34th North American and European Union Agricultural Conference

Session 3: Seeking Price Security in Volatile Markets

October 20, 2009

Lic. Enrique Domínguez LuceroConfederación de Porcicultores Mexicanos MEXICO

Seeking Price Security on High Volatile Markets

The correlation between the grain and soy markets,

The price correlation crude oil–corn in the past 12 months shows a correlation coefficient of 0.64%, with a R2 that equals 42%.

Crude oil prices also associated with the US dollar

Seeking Price Security on High Volatile Markets

Seeking Price Security on High Volatile Markets

Seeking Price Security on High Volatile Markets

US Farm Bill and or Energy Act as unilateral policy causes mayor crisis on Mexico:

• Dependence in corn for feed at 50% because competence in market price.

• Taking a 25% of corn for producing subsidized ethanol and soybean for bios fuel brings to broke the livestock industry in Mexico in the past two years

SOURCE OF VOLATILTY

Corn – Ethanol PerspectivesThe needs for renewable fuels

Grain Prices Impact Livestock Production Cycle

• Prices paid for feed doubled from 2006 to 2008, mainly due to higher corn and soy meal prices

• Feed prices has bean declined for 2009, but the the cost already for livestock industry was really bad and

• Limited or reduce demand for animal protein is coming worse and over supply by region bring us a new attention (other H1N1)

PRECIO PROMEDIO GRANO NACIONAL - CERDO EN PIE 06 - 09

1,000.0

2,000.0

3,000.0

4,000.0

5,000.0

6,000.0

7,000.0en

e-06

feb-

06m

ar-0

6ab

r-06

may

-06

jun-

06ju

l-06

ago-

06se

p-06

oct-0

6no

v-06

dic-

06en

e-07

feb-

07m

ar-0

7ab

r-07

may

-07

jun-

07ju

l-07

ago-

07se

p-07

oct-0

7no

v-07

dic-

07en

e-08

feb-

08m

ar-0

8ab

r-08

may

-08

jun-

08ju

l-08

ago-

08se

p-08

oct-0

8no

v-08

dic-

08en

e-09

feb-

09m

ar-0

9ab

r-09

may

-09

jun-

09ju

l-09

ago-

09se

p-09

$/TO

N

0

5

10

15

20

25

$/K

g.

MAIZ

SORGO

SOYA

CERDOEN PIE

Corn – Ethanol

Corn+Soybean=Animal Protein

Future prices driven by:

• Ethanol produce from corn, soybean? Or

• “Bussines as usual” (WTO ISSUES: Doha Round)

PRICE SECURITY UMBRELLA(limited)

1.Buying by Contract

2.Hedges (B&S)

3.Finance

4.Compensation

CONCLUSIONS

Volatility on commodities, by Agriculture or Energy Policy assumed by mayor players.

• Alternative source of energy will play a mayor rule on the next future.

• Financial Crisis brings us a new scenario about free market regulation and about…

• Doha as to be finished and go on!

G R A C I A S

www.porcimex.org

www.cna.org.mx