Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.
commoditia
Observations for discussion at the CIAT workshop on
cassava value chains, Cali, Colombia
Simon Bentley
August 2...
commoditia
commoditia, 2016©
About
• Commoditia is incorporated in Singapore to serve the global agribusiness
industry
• O...
commoditia
commoditia, 2016©
Agenda
• Overview of global trade in carbohydrates
• Focus on trends in trade in cassava prod...
commoditia
commoditia, 2016©
The most important diagram:
Is this how population will develop?
Overwhelmingly, population b...
commoditia
World trade in carbohydrates
commoditia
commoditia, 2016©
The world is increasingly divided into regional
buyers and sellers of carbohydrates
Asia and ...
commoditia
commoditia, 2016©
Africa imports mainly wheat, as well as roughly
equal quantities of corn, sugar and rice
Afri...
commoditia
commoditia, 2016©
In contrast Asia imports growing quantities of
corn whilst it is still a net exporter of rice...
commoditia
commoditia, 2016©
The Americas export mainly feed grains and
sugar as well as sizeable quantities of wheat
The ...
commoditia
commoditia, 2016©
What does this tell us?
• The land rich, people poor regions of the Americas in particular an...
commoditia
Focus on trade in cassava products
commoditia
commoditia, 2016©
Global trade in cassava peaked mid 1980’s and
has been in decline ever since
EU reform of its...
commoditia
commoditia, 2016©
However as global trade died intra-Asian trade
took off…
EU imports of cassava products got d...
commoditia
commoditia, 2016©
…in both dried chips as a feed substitute and raw
material for ethanol production…
Dried chip...
commoditia
commoditia, 2016©
…and also directly in starch for food and
industrial use
Cassava starch is also mainly a Thai...
commoditia
commoditia, 2016©
So far conditions have only supported intra-Asian
trade in cassava
Although both Africa and S...
commoditia
commoditia, 2016©
…but perhaps there are very limited signs of
something similar developing in Africa…
There is...
commoditia
commoditia, 2016©
Why has Asia been different?
• Put simply, growth in demand for carbohydrates in East Asia,
b...
commoditia
What does this mean for cassava value chains
in other regions?
commoditia
commoditia, 2016©
Recap
• Asia and Africa are the big buyers of carbs. Among the
leading exporters, and because...
commoditia
commoditia, 2016©
South America: intense competition, limited potential
• Lets deal first with South America. S...
commoditia
commoditia, 2016©
Africa looks more like Asia and has more potential…
• Africa is different. It is a net import...
commoditia
commoditia, 2016©
…so long as incomes continue to grow
• However growth in population and incomes in Africa sho...
commoditia
Some observations on policy
commoditia
commoditia, 2016©
Policies affecting trade in cassava products
• EU tariffs on starch derivatives (and previous...
commoditia
commoditia, 2016©
China has supported domestic corn well above
world market prices
The large gap that opened be...
commoditia
commoditia, 2016©
To implement this policy large stocks of corn
have been formed at substantial cost
Chinese co...
commoditia
Wrap up
commoditia
commoditia, 2016©
What have we learned?
• The flow of different types of carbohydrates around the world
crucial...
commoditia
commoditia, 2016©
simon@commoditia.com
+44 (0)7930 520 595
For further information
contact:
Upcoming SlideShare
Loading in …5
×

Trends in cassava trade and some thoughts on policy affecting this

535 views

Published on

And what this means for cassava value chains around the world)
Presentation at the Cassava Value Chains Workshop
CIAT, Cali, Colombia. 24-26 August 2016
Speaker: Simon Bentley

