Food production and grain trade, Jan 2011
The International Grains Council (IGC) has released its Grain Market Report for 2011 January. The IGC said that world grains supplies are forecast to tighten in 2010-11 but the outlook is little changed from two months ago. World production is expected to decline by 3.8%, to 1,726m. tons: the wheat estimate is lifted on better than expected southern hemisphere crops but the maize total is cut.
By far the biggest fall in grains output was in drought-affected Russia, with big reductions too in the EU, the US, Kazakhstan and Ukraine. A further rise in world grains consumption is forecast in 2010-11, to 1,787m. tons. However, at 1.4%, the rise is flatter than in recent years. The expansion in industrial use has slowed markedly, especially in the US ethanol sector, although recent use there has been higher than anticipated. Total feed use will only rise moderately this year.
The forecast fall of 62m. tons in global carryover stocks mirrors the reduction in the major grain exporters, with big declines in Canada, the EU, Russia and the US. World trade in grains is expected to rise by 2m. tons, to 242m., only marginally more than before, with bigger imports by the EU and Russia expected to outweigh reductions in Near East and Far East Asia. Because of the fall of 29m. tons in Black Sea shipments, exports by Argentina, Australia, the EU and the US are expected to climb steeply.
IGC said that international grain and oilseed prices advanced strongly in December and again in January, with some values at their highest for two years. However, export prices remained below the peaks recorded early in 2008. While there has been little fundamental change in the overall supply and demand balance in the past two months, markets were driven higher by concerns about supplies of quality milling wheat and the tightening outlook for maize and soyabeans.
The influence of other commodities, including crude oil, also featured regularly on the major exchanges. For wheat, reports that the extremely wet conditions in eastern Australia would render at least one-third of the country’s large wheat crop unfit for flour milling were especially bullish. More recently, better prospects for US exports and a winter wheat acreage report showing a smaller than expected rise in Hard Red Winter wheat plantings further triggered buying.
IGC said that China was among several recent customers for Australian feed grade wheat. For maize, there were worries about a reduced official US carryover forecast as well as about whether plantings for the next crop would be sufficient to prevent stocks falling further in 2011-12. The impact of dryness, attributed to the La Niña event, on Argentina’s upcoming harvest added to the market’s nervousness. Similarly, despite quite ample current stocks, US soyabean prices moved higher, initially because of continued heavy demand from China but more recently due to a lower official US supply estimate and strength in crude oil. Rice export prices also increased, but while Thai values in late-December climbed to a ten-month peak, they subsequently fell back as the main crop harvest advanced. After mostly declining since June, ocean freight rates for grains firmed slightly in recent months, despite a further slide in the Capesize sector.
The US Department of Agriculture’s World Agricultural Supply and Demand Estimates (WASDE) for 2011 January has said that global 2010-11 wheat supplies are raised slightly this month as increased beginning stocks are mostly offset by lower foreign production. Beginning stocks for Argentina are up 0.9 million tons with upward revisions to 2008-09 and 2009-10 production estimates. Argentina production is also raised 0.5 million tons for 2010-11 as harvest results indicate higher-than-expected yields. Production in Brazil is raised 0.4 million tons as favorably dry harvest weather boosted yields for the 2010-11 crop. EU-27 production is raised 0.3 million tons based on the latest official estimates for Poland. More than offsetting these increases are reductions for Kazakhstan and Australia. Kazakhstan production is lowered 1.3 million tons based on the latest government reports. Australia production is lowered 0.5 million tons as heavy late-December rains and flooding further increased crop losses in Queensland.
According to WASDE 2011 January, world wheat imports and exports for 2010-11 are both raised slightly. South Korea imports are raised 0.4 million tons, mostly offsetting an expected reduction in corn imports. Imports are also raised 0.2 million tons each for Thailand and Vietnam based on the pace of shipments to date and the increased availability of feed quality wheat in Australia. Imports are lowered 0.5 million tons for EU-27 based on the slow pace of import licenses to date. Major shifts among exporters are projected as importers focus on U.S. supplies to meet their milling needs. Australia exports are reduced 1.5 million tons as quality problems limit export opportunities. Kazakhstan exports are reduced 1.0 million tons with lower supplies. While Argentina marketing-year (December-November) exports are raised 0.5 million tons, exports during the remainder of the July-June world trade year are expected to be lower based on the slow pace of government export licensing.
Global 2010-11 wheat consumption is projected 1.2 million tons lower, mostly reflecting reduced wheat feeding in EU-27, the United States, and Kazakhstan. Food use is also lowered for EU-27 and Pakistan. Partly offsetting are increases in feed use in South Korea, Thailand, and Vietnam, and higher expected residual loss in Australia with the rain-damaged crop. Global ending stocks are raised 1.3 million tons with increases for EU-27, Argentina, and Australia, more than offsetting the U.S. reduction.
WASDE 2011 January said that global 2010-11 rice production, consumption, trade and ending stocks are lowered slightly from a month ago. The decrease in global rice production is due primarily to a smaller crop in Egypt, which is down 0.5 million tons (-14%) to 3.1 million. Egypt’s area harvested in 2010-11 is reduced 19 percent from a month ago and is down 30 percent from the previous year. A reduction in the Egyptian government’s support of producer prices has discouraged farmers from planting rice. Additionally, the Egyptian government has imposed water restrictions thus reducing irrigation water availability. Furthermore, government restrictions have reduced exports. Global imports are increased slightly due primarily to increases for Indonesia and Turkey, but partially offset by a reduction for Egypt. Global exports are increased slightly due mostly to an increase for Thailand, partially offset by a decrease for Egypt. World ending stocks are projected at 94.4 million tons, down 0.4 million from last month and last year.