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IGC Grain Market Report


26 October 2012

IGC Grain Market Report - October 2012IGC Grain Market Report - October 2012

Against a still uncertain macroeconomic backdrop, grains have remained supported by a tight fundamental outlook. The IGC Grains and Oilseeds Index (GOI) is down by 2% m/m, but this largely reflects a 5% m/m decline in soyabeans, driven by fund liquidation as crop prospects improved. The maize and wheat subIndices rose by 4% and 1%, respectively, while rice was broadly unchanged.
International Grain Council Grain Market Report

A further 6m t has been cut from the 2012/13 forecast for total global grains production, which is now expected to be 5% lower y/y, at 1,761m t. The decline includes 39m t of wheat, 46m of maize, and 4m of barley. Reduced availabilities and higher prices are expected to ration demand, resulting in the first y/y fall in grains consumption since 1998/99.

The forecasts show a further tightening in the balance this month, with 2012/13 end-season total grains stocks revised down by 4m t to 328m (372m the previous year), the lowest since 2007/08. Inventories for the major exporters will be even tighter and the smallest for 17 years. The global y/y decline is forecast to come from a 24m t reduction in wheat, an 18m decline in maize, and a 1m drop in other coarse grains, notably barley.

Global grains trade is expected to fall by 19m t from last year’s high, to 249m, with a particularly steep decline for wheat – down by 13m y/y, largely due to a forecast reduction in EU feed wheat imports against the backdrop of tight Black Sea supplies. The rice market remains relatively comfortable with stocks expected to rise by 3% in major exporters, largely reflecting a projected increase in Thailand due to ongoing government intervention buying.

The outlook for rapeseed/canola has tightened sharply owing to reduced crop prospects in Canada. Global ending stocks are expected to fall by almost one-quarter, including a steep decline in the two major exporters. Tight supplies and high prices are expect to constrain world trade, seen falling by 11% y/y. This contrasts with better prospects for soyabeans, although the forecast recovery in world production depends on favourable weather for key South American crops.

SUMMARY 2012/13 OUTLOOK FOR KEY GRAINS AND OILSEEDS

WHEAT

  • Wheat sentiment remains generally bullish, underpinned by evidence of very thin export supplies in the Black Sea region.
  • Lower yields in the EU and Kazakhstan, as well as deteriorating crop prospects in Argentina and Australia, reduce the forecast for world production to 655m t.
  • Global feed use is forecast to fall sharply, and world carryover stocks are placed 3m t lower than before, at 172m, with those in the major exporters at a five-year low.
  • Export forecasts have been cut for the US and Australia in favour of bigger shipments by Russia and India.

MAIZE

  • Tight fundamentals compounded by bullishly-perceived USDA reports, led to net gains in world export prices during October.
  • Northern hemisphere production prospects have mostly worsened. Although sowing is slightly delayed, the outlook for South American crops remains mostly favourable.
  • Despite a forecast 3% contraction in demand, the stocks outlook has tightened further - end season inventories in the major exporters could shrink by almost one quarter.
  • EU import needs are rising but, with Mexico and China likely to buy less, world trade is forecast to slip to a three-year low.

RICE

  • The IGC GOI daily rice price index was largely steady during October, although quotations at major origins were mixed.
  • The forecast for 2012/13 global rice production is cut slightly but, at 465m t (463m), would still be a record, and global use is set to expand to an all-time high of 466m t (457m).
  • World ending stocks in 2012/13 are projected to remain comfortable, at 102m t, including a 3% rise in major exporters.
  • World trade in rice in 2013 is seen falling by 2% – on smaller shipments to Far East Asia and sub-Saharan Africa.

OILSEEDS

  • Weighed by improving global production prospects, the IGC GOI soyabean sub-Index is down by around 5% m/m.
  • World soyabean output is forecast to rise 11% y/y, due to improved crops in South America, resulting in a near 50% expansion in major exporters’ inventories.
  • In contrast, the projection for world rapeseed/canola output in 2012/13 is cut markedly, to 58.8m t (60.4m), while global ending stocks will fall by almost one-quarter, including a steep fall in major world market suppliers.
  • World soyabean trade is projected to expand by 5% y/y, but tight supplies and high prices are expect to constrain trade of rapeseed/canola, which is seen falling by 11% y/y.

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