driven by buoyant internal demand.
during the growing season, due to rainfall and temperature
systems, which have been erratic in recent years, including
natural disasters, like the recent earthquakes that have occurred
in Haiti and Chile.
US WHEAT PLANTINGS FALL The US wheat area, especially soft wheat, is forecast to fall by
6M/acres to 37.1M/acres (15M/ha) the lowest total since 1913.
Land not planted to wheat could shift into a variety of crops
including increasing corn and soyabean plantings, which could
provide comfortable, if not burdensome, supplies into 2010/11.
By contrast, EU, winter wheat sowings are expected to increase
at the expense of barley. Plantings of winter wheat in the CIS
countries were delayed, but reports confirm that the Russian
Federation’s planted area is reported to have increased, with
estimates for output varying, although severe low temperatures
cover most winter grain areas, snow cover is expected to
protect much of this crop from the cold. Meanwhile, Ukraine is
expected to have planted a similar number of hectares to last
year but early season dryness and reduced use of inputs could
negatively affect yields
SMALL INCREASE IN CHINESE WHEAT AREA A small increase in China’s wheat area is likely, reflecting strong
government support for wheat production. Weather conditions
to date have been favourable in the major wheat producing
provinces but extreme dry conditions have been reported in
some south western parts, which may affect yields. While
Pakistan, Bangladesh and India experienced prolonged dry spells
and erratic rainfall since the beginning of the season, India’s
wheat area is up by 2%-improved growing conditions are
expected to increase output to over 80mt (million tonnes) —
unofficial reports put the crop closer to 82mt.
In the Middle East crops in particularly in Iran, Iraq, have
recovered somewhat this year but are still below average. Saudi
Arabia’s decision to phase out 2-3mt of irrigated wheat
production will increase import demand. North Africa is
expected to benefit from rain and cool temperatures despite a
dry start to the season, but Morocco’s wheat crop is
experiencing problems.
SPECULATION SURROUNDS AUSTRALIA’S WHEAT SOWINGS Like Argentina, the Canadian Wheat Board (CWB) also expects
wheat output to fall to 24mt, as farmers reduce wheat planting
in favour of other crops. Rabobank and others believe the
Australian wheat sowings will fall with the crop close to 20mt;
while the Australian Bureau of Agriculture and Resource
Economics (Abare), agrees the wheat area will fall, they forecast
yields will outperform the norm and raise output to 22mt. The
estimate follows considerable speculation of a fall in Australia's
harvest this year, as weak prices prompt farmers to cut back
more significantly on sowings although outturn is expected to
depend largely on the timing of rains. Over the next five years,
Abare expects wheat sowings, to expand by some 166,000/ha,
with production approach 25mt.
NEAR RECORD WHEAT CROP IN 2009 INCREASES ABUNDANT
SUPPLIES World wheat production is forecast at a near record 678mt in
2009, which has helped swell stocks, to levels not seen since
2001/02, with wheat use forecast to increase by 7mt to 647mt, a
slight fall in feed use 112mt, being more than offset by increased
use for food and industry 535mt.
WORLD TRADE PLUMMETS AS BLACK SEA EXPORTERS COMPETE
AGGRESSIVELY FOR MARKET SHARE World trade in wheat is forecast to fall by 17mt to 126mt in
2009/10 due to higher production and ample supplies in several
countries. Black Sea grains are highly price competitive and are
gaining market share from traditional exporters, particularly the
US, where high domestic prices have not helped exports, which
are expected to fall by over 5mt to 22.5mt. “The world is awash
in wheat, and exporters are becoming increasingly competitive,”
the USDA said. The department highlighted the growing
pressure from Russian exports forecast at 18mt in 2009/10,
where storage capacity although “far from sufficient or efficient”
was adding to incentives to trade. “Grain elevators in the south
of the country, Russia’s main ‘export plate’, are full to the brim as
a result of last year’s massive intervention,” the USDA said.
Lithuania has also emerged onto the export market, selling
into South East Asia and also involved in a huge Saudi wheat
tender 440,000/t (February — origin unspecified) bought
through Bunge, Nobel Resources and Toepfer International.
