Another grain trade shake-up

Global grain trade is experiencing another upheaval. Dramatic reductions in recent US and Black Sea region harvests have sharply limited the volume of grain supplies available. Together with the resulting higher international prices, this abrupt change is weakening import demand in many countries. Patterns of seaborne trade and bulk carrier employment are being greatly affected.
PLUMMETING BLACK SEA EXPORTS
After suffering a huge setback in 2010/11, Black Sea suppliers bounced back in the past twelve months. Russia, Ukraine and Kazakhstan achieved a record high 60.1mt (million tonnes) of wheat and coarse grains exports in 2011/12, comprising over one- fifth of the annual world total. This notable performance is likely to be reversed by the recent summer’s poor harvest.
Excessively hot and dry weather through the growing season severely damaged crop yields in many areas. The summer 2012 grain harvest in the three countries combined is estimated at 122mt, a very large 50mt or 29% decline compared with 172mt last year. Production in Ukraine and Russia was 24–26% lower, while Kazakhstan’s output was more than halved.
The downturn in Russia’s and Ukraine’s production is especially significant for the world market, because of their key roles among exporters. In Russia wheat, which provides the largest part of foreign grain sales, was adversely affected by drought in southern producing areas. Ukraine’s wheat crop was also affected, but the country’s corn output, providing a large proportion of grain exports, benefited from a higher planted area which partially offset yield losses.
FALLING US EXPORTS
A devastating drought in the USA this year has greatly restricted grain output and also cut soyabeans production. In 2011/12 US exports of wheat plus corn and other coarse grains comprised well
over one-quarter of the world total, at 72.5mt. In the current year a sizeable decline is forecast, but the market share may be similar because global trade is likely to be proportionately lower.
Although the US crop growing season began well, extreme heat and drought were features during the 2012 summer period. However, wheat, which is mostly harvested earlier than other crops, experienced generally favourable weather resulting in increased production. The much larger corn crop was damaged by insufficient rainfall and abnormally high temperatures, cutting output by over one-fifth.
Availability of US grain for foreign sales in 2012/13 consequently has tightened. Wheat exports are still expected to rise, by about 10%, reaching 30.8mt but corn and other coarse grains exports may be 28% lower at 32.3mt. The overall total, according to the IGC, could be 13% down at 63.1mt.
GLOBAL GRAIN IMPORT DEMAND HIT
During the past twelve months a strong surge in global wheat and coarse grains trade unfolded. The total rose by 28mt (11%), reaching 270mt. Bulk carrier employment, and activity in many grain loading and discharging ports around the world, was boosted. This progress is set to be substantially reversed in 2012/13, when IGC estimates suggest a 19mt (7%) reduction to 251.0mt could emerge.
Import demand probably will be widely affected by tighter supplies and higher prices, while other factors are evident as well. In several instances improved domestic production of grain within importing countries is enabling foreign purchases to be reduced.
A prospective reduction in China’s grain imports can be related primarily to slightly better domestic output this summer. The country’s 2012 estimated wheat and coarse grains harvest is about 7mt (2%) higher, at 326mt. Although consumption for both food and livestock feed is on a solidly rising trend, imports in 2012/13 may be almost halved to 5mt.