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IGC - Global grain trade to fall in 2010/11

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.
 
Poor harvest weather
Another feature is the difficult harvest weather in some countries, affecting milling wheat and malting barley quality.
 
US soybean prices partly mirrored the upturn in maize, but were also supported by concerns about South American crop prospects and continued heavy buying by China.  
 
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.
 
Futures fluctuate more
One measure of such volatility is the day-to-day change in futures values which 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.
 
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.
 
Global grain production down
World production in 2010/11 is forecast at 1,741million tonnes (MT), (1,787 MT), or 4 MT 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 use up
Grain consumption in 2010/11 is projected to increase by 0.6%, to 1,780 MT, 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.
 
Carry over stocks down
With global grains consumption expected to exceed output after three surplus years, global carryover stocks in 2010/11 are projected to fall by 39 MT, to 353 MT, 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 237 MT (239 MT), the total is 5 MT above the August forecast, following upward revisions for the EU, Russia and sub-Saharan Africa.
 
Exports lifted
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.
 
Source: International Grains Council
 

Dick Ziggers

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