Cme Group Inc. · NASDAQ:CME
Cme — Investor Presentation (July 2008)
21 slides from Cme's investor presentation, Jul 11, 2008
Slide 1: Fundamental Factors Affecting Agricultural and Other Commodities
Fundamental Factors Affecting Agricultural and Other Commodities Research & Product Development Updated July 11, 2008
Slide 2: Outline
Outline • Review of key supply and demand factors affecting commodity markets • World stocks-to-use levels for corn, wheat and soybeans • Current events impacting corn, wheat and soybean prices • Impact of U.S. dollar depreciation on commodity prices • Global growth of agricultural futures market •
Slide 3: Highlights
Highlights • Our Markets are Working • Many Factors Affect Commodity Prices • Basic Supply and Demand Principles • Weather and disease limiting supply • Growing demand from developing countries • Higher input costs related to increasing energy prices • Falling U.S. dollar • Biofuel production increa
Slide 4: Agricultural Commodity Stocks Are Extremely Low
Agricultural Commodity Stocks Are Extremely Low World Current ratio versus the 10-year average ratio: Stocks-to-Use Ratio Corn at 13% vs. 22% 40% Wheat at 19% vs. 28% Soybean at 21% vs. 22% 35% Soybean Wheat Corn 30% 25% 21% 20% 19% 15% 13% 10% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Slide 5: Events Impacting Corn Prices Since June 2006
Events Impacting Corn Prices Since June 2006 Global supply concerns increase, as consumption Price rises faster than production. World stocks-to-use ratio at historical low in 2007 at 14.2% and $8.00 projected to decline further to 12.6% in 2008. Corn Price Prices stabilize due to 30 Day Battle for
Slide 6: Events Impacting Wheat Prices Since June 2006
Events Impacting Wheat Prices Since June 2006 Price $14.00 Australian crop cut almost in half for the second year in a row due to drought. $10.50 Late spring frost occurred in the U.S. Australian crop that damaged Wheat Price cut almost in half emerging crop. due to drought. 30 Day Average $7.00 Spr
Slide 7: Events Impacting Soybean Prices Since June 2006
Events Impacting Soybean Prices Since June 2006 Price Battle for 2008 acres and a very thin U.S. Wet and cool spring carry-out led prices to a historical high. $18.00 turning into a hot and dry Following harvest, summer led to increased prices continued to Soybean Price crop stress. In addition, $15
Slide 8: Weak U.S. Dollar is a Key Driver of Increasing Commodity Prices
Weak U.S. Dollar is a Key Driver of Increasing Commodity Prices Cents per Bushel 800 Corn Prices Cents per Bushel Wheat Prices 1400 700 1200 20% 600 1000 500 800 20% 400 600 300 400 200 200 Jan. 3, 2006 Jul.1, 2008 Jan. 3, 2006 Jul.1, 2008 Cents per Bushel 1600 Soybean Prices Nearby Corn Futures Nea
Slide 9: Index Fund Net Long Positions Have Decreased in Corn Futures Market
Index Fund Net Long Positions Have Decreased in Corn Futures Market Index Net Long (Short) Positions Nearby Price as % of OI Corn Cents per Bushel 70% 800 700 60% Though index fund 50% 600 positions as a percentage of open 500 40% interest declined 400 from 27% to 21% 30% 27% over the last two 300 y
Slide 10: Index Fund Net Long Positions Have Decreased in Wheat Futures Market
Index Fund Net Long Positions Have Decreased in Wheat Futures Market Index Net Long (Short) Positions Nearby Price as % of OI Wheat Cents per Bushel 100% 1,400 90% 1,200 80% Though index fund 1,000 70% positions as a percentage of open 60% 800 interest declined 49% from 49% to 41% 50% over the last
Slide 11: Index Fund Net Long Positions Have Remained Steady in Soybean Futures Market
Index Fund Net Long Positions Have Remained Steady in Soybean Futures Market Index Net Long (Short) Positions Nearby Price as % of OI Soybeans Cents per Bushel 70% 1,800 1,600 60% 1,400 Index fund positions 50% as a percentage of 1,200 open interest 40% 1,000 increased slightly from 24% to 27% 800 3
