Grain market report, February 2011
The International Grains Council has released its monthly grain market report, covering the movements in and events of February 2011. Here are the main observations and forecasts.
Outlook for 2011-12: Although forecasts of production and consumption are tentative at this time, global wheat supply and demand is projected to be broadly in balance in 2011-12. Strong prices will boost plantings in a number of countries in 2011, the global area forecast to increase by 3%, to 224m. ha., the largest since 1998. Although there are concerns about crop prospects in some major producers, world production in 2011 is forecast to increase by 24m. tons, to 672m., second only to the 2008 record.
With 2010-11 southern hemisphere maize harvests only just underway and planting intentions for the next crop still uncertain, forecasts for 2011-12 are largely nominal. Given initial planted area assumptions and, assuming trend yields, larger maize harvests are forecast in several key producers, including the US and China. World production is expected to set a new record but, unless yields are exceptionally high, a second consecutive drop in world supplies is projected. Based on underlying strong demand, maize availabilities are projected to remain tight, with closing stocks set to fall for a third successive year.
Commentary: Grain and oilseed prices continued their upward march in early February, with some values nearing the peaks seen in 2008. However, in renewed day-to-day volatility, markets then fell back sharply, partly on concerns about the impact of political turmoil in parts of North Africa and Near East Asia. There was little fundamental change in this year’s overall global supply and demand situation, although there were still uncertainties about the final outcome of ongoing maize and soyabean harvests in the southern hemisphere, as well as prospects for 2011-12 crops.
In wheat markets, tightening milling grade availabilities and heavy international buying, including of feed wheat, spurred further substantial price gains early in the month, while worries about winter wheat crops in the US and China also featured. Several countries announced they would reduce or remove import duties. In the second half of February, nearly all earlier gains were reversed as the political unrest in some countries triggered a wave of selling in commodity futures. While maize (corn) prices also fell back somewhat, they still registered significant net gains. These reflected more fundamental future supply concerns, with evidence of continued heavy industrial and feed demand and speculation about the additional plantings required in the US to prevent a further decline in stocks.
In contrast, oilseed prices registered a sharp fall despite initial strength, with markets also noting the improved crop prospects in South America. Trends in international rice prices were mixed in the past month, export values in Thailand firming somewhat while those in Vietnam falling back as the main harvest gathered pace. Dry bulk ocean freight markets, especially in the non-grain sector, initially declined further due to excess capacity, but then displayed a firmer trend, with higher bunker fuel prices also a factor.
Grains supply and demand in 2010-11: The latest assessment of the global grain situation in 2010-11 shows little overall change from last month. Mainly due to revisions to the southern hemisphere crop estimates there is a 2m. ton increase in the world grain production estimate for 2010-11, to 1,728m. tons (1,793m.). However, this is accompanied by an increase of 3m. tons in the consumption forecast, mostly because of higher than anticipated use of maize for ethanol (in the US) and of wheat for feed. Total consumption of grains is now placed at 1,790m. tons, up from 1,761m. in 2009-10, therefore exceeding output by 62m. tons. This is reflected in a drop in stocks at the end of 2010-11 which, at 341m. tons, will be the smallest since 2007-08.
Wheat: World wheat production in 2010-11 is placed only marginally higher than before, at 648m. tons, with an increase in the estimate for Argentina balanced by a reduction for Australia. The forecast of consumption is almost unchanged, at 661m. tons (649m.), as a larger feed use estimate is offset by smaller figures for food and industrial use. Feeding of wheat is being boosted by competitive prices relative to maize and by ample lower-grade export availabilities in Australia and Canada. Strong export demand for these supplies contributes to an increased forecast of world trade, up by 0.9m. tons, to 123.6m. The forecast of world wheat stocks at the end of 2010-11 is unchanged from last month, at 185m. tons, down by 13m. from the start of the season.
Maize: World maize production in 2010 is forecast at 811m. tons, 2m. higher than last month but down 2m. from the previous year’s record. Yield prospects improved in Brazil but declined in Argentina and South Africa. The consumption forecast is raised by 3m. tons, to a record 845m., some 30m. higher than last year. Industrial use is up 2m. tons from before, reflecting increased demand from US ethanol and HFCS manufacturers. World closing stocks are forecast to fall by 22%, to a four-year low of 119m. tons. US carryovers are placed at just 17.1m. tons (43.4m.), lowering the stocks-to-use ratio to 5%. Global trade (July-June) is forecast to increase by 8% to 93m. tons.
Rice: At 450m. tons, the forecast of global rice production in 2010-11 is placed slightly lower than in January, but is still 10m. higher than in the previous year, following bigger crops in India and China. Increased use in those countries is expected to result in a 2% rise in consumption, to an all-time high of 447m. tons, while the larger global outturn will also enable an increase in ending stocks, to 96.9m. (93.9m.). At 30.5m. tons, global rice trade in calendar 2011 is forecast to expand by around 1%.