Published in: Science
  • Be the first to comment

Trends in cassava trade and some thoughts on policy affecting this

  1. 1. commoditia Observations for discussion at the CIAT workshop on cassava value chains, Cali, Colombia Simon Bentley August 24-26, 2016 Trends in cassava trade and some thoughts on policy affecting this (and what this means for cassava value chains around the world) commoditia
  2. 2. commoditia commoditia, 2016© About • Commoditia is incorporated in Singapore to serve the global agribusiness industry • Our purpose is to develop original data, analysis and intelligence to assist agribusiness to add value to all aspects of their operations from field to final product • In addition to confidential client work, aimed at investors, processors and traders, our focus is targeted industry studies addressing important issues facing agribusiness as well as detailed analysis of different aspects of commodity prices and markets
  3. 3. commoditia commoditia, 2016© Agenda • Overview of global trade in carbohydrates • Focus on trends in trade in cassava products • What this means for cassava value chains outside Asia • Some observations on policy • Wrap up
  4. 4. commoditia commoditia, 2016© The most important diagram: Is this how population will develop? Overwhelmingly, population begins to increase in Africa World population African population 0 1 2 3 4 5 6 2015 2025 2035 2045 2055 2065 2075 2085 2095 billionpeople Africa Asia Europe S America N America 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2015 2025 2035 2045 2055 2065 2075 2085 2095 billionpeople Eastern Africa Middle Africa Northern Africa Southern Africa Western Africa
  5. 5. commoditia World trade in carbohydrates
  6. 6. commoditia commoditia, 2016© The world is increasingly divided into regional buyers and sellers of carbohydrates Asia and increasingly Africa import carbohydrates while, in addition to North America, Europe and South America are leading exporters World trade in carbs • Africa has emerged as the second most important importer of carbohydrates • Post CAP reform and with the resurgence of Black Sea grain Europe is now a sizeable exporter of carbohydrates • South America has emerged very rapidly as the other important exporter of carbohydrates competing with North America
  7. 7. commoditia commoditia, 2016© Africa imports mainly wheat, as well as roughly equal quantities of corn, sugar and rice African carbohydrate imports are focussed mainly on food products African imports of carbs • Wheat imports have grown sharply, drawing on growing availability in Europe as well as other origins • This is mainly for use in bread and confectionery, areas where cassava may struggle to compete
  8. 8. commoditia commoditia, 2016© In contrast Asia imports growing quantities of corn whilst it is still a net exporter of rice Feed grains have driven increases in Asian imports of carbohydrates Asian imports of carbs • Asian imports of corn have grown rapidly and this is mainly for feed and industrial use, areas where cassava competes well if it is priced competitively • While Asia was once a net exporter of cassava these supplies have now been taken up in internal use
  9. 9. commoditia commoditia, 2016© The Americas export mainly feed grains and sugar as well as sizeable quantities of wheat The big growth has been in exports of corn from the US and sugar from Brazil and increasingly corn from Brazil North American exports of carbs South American exports of carbs
  10. 10. commoditia commoditia, 2016© What does this tell us? • The land rich, people poor regions of the Americas in particular and to a lesser extent Europe and Oceania have excess sugar and grain to export • The densely populated and relatively low agricultural productivity regions of Asia and Africa are buyers of these commodities paying mainly with manufactured goods and minerals • Carb prices should be (and are) high in Asia and Africa and relatively low in exporting regions because of the cost of freight between importers and exporters • This price structure can support local value chains for cassava and this has been particularly important in Asia
  11. 11. commoditia Focus on trade in cassava products
  12. 12. commoditia commoditia, 2016© Global trade in cassava peaked mid 1980’s and has been in decline ever since EU reform of its grains markets killed off the trade in cassava pellets World trade in cassava • Asia developed as a sizeable exporter mainly of cassava pellets to the EU to be used as a feed ingredient • Reform of EU grain markets generated surpluses that pushed local grain prices to export parity levels making the trade in cassava pellets no longer profitable
  13. 13. commoditia commoditia, 2016© However as global trade died intra-Asian trade took off… EU imports of cassava products got diverted to East Asia as new markets opened mainly in China for both dried chips and starch Regional trade in cassava • South East Asian (SEA) exports of cassava continued to grow but rather than supplying the EU exports were mainly within the region and overwhelmingly to China • China now imports more cassava than did the EU at its peak • The freight cost from SEA to East Asia is much less than between SEA and Europe
  14. 14. commoditia commoditia, 2016© …in both dried chips as a feed substitute and raw material for ethanol production… Dried chips flow overwhelmingly from Thailand to China Exports Imports 0 2 4 6 8 10 12 1961 1971 1981 1991 2001 2011 milliontonnes Thailand Indonesia Vietnam Other 0 2 4 6 8 10 12 1961 1971 1981 1991 2001 2011 milliontonnes China South Korea Japan Thailand Other
  15. 15. commoditia commoditia, 2016© …and also directly in starch for food and industrial use Cassava starch is also mainly a Thai-China trade with Indonesia emerging as an important net importer Exports Imports
  16. 16. commoditia commoditia, 2016© So far conditions have only supported intra-Asian trade in cassava Although both Africa and South America are major producers of cassava so far very little of the crop is traded Production and trade in cassava roots • It is clear that there is almost no inter- regional trade in cassava and all crops are consumed mainly locally • However, Asia is the exception because economic growth and a divergence in the types of crops grown has led to the trade between SE Asia and East Asia which is the major world movement of cassava products
