over time – called backwardation – are downward sloping. These indicate a deficit supply situation relative to demand and relay a “sell” signal to participants along the supply chain.

In agricultural markets which feature renewable commodities, forward curves often include both upward sloping and downward sloping configurations that proceed from a surplus situation right after harvest time to relative scarcity towards the end of the crop year.

Certain portions of the forward curves are commonly referred to as “spreads” and are quoted as the arithmetic difference between the nearest and the furthest contract month. For example, the difference between the July and November soybean contracts of any one year is keenly watched as a highly dynamic spread. To illustrate, in 2013, the July/November spread displayed steep backwardation reaching a level of USD 132 per tonne as global demand exceeded supplies. Conversely, in 2018, the July/November spread declined from a small inverse to a USD 9 contango as the demand rate slowed amid abundant supplies.

In 2019, the maize market exhibited dynamic movement during the growing season between June 20 and August 20. As record spring rainfall threatened to reduce acreage and yields dramatically, the y/y spread between December 2019 and December 2020 reached a high point of USD 18.21 inversion in June. Following the USDA August crop report, which projected larger crops than private estimates, the spread declined to USD 18.01 contango by late August, moving more than USD 36 in total (see image).

03 Feb 2020

The European Union was elected as the next AMIS Chair at the 9th Session of the AMIS Rapid Response Forum. Represented through Dr Tassos Haniotis, a long-time supporter of AMIS who has been part of the initiative since the onset, the European Union will take over the chairmanship from Brazil in May.

20 Dec 2019

World maritime transport lost momentum last year, expanding at a rate below the historical average. Nearly 2 percent of maritime trade was affected by tariffs escalations (September 2018 to May 2019), especially grain, containerized trade and steel products, leading to product and supplier substitution and trade diversion effects. The upsurge in soybean exports from Brazil to China displacing shipments from the US is a case in point. On the supply side, the rise of mega vessels, alliance reshuffling, and consolidation remain key features of the shipping industry. Fuel economics were also in focus as industry prepared for the entry into force on 1 January 2020 of IMO’s regulation lowering the global sulphur cap in ship bunker fuel.

Meanwhile, structural factors are silently redefining the maritime transport landscape. Moderate global economic and trade growth contrasting with the pre-2009 period is becoming the norm. Other forces at play include (i) supply chain restructuring in favour of more regionalized trade flows; (ii) greater use of technology and services in value chains and logistics; (iii) intensified natural disasters and climate-related disruptions; (iv) changes in demand patterns; and (v) accelerated environmental sustainability and energy transition agendas.

Looking forward, maritime trade is projected to grow at an average annual rate of 3.4 percent over the next five years. Nevertheless, several risks continue to cloud the horizon. Aside from a weakening in global demand, growth prospects of dry bulks – particularly relevant for AMIS – are also shaped by economic and regulatory developments in China, the mainstay of bulk trade for over a decade; potential supply-side disruptions (e.g. iron ore); the further spread of African Swine Fever (grain); and climatic factors, including those affecting maritime passages. In addition, containerized trade will remain under pressure due to continued overcapacity and weaker demand.

Supported by the United Nations Conference on Trade and Development (UNCTAD), AMIS will continue monitoring these developments to ensure a better understanding of global issues at stake and their implications for maritime transport and trade.

27 Nov 2019

Check out the latest supply and demand data of wheat, maize, rice and soybeans. Apart from running your custom query, you can consult a country's entire commodity balance and compare AMIS numbers with those of other global data providers.

15 Nov 2019

The multilateral trading system faces a momentous reform objective as it heads towards next year’s WTO Ministerial Conference in June. With the objective of establishing “a fair and market-oriented agricultural trading system", a range of policy domains relevant to AMIS is being examined.

As a priority, alternative approaches to reduce trade-distorting support are being studied. Simultaneously, negotiators are exploring options to ensure that subsidized stockholding for food security, if exempted from stricter disciplines, does not displace competitive suppliers or adversely impact their livelihood security due to price distortions.

In market access, interest is clearly shifting towards fostering predictability, including by simplifying complex forms of tariff bindings; reducing the gap between applied and bound tariffs; ensuring that shipments en route are given due consideration when applied tariffs are suddenly modified; improving tariff quota administration; and promoting the integration of competitive exporting countries in global value chains (e.g. tariff peaks and escalation).

Since the 2015 landmark agreement to eliminate export subsidies, all WTO Members with scheduled reduction commitments, with the exception of three developing countries, have taken the required implementation steps. Many participants are now keen to refine specific export competition elements, ensuring that past achievements are not circumvented through the operations of exporting state trading enterprises, international food aid, or subsidized export credits.

While the right to temporarily institute export restrictions and prohibitions to relieve critical domestic food shortages has long been recognized, the debate focuses primarily on transparency requirements and the need to mitigate supply disruptions and price volatility. Furthermore, a proposal to exempt WFP food procurement for humanitarian purposes from export restrictions remains on the table.

A successful outcome of the WTO Ministerial Conference would contribute towards better targeted domestic and trade policy, smoother international supply chains, and revitalized business environments. Clearly, as negotiators ponder the opportunities and practical trade-offs, landing zones will largely shape up based on political sensitivities and vulnerabilities; the technical complexity of the subject matter; as well as perceived linkages with other fields of WTO activity of crucial relevance to grain trade competitiveness globally such as non-tariff measures; non-agriculture market access; and services.