Kazakhstan, revealed it had agreed a deal to sell up to 1–1.5mt
to Egypt, through trading house Venus International, beginning in
March. This comes a week after Kazakh wheat secured 60,000/t
of a larger Egyptian wheat tender 180,000/t, for the first time
since 2008. Asylzhan Mamytbekov, chairman of Kazakhstan’s
state grain company KazAgro, added that the country was
“actively” seeking further fresh export markets, and “plans to
begin grain export to China and the countries of the Pacific
region”. While Kazakh exports are expected to rise to 7.5mt,
Ukraine’s exports are expected to fall to 9mt in 2009/10.
WEAKER EURO BOOSTS FRENCH WHEAT EXPORTS While EU wheat exports are expected to fall to 19mt, due to
lack of demand and greater competition from other exporters,
Bunge exploited the weakness of the euro, to tender French
wheat and join rivals Glencore and Nidera in winning trade from
a 300,000/t Egyptian grain tender. The offer of 60,000/t of
French wheat at $169.40/t (E124.50/t 18 February) from Bunge,
was accepted being the cheapest that Egypt’s state grain
authority, the GASC, has bought since September, beating stiff
competition from Russian wheat, offered at $170.17/t. The
French discount reflecting a stronger rouble, helped by the
recovery in oil prices, and reduced transport costs. French
wheat, has now won a showing in two successive Egyptian wheat
tenders, despite Cairo imposing tighter export restrictions.
Elsewhere, Australia’s wheat exports are forecast to rise to
14.5mt, with Canada’s exports of 18.5mt similar to last year,
while Argentine shipments are expected to fall by 77% to 4mt.
MORE ACRES PLANTED TO COARSE GRAINS IN 2010
The IGC expects world corn plantings to increase by 1.6%, with 2006–2009/10 (mt)
bigger areas projected for the US, CIS and South America, while
barley sowings are expected to fall in the EU and the CIS.
USDA forecast an increase in US corn area by 2.5M to
89M/acres, with corn production, forecast at 335mt in 2010,
similar to last year.
According to a recent report by Abare, over the medium
term, more land is expected to be planted to coarse grains,
particularly corn, driven largely by demand from bio-fuel plants
and feed use, with prices likely, ‘…to be kept in check by a 4.9%
jump in sowings…’ Although the Bureau suggests crop yield
improvements, particularly for corn, are not expected to fully
offset the increase in demand, leading to a gradual decline in
stocks in the next few years.
NEAR RECORD COARSE GRAIN OUTPUT IN 2009Global coarse grain production is forecast at 1,100mt, the second
largest crop on record, boosted by a huge crop in the US, with
better crops in China, Argentina and the Ukraine. Consumption
is forecast to rise by 31mt to a record 1,106mt, outstripping
supply for first time in three years. Feed use is forecast up by
157mt to 662mt, while food/industrial growth is forecast to
increase by 16mt to 444mt mostly due to ethanol production.
While imports for most regions are forecast to decline,
lower corn production in Mexico, and increased demand in
South Korea, are expected to keep the overall world trade level
more or less unchanged 111mt. Exports from the US are
expected to be similar at 52mt, with increased exports from
Argentina 14mt and Brazil 8mt.
GLOBAL MEAT DEMAND IMPROVES OUTLOOK FOR PORK AND
POULTRY WITH BEEF SLOW TO RESPONDGlobal corn production is expected to set a new record 804mt
crop, 6mt up on last year. In just five years global corn output
has risen from 699mt to 804mt, mainly due to successive record
US crops, which is forecast at a record 334mt and helped by
better prospects in Argentina 21mt, Brazil 51mt and South Africa
13.5mt. Global corn consumption is forecast at a record 810mt,
33mt more than last year. Food and industrial use, mainly
ethanol, is expected to rise by 19mt to 316mt while feed use is
forecast to rise by 14mt to 493mt.
As consumer demand recovers, pork output is expected to
increase by 2% to 102mt with China driving growth in 2010.
Similarly, poultry output, is forecast to rebound and rise by 3%
to 73.7mt, largely driven by Brazil’s export demand and China’s
domestic demand with virtually all other major producers
including the US, Argentina, India and Russia expected to expand
production. In contrast, beef production is forecast to decline,
albeit at a slower rate of less than one percent.