Slide 12: Changes in Non-Commercial Positions in Corn Have Low Correlations to Price Changes
Changes in Non-Commercial Positions in Corn Have Low Correlations to Price Changes Corn Nearby Price Net Long (Short) 40% Cents per Bushel 800 35% 700 Non-commercial 30% 600 net long positions decreased as a 25% 500 percent of open interest even as 20% 400 the corn market has rallied. The 15% 300 co
Slide 13: Changes in Non-Commercial Positions in Wheat Have Low Correlations to Price Changes
Changes in Non-Commercial Positions in Wheat Have Low Correlations to Price Changes Nearby Price Net Long (Short) Wheat Cents per Bushel 25% 1200 Net positions for 20% 1000 non-commercial participants have 15% changed several 800 times over this period from being 10% net long to net 600 short. The c
Slide 14: Changes in Non-Commercial Positions in Soybeans Have Low Correlations to Price Changes
Changes in Non-Commercial Positions in Soybeans Have Low Correlations to Price Changes Nearby Price Net Long (Short) Soybeans Cents per Bushel 50% 1800 45% 1600 Non-commercial 40% 1400 participants 35% continue to hold 1200 30% net long positions 1000 in soybeans. The 25% correlation 800 20% between
Slide 15: Prices in Commodity Markets with Little or No Speculator Participation Also Have Increased
Prices in Commodity Markets with Little or No Speculator Participation Also Have Increased • Prices for commodities - that do not have speculator participation - also are on the rise as demand outpaces supply © 2008 CME Group Inc. All rights reserved Source: CME Group and Bloomberg 15
Slide 16: Rough Rice Prices Increase as Consumption Outpaces Production
Rough Rice Prices Increase as Consumption Outpaces Production $25.00 Rough Rice prices have $23.00 increased 188% since the Adverse weather leading to short crop and disease issues first of 2005 and 42% since in major rice producing countries around the world. $21.00 the beginning of 2008 $19.00 Pri
Slide 17: Over Regulating US Commodity Markets Will Encourage Flow to OTC and Overseas
Over Regulating US Commodity Markets Will Encourage Flow to the Already Active OTC Markets and Overseas Exchanges • 65% growth in OTC commodities in two years while overseas exchange traded commodity market is now 58% of global annual volume • OTC commodity market is estimated at 5 times the size of
Slide 18: Volatility and Margin Levels Have Increased
Volatility Volatility 0% 10% 20% 30% 40% 50% 60% 0% 10% 20% 30% 40% 50% Jan-03 Jan-03 Apr-03 A pr-03 Jul-03 Jul-0 3 Oct-03 Oct-03 Jan-04 Jan-04 Apr-04 A pr-04 Jul-04 Jul-0 4 Oct-04 Oct-04 Jan-05 Jan-05 Apr-05 A pr-05 Jul-05 Jul-0 5 Oct-05 Oct-05 © 2008 CME Group Inc. All rights reserved Corn Jan-06
Slide 19: Margin Levels Have Already Been Increased
Margin Levels Have Already Been Increased $2,500 9% Corn • Margins as a % of contract value Margin as a % of Contract Value 8% $2,000 increased 21% in corn, 99% in wheat 7% and 79% in soybeans since Jan ‘03. 6% $1,500 5% • Currently, margins as a % of contract Margin 4% value are 5.5% in corn, 14.3%
Slide 20: Speculative Position Limits for Ag Markets Have Not Increased Since December 2005
Speculative Position Limits for Ag Markets Have Not Increased Since December 2005 • Speculative position limits are federally mandated in CFTC Reg 150.2. They are determined by a formula and have not been increased since Dec 20051. • Spot Month speculative limits have not changed during this time. T
Slide 21: Summary
Summary • When basic supply and demand principles are studied, it is clear that many factors affect commodity prices • There is no evidence that the participation of non-commercials is adversely affecting grain and oilseed markets – Speculators help form efficient, liquid markets – Speculators have