Maria Cappuccio 

AMPLE SUPPLIES TO LIMIT UPSIDE PRICE POTENTIAL IN 2018
In the latest assessment of the global economy the International Monetary Fund (IMF) confirmed that last year, more trade, investment and faster-than-expected growth in China and most of the G7 countries, which is to remain stable over the next few years, should help boost demand. The IMF raised its growth forecasts for the global economy to 3.9 percent for 2018 and 2019, the strongest expansion since 2011.

In global grain and oilseed markets, production has outpaced consumption for many grains and oilseeds over the last four years. Overall trends for the three major crops in 2018/19, point to only a modest decline in wheat production with potentially larger output for coarse grains and soybeans. The combination of rising wheat stocks, relative to use, approaching record highs-and continuing large global production, is expected to limit upside potential for prices although an uptick in demand is expected relative to production in the new season. Longer-term the USDA projects a moderate rise in prices, reflecting growth in global demand for agricultural products and continued biofuel feedstock demand.  
 

WHEAT OUTPUT FORECAST LOWER IN 2018
The International Grains Council (IGC) forecast a reduction in the global wheat area to 217.9/ha the lowest in six years, due to unfavourable weather conditions, experienced in India, Morocco, Russia and parts of the EU only partially offset by increased plantings in the US and Canada, with global wheat output projected at 741mt (million tonnes), still a substantial crop, albeit some16mt below last year.  

NORTH AMERICAN WHEAT ACREAGE TO EXPAND
With winter wheat seedings for 2018 essentially flat, current price strength in spring wheat suggests some expanded area in the Northern Plains, with the domestic harvest forecast at 50mt. Recognizing some considerable setback from the dry conditions affecting winter wheat crops in major growing areas in the southern Plains, with wheat prices to rise modestly to $4.70/bu and slightly above last year. Canadian plantings are also anticipated to rise helped by a more competitive currency

EU WHEAT OUTPUT PROJECTED LOWER

Several parts of Europe recorded a rain deficit this year, but this does not represent an immediate concern for crops according to the EU’s Monitoring Agricultural Resources (Mars), but the possibility of a cold-snap and a plunge in temperatures below –12° Celsius may threaten large parts of Europe where crops have not acclimatized sufficiently, particularly in Hungary, Romania, Bulgaria and the Iberian Peninsula. EU winter wheat crop is forecast lower at 142mt.

FEWER PLANTINGS, SCANT RAINFALL TO REDUCE INDIA’S WHEAT CROP
India’s wheat crop is forecast to fall to 92mt in 2018. Fewer plantings and lack of adequate rain is expected to cut India’s wheat output to 92mt in 2018/19 with imports expected to double to 4mt according to the IGC.

RISE IN WHEAT PLANTINGS BUOYED BY EXPORTS
Argentina’s wheat plantings are expected to rise in 2018/19 buoyed by a record export campaign. On the back of a large wheat harvest, low-priced Argentine sup- plies are challenging US exports not only in Brazil and Central and South American but also in other markets including, Sub- Saharan Africa and Southeast Asia.

RECORD WHEAT CROP BOOSTS SUPPLIES

Boosted by a huge crop in Russia, India and better crops in the EU and Turkey offset the steep fall in US production, with global wheat output forecast at a record 758mt in 2017/18.

STRONG GLOBAL GROWTH PROPELS TRADE TO 184MT
Consumption growth especially for food/industry and feed in developing countries has pushed global trade to a record 184mt, the top importers for wheat in 2017/18 include, Indonesia, Egypt, Iraq, Bangladesh and the US. In the current marketing year, Indonesia has surpassed Egypt as the largest single wheat buyer. Imports are forecast to rise by 2.5mt to 12.5mt, mostly in response to growing food and feed needs as population/incomes rise, and diets move towards western trends for bread, noodles, poultry and aquaculture products. Additionally, importing low- quality milling wheat for use in feed rations, helps feed millers circumvent the government’s ban on imports of corn and feed wheat.

