Grain markets and trade for the last third of 2010
The International Grains Council released its monthly Grain Market Report on 2010 September 23. In this report the IGC said that global grain prices advanced again in September, those for wheat having returned to the peaks reached in early August. While the initial trigger for the steep upturn in wheat and barley values in recent months was the fast deteriorating outlook for these crops in the Black Sea region, much of the more recent bullishness is attributed to concerns about smaller than anticipated US maize (corn) yields, as well as substantial new grain buying activity by importers.
The market commentary of the report said: “Another feature is the difficult harvest weather in some countries, affecting milling wheat and malting barley quality. US soyabean prices partly mirrored the upturn in maize, but were also supported by concerns about South American crop prospects and continued heavy buying by China. Asian rice prices moved higher, largely because of the impact of the flood emergency in Pakistan. The recent surge in world grain prices, while not on the same scale as in 2007-08, again prompted concerns about its impact on global food prices as well as the increased volatility in the major commodity exchanges. One measure of such volatility is the day-to-day change in futures values which, even allowing for the events of three years ago, is significantly greater than earlier in the decade. Given the generally adequate supply situation for wheat and other grains, despite recent crop concerns, many have expressed surprise at the ferocity of recent market responses.”
Grains outlook for 2010-11 – This year’s sharply reduced crops in the CIS and Europe will contribute to a fall of 1.2% in global grain supplies, reversing three successive years of stock building. World production in 2010-11 is forecast at 1,741m. tons, (1,787m.), 4m. below the previous month’s projection. This follows downward revisions, for maize in the US and wheat in the CIS region, more than offsetting improved prospects in Australia. Significant reductions in wheat and barley output will outweigh another rise in maize, although prospects for the latter crop are downgraded slightly. The difficult growing and harvesting conditions in parts of North America, Europe and the CIS have affected supplies of high-quality milling wheat and malting barley.
Grain consumption in 2010-11 is projected to increase by 0.6%, to 1,780m. tons, but this represents a marked slowing compared with previous years as the overall rate of expansion in industrial use, especially for ethanol in the US, is scaled back. In the animal feed sector, maize use is expected to be boosted, while that of wheat will likely hold steady, but this will be more than offset by reductions in barley and other grains. With global grains consumption expected to exceed output after three surplus years, global carryover stocks in 2010-11 are projected to fall by 39m. tons, to 353m., mostly because of declines in the world’s exporters, notably Russia and the US. However, the total carryover will remain significantly above the lows seen earlier in the past decade.
Global trade in grains is expected to fall in 2010-11, mainly because of reduced wheat shipments. At 237m. tons (239m.), the total is 5m. above the August forecast, following upward revisions for the EU, Russia and sub-Saharan Africa. Export forecasts for several countries, including Australia, Canada and the US, have been lifted, with total availabilities still seen as ample in a year which will see a huge shift in trade away from the drought-afflicted Black Sea region. In all, wheat and coarse grains shipments from Kazakhstan, Russia and Ukraine will fall by 27m. tons compared with 2009-10, with around half of this shortfall likely to be sourced in the United States.
The US Department of Agriculture’s ‘Grain: World Markets and Trade’ September 2010 report is also out. It noted wheat trade changes in 2010-11 in this way:
Selected Exporters: Australia is down 500,000 tons to 15.5 million based on logistical constraints. Canada is boosted 2.0 million tons to 17.5 million due to larger exportable supplies. EU is lowered 3.0 million tons to 21.0 million on reduced exportable supplies and quality concerns, particularly for German wheat. Iran is raised 450,000 tons to 500,000 due to greater exportable supplies and opportunities opened by reduced supplies in Russia. Kazakhstan is up 500,000 tons to 6.5 million on higher Russian import demand. Russia is raised 500,000 tons to 3.5 million based on exports shipped before the ban. United States is boosted 1.0 million tons to 34.0 million on strong demand, particularly for higher quality wheat.
Selected Importers: Nigeria is up 400,000 tons to 4.0 million due to expected consumption growth. Russia is raised 1.4 million tons to 2.0 million due to increased demand for milling wheat caused by drought-reduced production.
The USDA report recorded trade changes in 2009-10 as “large late-season adjustments reflect reported shipments”. These are – Selected Exporters: Canada is up 500,000 tons to 19.0 million. The United Arab Emirates is raised 450,000 tons to 950,000. Selected Importers: Indonesia is down 450,000 tons to 5.4 million. Iran is up 600,000 tons to 3.6 million. Turkey is lowered 300,000 tons to 3.2 million.
Rice world markets and trade – Despite weather problems in China and Pakistan, global crop prospects remain excellent said the USDA report. Record world production is expected to not only meet rising demand but also maintain global stocks at the highest level since 2004.
Prices – though quotes from all origins are up somewhat from last month, Vietnam’s increase is the most dramatic. With 2010 contracts already at a record 6.2 million tons, Vietnam raised the minimum export price of 5% broken to $450 per ton FOB, essentially halting new sales and, for the first time, pushing above higher-quality U.S. #2/4 quotes ($445 per ton FOB). Vietnamese quotes are now only $30 below Thai 100B quotes, a stark departure from the $120 spread just 2 months ago. As sales stall in Vietnam, Thai sales are expected to increase as the government finally releases intervention stocks. U.S. long-grain sales are also expected to pick up on newfound competitiveness and a record crop. By contrast, the medium-grain trade is somewhat on hold as the California crop has yet to be harvested. In addition, many tenders in major markets have yet to be announced.
The USDA report forecast trade changes for 2011. These are – Pakistan’s exports are slashed 750,000 tons to 2.9 million as floods have reduced the crop and damaged infrastructure. Afghanistan’s imports are reduced 100,000 tons to 200,000, as Pakistan is by far the largest supplier due to proximity and relative prices. Iran’s imports are cut 300,000 tons to 1.2 million on the expectation that imports from Pakistan will fall. Thailand’s exports are down 500,000 tons to 9.0 million because the government stock release is happening much later in the year than originally anticipated. Vietnam’s exports are raised 450,000 tons to a record 6.2 million on contracts to date. By contrast, imports are dropped 100,000 tons to 400,000 on a slowdown of border trade with Cambodia. Indonesia’s imports are doubled to 500,000 tons as relatively high domestic prices have caused a surge in trade with neighboring countries. Iran’s imports are dropped 150,000 tons to 1.2 million on the pace of shipments. Nigeria’s imports are lowered 100,000 tons to 1.7 million on slower-than-expected imports from Thailand.