  17. 17. commoditia commoditia, 2016© …but perhaps there are very limited signs of something similar developing in Africa… There is limited evidence of intra-regional trade in cassava in Africa African regional trade in cassava • Although the volumes are very small there is some evidence of regional trade in cassava in Africa • On the one hand surpluses in East and Central Africa seem to be increasingly exhausted while a deficit has arisen in mainly South Africa • However, compared to Asia this trade is likely to be small because of the vastly different geography and growth patterns
  18. 18. commoditia commoditia, 2016© Why has Asia been different? • Put simply, growth in demand for carbohydrates in East Asia, by raising the basis for cassava from SEA by roughly the difference in freight costs between Asia and Europe, has poured value into the South East Asian cassava crop. It is very much a classical story of trade due to comparative advantage. • This has led to growth in production of roots in both Vietnam and Cambodia • The question is, are these conditions present in any other part of the world?
  19. 19. commoditia What does this mean for cassava value chains in other regions?
  20. 20. commoditia commoditia, 2016© Recap • Asia and Africa are the big buyers of carbs. Among the leading exporters, and because of climate, only South America is a major producer of cassava while there is limited potential to grow the crop in northern Australia • So we need to ask is there a growth market for cassava in Africa and South America that could mimic what has happened in Asia?
  21. 21. commoditia commoditia, 2016© South America: intense competition, limited potential • Lets deal first with South America. Since it is a leading exporter of both sugar and corn, cassava must compete heavily with these crops which are all priced at export parity levels giving no structural or comparative advantage to cassava. • Cassava productivity in South America is OK, but without major improvements competition from other crops is likely to constrain the profitability of cassava in this region • As we saw above, most of the growth in exports has been in sugar directly and not in starch sweeteners. On balance it is very hard to find a case for strong growth in cassava in South America, at least on the scale of other carbohydrate crops.
  22. 22. commoditia commoditia, 2016© Africa looks more like Asia and has more potential… • Africa is different. It is a net importer of carbs and cassava is a local crop much as in Asia. In short, all the positive features of the Asian market seem to apply to Africa, but with three main exceptions • First, cassava is consumed mainly as food in Africa and productivity levels are low compared to Asia. This raises root prices and destroys somewhat the competitiveness of the cassava crop • Second, we saw that demand is mainly for a food crop (wheat) and not an industrial crop (corn). This limits demand for cassava since it competes relatively poorly as a direct substitute for flour • Finally the geography of Africa is not so supportive of cassava trade since there is no East coast of China market (yet) nor a cassava heartland like Thailand located close to ports
  23. 23. commoditia commoditia, 2016© …so long as incomes continue to grow • However growth in population and incomes in Africa should raise demand for meat and thus feed grains and to a lesser extent processed food. Cassava could then become more important • Moreover if the coastal regions of Africa grow as predicted then demand for carbohydrates will surely become very large • This then raises this issue of whether, for example, corn from the western hemisphere can reach African coasts at lower cost than internal flows of cassava. This is hard to answer at such a distance but history suggests this will be a big boost for African cassava.
  24. 24. commoditia Some observations on policy
  25. 25. commoditia commoditia, 2016© Policies affecting trade in cassava products • EU tariffs on starch derivatives (and previously domestic support for starch products) — a relatively small policy impact • AFTA and SEA free trade in products — supportive of regional flows in cassava but again, relatively minor in terms of impact • Indonesia’s increasingly protective policy for corn, a mixed blessing for cassava • Chinese domestic support for its corn sector — the most important domestic policy affecting world (i.e. Asian) trade in cassava products
  26. 26. commoditia commoditia, 2016© China has supported domestic corn well above world market prices The large gap that opened between US and Chinese prices is now under pressure as China has finally reformed its domestic support policy US and China corn 0 50 100 150 200 250 300 350 400 450 2000 2003 2006 2009 2012 2015 US$/tonne Corn China corn • By raising domestic prices for corn China affected the entire value chain for starch derivatives in China (which are made mainly from corn) • In addition to all the other factors supporting imports of cassava products this has been very important since it raised the price of roots in producing countries and allowed expansion of area e.g., in Cambodia
  27. 27. commoditia commoditia, 2016© To implement this policy large stocks of corn have been formed at substantial cost Chinese corn stocks reached very high levels China corn stocks and price 0 50 100 150 200 250 300 0 25 50 75 100 125 150 2000 2003 2006 2009 2012 2015 PricedifferenceUS$pertonne Stocks'000tonnes Stocks Diff over US Gulf • Large corn stocks were acquired through price supports at substantial cost • Now China has followed the path of, e.g., the EU in moving away from price supports and to more direct non-price support • This should allow Chinese corn prices eventually to settle at world market prices plus freight. This has weighed on cassava root prices in SE Asia
  28. 28. commoditia Wrap up
  29. 29. commoditia commoditia, 2016© What have we learned? • The flow of different types of carbohydrates around the world crucially affects the economics of cassava value chains • The best possible scenario (e.g. in Asia) is for a region to be deficit a feed carbohydrate (basically corn) and to have a high yielding local supply of cassava. This sucks value into the cassava supply chain • A more challenging environment is if a region is an exporter of carbohydrates but also produces cassava in competition with these. Then cassava must compete for both area and productivity with often high yielding crops such as corn
  30. 30. commoditia commoditia, 2016© simon@commoditia.com +44 (0)7930 520 595 For further information contact:

×