US ETHANOL DEMAND RISINGCollapsing energy prices, frozen credit markets and volatile
commodity markets forced some ethanol producers to make
difficult decisions last year. But as oil prices have improved and
are almost double $80.20p/b (2 March) those of last year, this
has led to more profitable operations. In 2010, under the US
Renewable Fuel Standard provisions of the Energy Independence
and Security Act 2007, ethanol bio-refineries are forecast to
convert 4.3Bn bu (109mt) of corn into 11.5Bn gallons of ethanol
and 34.5mt of high value livestock feed-DDGS, corn gluten feed
and meal, with corn use up 16mt on the previous year,
accounting for almost 39% of the total US corn use in 2009/10.
Dairy cattle, swine and poultry industries are utilizing more
DDGS to displace some quantities of corn and soyabean meal,
while exports of DDGS to markets in Asia, Europe and
elsewhere are forecast over 6mt.
MODEST RECOVERY OF CORN TRADE EXPECTED IN 2009/10Global corn trade is forecast to increase to 85mt, boosted by
larger purchases in several countries including Mexico 9.5mt,
Chile and South Korea, driven by lower prices and firmer
demand from the livestock sector. Corn stocks are expected to
fall to 140mt down 6mt from last year with major exporter
stocks at 62mt similar to last year. With the prospect of larger
harvests, corn prices have fallen since the beginning of the year
from $195/t — US Corn 3 yellow FOB Gulf $167p/t (5 March)
down $5/t on the previous week.
LARGE SUPPLIES BOOST BARLEY CONSUMPTION
Smaller barley crops in the EU 62mt, Russia 18mt, Ukraine 12mt,
have reduced production to 148mt down 6mt from last year.
Trade is also forecast lower at 17mt, and, with the exception of
China expected to increase malting barley imports, several
countries are buying less, with only, the Ukraine 6mt, Australia
3.8mt and Argentina 0.9mt reporting increased sales. In the past
the EU dominated much of the international barley market.
However, with the removal of EU support programmes
(including intervention from next year) and the emergence of
low-cost supplies like Russia and the Ukraine, should see some
EU acreage shift to more profitable crops. Global consumption
of barley rose by 1mt to 145mt, with increased use in EU, Russia
and Canada, while stocks are forecast to rise by 3mt to 33mt.
Export prices EU (France) Barley FOB Rouen (5 March) $138/t.
EAST AFRICAN BREWERIES TO SUBSTITUTE SORGHUM FOR
BARLEY LOWERWhile global sorghum production is forecast lower at 62mt,
better crops in Argentina and Nigeria, have been offset by
smaller crops in Australia, India and the US. Increased feed
demand mainly in Mexico, Nigeria and Argentina, offset by
declining use in several countries including feed use in the US.
A major initiative to make sorghum a dependable cash crop for
10,000 farmers in Africas’s eastern province are in for a windfall
after East Africa Breweries Limited announced last week that it
will buy all the grain produced locally, substituting barley with
sorghum. Sorghum quoted FOB Nola at $171/t (11 February)
for March delivery.
US NEW CROP SOYA PLANTINGS EXPECTED TO FALL
USDA preliminary forecast indicates the US may reduce
plantings for soyabeans to 77M/acres in 2010, 0.5M/acres below
last season with production projected down to 3.26Bn bushels
almost 89mt, 3mt below this year’s crop, as improved returns
and rotational considerations favour corn plantings. The season
average price is projected lower at $8.80/bu as record South
American supplies weigh on the market.
HUGE GLOBAL SOYA SUPPLIES PRESSURE PRICESGlobal oilseed production rose by 39mt to a record 434mt in
2009, mainly due to a larger planted area for soyabeans at the
expense of other oilseeds including rapeseed, sunflowerseed and
groundnut. Soyabean production is forecast at a record 255mt,
44mt more than last year, with Argentina, US, Brazil and Paraguay
posting sizeable gains. Despite a smaller area, better rapeseed
yields raised output to almost 60mt with larger crops in China
13.2mt, the EU 21.4mt, offset by reduced crops for sunflower
seed 31mt, cottonseed 40mt and groundnut 31mt, while palm
kernel 12mt and copra 6mt remains similar to last year.
IMPROVED DEMAND FOR LIVESTOCK PRODUCTS AND BIO-DIESEL
BOOSTS CONSUMPTIONOilseed crushings have risen by almost 13mt to 352mt the
increase mainly for soy and rapeseed in response to stronger
demand for livestock products following the recession and biofuel.