BLACK SEA WHEAT DOMINATES TRADE

Russia and other Black Sea countries continue to dominate global trade with offers $50–60/t below their rivals and increasing market share at the expense of other major exporters. Russian wheat exports are forecast at 36mt in 2017/18 and together with the Ukraine 17mt and

Kazakhstan 7.5mt, Black Sea exports total almost 61mt, one-third of the global wheat trade. Record wheat production, better infrastructure and transportation subsidies have improved Russia’s competitive edge, reflected in Egypt’s GASC tender (2 February 2018) for 180,000/t wheat at prices $202–204/t FOB (free on board) basis.

Drought in Argentina and in the southern US Plains, robust export demand contributed to price gains in some countries. CBOT (Chicago Board of Trade) May 2018 wheat contract closed up at $4.642/bu ($170.55/t), Paris May contract milling wheat E164.50/t ($202.24), UK May contract feed wheat £139.25/t ($194.50/t) (23 February 2017)

LARGER CORN, BARLEY AND SORGHUM IN 2018/19
USDA forecast a modest increase in US corn plantings c.90m/acres and a crop of c.366mt with pressure from soybeans expected to impact corn and other soybean acreage and with a rebound in South America’s, likely to boost the global corn output higher in 2018/19. For other coarse grains, barley and sorghum lower inventories and improved profitability point to above-average global harvest. US corn output due to lower yields is anticipated to fall to c.366mt, with a small increase in domestic consumption and fewer exports of 48mt, US corn stocks are expected to close down to 58mt.

DEMAND FOR COARSE GRAINS OUTPACES SUPPLY IN 2017/18

The global coarse grain harvest is forecast at 1.32bn/t in 2017/18, some 42mt below last season, due to a reduced corn crop and smaller barley and sorghum output. Overall demand is expected to outpace supply for the first time in five years. While food/industry use is expected to contract by over 17mt to 539mt, demand for feed use expected to rise in several regions by16mt to 816mt, with global trade forecast at a record 190mt.  

CORN OUTPUT DROPS IN MAJOR EXPORTERS
Global corn production is forecast lower at 1.042bn/t down by 34mt in 2017/18 from last season. Lower crops in the US 371mt, Ukraine 24mt, China 216mt and a significant fall in South America, while drought conditions have sharply cut corn output in Argentina from 42mt to c.35–37mt, with some estimates as low as 30mt. In Brazil the safrinha corn crop, which usually powers exports, handicapped by harvest overrun and dry weather in the south-preliminary crop estimates have been revised down c.88mt.

CORN DEMAND OUTPACES SUPPLY

Strong demand for corn at 1.068bn/t, is set to outpace supply by 42mt, while food and industry use is expected to contract by over 11mt to 418mt; feed use is expected to rise by almost 19mt to 651mt, especially in China, US, Mexico, Egypt,Vietnam, Saudi Arabia and several other countries, boosting global trade, to rise by 10mt to 152mt in 2017/18. With the downturn in South American crops, prices are expected to remain competitive. Brisk sales of US corn lifted exports to 52mt, while Argentina expects to export near 27mt, Brazil 34mt and Ukraine 20mt.

LOWER CORN STOCKS IN MAJOR
EXPORTERS
Global corn stocks expected to fall for the first time in seven years to 230mt mostly in China as it continues to dismantle the mountain of corn stocks. The IGC made an upward revision in January to China’s corn stocks from over 76mt to almost 191mt, by the end of 2017/18. Excluding China, corn stocks held in the major exporting countries are forecast at 76mt and much lower if estimates for South America are confirmed.

Rising demand and smaller supplies than anticipated strengthened corn prices to a record high in export markets — corn US 3YC FOB (Gulf) $177/t (26 February 2018) and on Futures Markets CBOT May Corn contract closed up at $3.762/bu (26 February 2018).

ROBUST DEMAND SUPPORTS UPTURN IN BARLEY
Firm demand in Saudi Arabia, Iran, Japan and China and with barley prices, unusually above those for corn for some time, global barley output is expected to rise in 2018/19 in the EU, Canada, CIS countries and Australia.

