Download BFAP July 2007

Outlook on Prices
Cattleman’s Conference
March 08
Benoni
Introduction
• Overview of BFAP methodology
• Baseline projections
– World outlook
– SA outlook
• Future refinement
• Scenario analysis
• Conclusion
BFAP family
CGE model (Provide)
FAPRI’s global models
BFAP AGGREGATE MODEL
Livestock
Biofuels
Field Crops
Population
GDP Growth
Production
Inputs
Interest
Rates
Horticulture
World Prices
BFAP SECTOR LEVEL
MODEL
• Exchange
• Rate
Weather
Policies
BFAP FARM LEVEL MODEL
Which industries?
Cereals
Oilseeds
Livestock
& Dairy
Horticulture
& Viticulture
Other
White Maize
Sunflowers
Chicken
Wine
Petrol
Yellow Maize
Sunflower cake
Beef
Table Grapes
Diesel
Wheat
Soya beans
Mutton
Apples
Ethanol
Sorghum
Soya cake
Wool
Potatoes
Biodiesel
Barley
Canola
Pork
Sugar
DDG
Eggs
Dairy
Land
reform
The task of projections
The perfect storm
World price changes: 2007 - 2008
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
Maize
Wheat
Soybean
Sunflower
Beef
What is a Baseline?
• Baseline projections generated under
combination of assumptions of the
exogenous variables
• The baseline can be regarded as one
possible scenario
• All existing policies - Including new
biofuel strategy
• Focus on feed and beef
Population
Total Population of SA
50
Millions
48
46
44
42
Source: Global Insight,
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
40
LSM segments
25
20
15
10
5
% of SA Adult population
LSM10
LSM9
LSM8
LSM7
LSM6
LSM5
LSM4
LSM3
LSM2
0
Monthly Income (R'000)
16
14
12
10
8
6
4
2
0
LSM1
Adult population (%)
The LSM Segments
Average monthly income (R'000)
Source: South African Advertising Research foundation
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
SA cents / US $
Exchange rate
Exchange Rate
1100
1000
900
800
700
600
500
World market – Fuel
1.0
0
0.0
US $ / gallon
20
2012
2.0
2011
40
2010
3.0
2009
60
2008
4.0
2007
80
2006
5.0
2005
100
2004
6.0
2003
120
2002
US $ / bbl
World Ethanol and Oil prices
US $/barrel Persian Gulf : F.O.B. Imported Crude Oil
US$/gallon World ethanol price (BRA anhydrous)
World biodiesel price Central Europe)
World market - Maize
170,000
250
160,000
200
150,000
150
140,000
100
130,000
50
120,000
0
99/00
02/03
05/06
08/09
Area Harvested
11/12
14/15
Corn (FOB Gulf)
17/18
$/ton
Thousand ha
World Maize Area and US FOB gulf price
World market – Soybeans
World Soybean area and CIF Rotterdam price
600
500
110,000
400
90,000
300
200
70,000
100
50,000
0
97/98
00/01
03/04
06/07
Area Harvested
09/10
12/13
15/16
CIF Rotterdam
S/ton
Thousand tons
130,000
SA Maize market
SA maize market
Yellow maize prices
3500.0
3000.0
R/ton
2500.0
2000.0
1500.0
1000.0
500.0
0.0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Import parity Durban
SAFEX
Export parity africa
SA beef market
500
200
0
Production
Average carcass price
Domestic use
c/kg
300
2012
1000
2011
400
2010
1500
2009
500
2008
2000
2007
600
2006
2500
2005
700
2004
3000
2003
800
2002
Thousand tons
Beef Prodution,Utilisation and Price
SA calf & beef prices
Calf and beef prices
3000.0
2500.0
c/kg
2000.0
1500.0
1000.0
500.0
0.0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Beef average auction price
Calf average auction price
Price ratios
Beef and calf - maize price ratios
25.0
20.0
15.0
10.0
5.0
0.0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Beef: maize price ratio
Calf: maize price ratio
Future refinements
• Discrepancy in the databases
• Improvement of model
– Drivers - beef price: Demand and Supply
– Drivers - calf price: Carcass price lagged 4
years, current carcass price, maize/chop
prices
• Price formation – the need for a future
market to hedge
• Better understanding of informal sector
So what?
How do I use the baseline?
• Scenario analyses = “What if” shocks
– shock the model and understand the changes
• Take risk and uncertainty into account
– Risk can be modelled
– We need to rely on scenario planning to capture
uncertainty
Economy growth shock
35%
decline
Beef price outlook: Economy shock
4000.0
c/kg
3000.0
2000.0
1000.0
0.0
2007
2008
2009
2010
Beef price: Baseline
2011
2012
2013
Beef price: Scenario
2014
2015
Economy growth shock
Beef:Maize price ratio outlook
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
2007
2008
2009
2010
2011
Beef: maize price ratio: Baseline
2012
2013
2014
2015
Beef: maize price ratio: Scenario
2007/08 Exchange rate: R/USD
Exchange rate - R/USD 2008
720.00
740.00
760.00
780.00
800.00
820.00
840.00
2007/08 SAFEX White maize price
SAFEX white maize price 2008
700.00
900.00
1100.00
1300.00
1500.00
1700.00
2007/08 SA Beef Auction price
Beef auction price- A2/A3 c/kg carcass 2008
1850.00
1900.00
1950.00
2000.00
2050.00
2100.00