Converting soya oil into bio-fuel has been boosted in the
major exporting countries. Clearance by the US environmental
authorities will revive soy-oil based bio-diesel consumption with a
$1/per gallon tax credit on blenders expected to be
re-introduced. Production capacity at most US bio-diesel plants
has been idled since January when the credit expired. In
Argentina, the government has introduced a mandate, to include
5% bio-diesel in transport fuel and 20% in the fuel used by power
stations. Expanded domestic bio-fuel use could create a demand
for up to 700,000/t equivalent to 44% of Argentina’s current use.
Global exports of oilseeds are forecast at 96mt, with
soyabean exports up by 4mt to 81mt. Rapeseed exports are
down to 10mt is mainly due to smaller imports into China 1.5mt
and the EU 2mt, while sunflower seed exports are down by over
300,000/t to 1.9mt. Due to reduced output sunflower oil prices
are expected to strengthen and likely to extend the premium of
$50–60/t over soya and rapeseed oil. And, global stocks are
expected to rise by 17mt to 72mt by the end of 2009/10.
SOUTH AMERICAN HARVEST PRESSURE GATHERS MOMENTUMIn contrast to last year’s drought, the El Niño weather pattern
brought record rainfall to large areas of Argentina and Brazil in
February, with some areas seeing up to 800% of normal rainfall
and some flooding. But despite experiencing the wettest
weather in a hundred years, Argentina’s soyabean crop is
expected to remain on track for a record soy harvest forecast at
52–53mt, while Brazil’s output is forecast at 65–66mt. And,
despite widespread infestation with Asian rust fungus and other
diseases, Oil World expects, even with a smaller crop for
Paraguay of 6.6mt, the South American soyabean production in
2010 to increase steeply by over 31mt.
For some countries in Asia, while the global financial crisis hit
other industries hard, the livestock sector was relatively better
off and may show further resilience as the economy recovers.
Demand for oil meals including fishmeal rose to 236mt (231mt
for vegetable meals) 7mt more than last year. And, with the
record South American crop moving into the market it was
expected that there would be flurry of sales activity. But crop
consultants Celeres has reported forward soyabean sales by
Brazilian farmers are lagging at 30% of the crop compared with
an average of 44% at this time of year. And, while most of the
Argentine’s supply pressure is expected to occur from April
onwards, Argentine growers advance sales of soyabeans are also
believed to have fallen considerably short of historic levels, with
farmers reluctant to sell new crop soyabeans so far. The
reluctance to sell stems from farmers seeking to create a
tightness on the export markets, to support soyabean prices,
while at the same time reviving the protest against the
imposition of the governments 35% tax on soyabean exportsintroduced
to keep domestic prices in check. Soyabean prices fell
to 940 pesos/t ($239.50 – 1 March) at Rosario Grains Exchange.
At the end of February, total US soybean sales commitments
(outstanding sales plus accumulated exports) to China amounted
to 21.9mt compared to 16mt, while total global sales amounted
to 35.9mt compared to 27.1mt for the same period last year.
Soyabean prices rose on concerns that unusually heavy rain
would damage crops in Argentina, with soyabeans ending higher
before retreating, as confirmation was received of record crops
in South America; this coupled with a seasonal slowdown in sales
to China put downward pressure on export bids. US. soyabean
export bids, FOB Gulf (5 March) averaged $367/t — Argentine
Up River FOB $345/t (5 March).
Japan: new export system
Japan is to end the state system of controlling imports
and domestic sales of wheat, because of volatile markets
and stricter food safety requirements. The change in
regime, will allow market participants, like flour millers
Nisshin Seifun Group Inc. and Nippon Flour Mills Co, to
take-over the responsibility of holding sufficient wheat
reserves to cover domestic consumption for two to
three months (previously they would have held only 15
days), likely to increase imports forecast at 5.3mt
2009/10, with government subsidies being paid to those
millers that comply with the scheme. Under the new
system, trading companies like Marubeni Corp. and Sojitz
Corp. will make logistics more efficient and reduce
transportation costs, by switching to larger vessels.
Additionally, import controls are expected to be eased
by raising the volume under the government’s
simultaneous ‘buy and sell’ system-expected to create
opportunities for exporters other than the US, Canada
and Australia, the main beneficiaries under the old
system. Like Japan, South Korea has indicated changes to
the way it traditionally sources grain, to improve the
fallout from global price hikes.