Reduced output in 2017/18 in the major producers, partially offset by larger Russian and Moroccan crops, cut the global barley crop to 142mt. Fewer imports into China 6.5mt, Iran 1.9mt, modest increase in Saudi Arabia 8.5mt reduced global trade to 27mt, with stocks forecast at a record low of 18mt. Saudi Arabia’s state grain buyer (Sago), purchased 960,000/t of barley at an average price of $243.47/t from Australia, North/South America, the EU and the Black Sea.

SORGHUM OUTPUT TO RISE IN 2018/19

Global sorghum crop to expand supported by demand and firm prices, that continue, like barley, to be at a significant premium to corn. Smaller crops in the US, Sudan and Nigeria, reduced output to 9mt in 2017/18, with consumption down to 59mt, mostly in the US and Sudan. Trade increased to over 8mt, on increased exports to China 6mt, with stocks reduced to 4mt. Prices strengthened at export ports-Sorghum FOB Nola (April) $204.61/t, (23 February 2018)

US SOYBEAN ACREAGE TO RISE IN 2018/19

With a slew of new estimates USDA forecasts soybean acreage at 90m/acres (89.5m/acres harvested), crop output at 118mt (4.320m/bu), stocks by the end of  2018/19 expected to rise from 9mt to 12.5mt (460m/bu) and slightly lower prices $9.25/bu for next season, with large US stocks expected to hold prices in check. According to Todd Hubbs Dept. of Agricultural and Consumer Economics Illinois, unless a significant increase in soybean consumption (higher exports and strong crush levels) or, a fall in output occurs, then a drop in soybean prices $9–9.20/bu is unavoidable. Longer term, USDA expects the US soybean area to match or exceed the corn area for much of the next decade supported by import demand from China, the expansion of trade in soybeans, to continue to put pressure on corn, but more likely on other crop areas too.

CHINA TO IMPORT 100MT SOYBEAN IN 2018/19
Rising global demand, along with a decline in the South American harvest, is expected to ease competitive pressures in the current season; although a rebound in South American output will likely support increased exports in 2018/19. Global trade will be driven by China, imports expected to exceed 100mt, with continued demand growth in the rest of Asia, Middle East and North Africa.

GLOBAL SOYBEAN CROP LOWER IN 2017/18
USDA forecast global oilseed production for 2017/18 at 579mt, a slightly lower soybean output 347mt and sunflower seed partly offset by higher output for cottonseed, ground-nuts, palm kernel, rapeseed and copra. Strong demand for soybeans in China, Japan,Thailand, Pakistan, Egypt and Mexico expected to boost trade above176mt in 2017/18, with a rise in crushings on robust demand for meal for feed use. Stocks are forecast to fall by the end of 2017/18.

SHARP FALL IN ARGENTINA’S SOYBEAN OUTPUT IN 2017/18
Record soybean crops for the US 120mt and Brazil 118mt, but drought in Argentina — the worst in ten years — is expected to slash output. The Rosario Grains Exchange revised its forecast to 46.5mt while private analysts peg the crop as low as 40mt well

below USDA’s 54mt; sunflower seed output is also expected to be adversely affected. Elsewhere, soybean forecast are lower for Paraguay, Bolivia, India and Ukraine.

DROUGHT SUPPORTS SOARING MEAL VALUES
Argentina is the largest producer and exporter of soybean meal/oil on the global market, the persistent drought and the declining crop conditions since the beginning of February, strengthened values on CBOT Futures market — SBM May 2018 contract closed up at $380.6/t (Feb 22’18). Soybean meal trade forecast to expand in 2018/19, with lower exports anticipated from Argentina and some other countries, US exports are forecast to rise from 11mt to 12.4mt in 2018/19.

Global oilseed crushings have increased with meal production to rise to 334mt in 2017/18, supported by strong demand for proteins in several countries. Despite a period of oversupply and low prices the prospect of a growing world population, nearing eight billion-expected to drive demand for proteins, like meal-fed beef, pork and aquaculture products, and remains attractive to companies like ADM, who are considering the takeover of longtime rival and major player in the global oilseeds sector Bunge Ltd. The deal, estimated at $16bn, to have enormous implications for the global agricultural industry.