Swiss Trader Ameropa Bearish on Grains as Bumper Crops Persist

April 12, 2016 07:05 AM
Swiss Trader Ameropa Bearish on Grains as Bumper Crops Persist

Grain prices will continue to slide as the world is poised for another year of bumper crops and as the removal of export taxes in Argentina helps boost supplies, according to Swiss trader Ameropa AG.

There’s still “some way down" for prices, Jan Kadanik, the company’s chief executive officer, said in an interview Monday before the start of the Financial Times Commodities Global Summit in Lausanne, Switzerland. It would take one or two weather shocks in a major producing country such as the U.S., Russia or Brazil to turn the trend around, he said.

Agricultural commodities have fallen for three years, the longest streak in more than a decade, as bumper harvests filled silos and overwhelmed demand. The removal of export taxes for corn and wheat and a reduction of the levy on soybean shipments in Argentina will add to global stockpiles the International Grains Council estimates will stay near a 30-year high next season.

"I wouldn’t place my private money on wheat futures," Kadanik said. "So far, it looks like we are looking at a bumper crop."

Wheat traded in Chicago has dropped 4.8 percent this year, heading for a fourth annual decline, as corn prices remain little changed. The end of export taxes in Argentina means the South American nation will boost wheat output by more than 50 percent and corn by more than 30 percent in the 2016-17 season, according to Dan Basse, president of researcher AgResource Co. in Chicago.

Argentina Lift

The end of the restriction will put more pressure on prices of wheat than corn or soybeans as that’s where the curbs were the toughest, Kadanik said. The devaluation of Argentina’s currency will also make exporting farm commodities that fetch U.S. dollars more attractive, he said. The peso has fallen 39 percent against the dollar over the past year, the biggest decline among 24 emerging-market currencies tracked by Bloomberg.

Good Crops

Crops in Hungary, Romania, Serbia and Croatia, where Ameropa has operations, currently look “very nice," he said. While weather developments could still change that before the season starts in about July, there’s “nothing particularly negative" where the company has units as well as in Bulgaria, where it also buys a lot of grain, he said.

Ameropa, which trades 12 to 13 million metric tons of grains annually, is looking to invest in port and origination facilities in Serbia, Kadanik said, without naming potential takeover targets. The market in the Balkan nation is “big enough" and still not dominated by the big farm-commodities traders, he said.

The company is also building a terminal at the Romanian port of Constanta with warehousing capacity of 200,000 tons, which should be running by the end of next year, he said. Ameropa, which traded only about 3 million tons of grains in 2007, when Kadanik joined the company, is also in the process of selling its Agri-Negoce unit to France’s Axereal, he said. It’s no longer interested in disposing of its barley business Interbrau after talks with Vivescia failed.

“We tried in the past, but it’s not for sale anymore," he said, referring to Interbrau. “We reshuffled the company a little bit and now we are comfortable with it."

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