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IGC Grain Market Report


27 February 2012

IGC Grain Market Report - February 2012IGC Grain Market Report - February 2012

Grain and oilseed markets mostly strengthened in the past month.
International Grain Council Grain Market Report

MARKET COMMENTARY

Grain and oilseed markets mostly strengthened in the past month, the IGC daily index (GOI) up 6% to nearfour- month highs. The upturn reflected concerns in early February about maize and soyabean crops in South America, as well as the impact of the recent severe cold spell in parts of Europe and the CIS. Moreover, after a very high rate of shipments from the Black Sea region in the first half of the season, sales activity declined, with US grain, in particular, attracting much more buying interest.

WORLD ESTIMATES

Wheat export prices in Europe climbed by some 8%, in somewhat tighter markets, with reports of logistical problems and possible future export restrictions in the Black Sea region (though denied), seen as potentially bullish. However, global supplies appear ample, with the likelihood that a portion of upcoming large South Asian wheat harvests will be offered for export. US maize (corn) values remained firm, supported by reports of crop losses in South America and active export interest for remaining old crop supplies, although forecasts of a further rise in US plantings this spring added a bearish element. Oilseed prices rallied strongly in the past month, reflecting worries about the final outcome of soyabean crops in Argentina and Brazil, good demand for US supplies, including a new trade deal with China, and rising crude oil values. International rice market trends were more mixed, with Thai prices supported by domestic support measures but those in Vietnam, especially broken grades, easing to compete with South Asian offers.

EXPORT PRICES

 

SUPPLY AND DEMAND IN 2011/12

GRAINS*

The world production estimate is lifted by 11m. tons, to 1,841m., largely because of upward revisions in Australia, Kazakhstan, Ukraine, India and Brazil, the latter because losses of its main maize crop will likely be more than compensated by a larger second crop. These upward revisions outweigh a reduced maize figure for Argentina. To an extent, the forecast of world consumption is adjusted higher to reflect the bigger crop estimates, with total use of grains placed 5m. tons above the January forecast, at 1,836m. The change is mainly for feed use, now put at 775m. tons, 4m. more than before and 4% higher than in 2010/11. Of particular interest is the marked slowdown in the annual increase in industrial use, expected to rise by only 2% this year, with ethanol use of maize in the US set to recede slightly from its peak in 2011. While the latest statistical forecasts of supply and demand suggest that, nominally, global carryover stocks will rise slightly in 2011/12 from last year’s low figure, to 378m. tons (373m.), the total carryover in the eight major grain* exporters is still expected to dip by 6m. tons, to 131m., the smallest figure since 2007/08. 

TOTAL GRAINS*: SUPPLY AND DEMAND


WHEAT: A further increase in the global wheat production estimate for 2011/12, to 695m. tons (653m.), boosts total availabilities to 892m., their highest ever. Projected food and industrial consumption are both revised lower this month, but attractive prices, particularly compared with maize, lift the forecast of feed use by 2m. tons, to 131m. (115m.), the most since the early 1990s. Strong feed wheat demand is reflected in the global trade figure, helping to lift total wheat trade to match the 2008/09 peak, at 136.8m. tons (125.7m.). Even though total consumption is growing at a faster than average pace, world stocks are projected to rise to 211m. tons (196m.), eclipsing the previous record in 1999/00.

WHEAT: SUPPLY AND DEMAND

MAIZE (CORN): Maize production in 2011/12 is expected to increase by 4%, to a record 864m. tons. The US crop, while disappointing, was slightly above average, and bumper harvests were collected in China, Ukraine and the EU. A severe drought has reduced yield prospects in South America, especially in Argentina, but Brazil remains on track to produce a record crop. Improved supplies in some countries are boosting consumption, with overall use forecast at a record high. Feed use of maize is expected to increase at a faster than average pace but, with US ethanol production likely to decline slightly, the rise in industrial demand will be below trend. With demand outpacing the increase in supplies, ending stocks are forecast to tighten further, including in the US. Amid solid buying by a number of importers, world trade is forecast to rise to a four-year high. 

MAIZE (CORN): SUPPLY AND DEMAND 

BARLEY: Better than expected 2011/12 harvest results, including in Argentina and Australia, lift the estimate of world barley production by 1.1m. tons compared with last month, to 134.7m. World consumption is expected to remain steady, contained by uncompetitive prices in the feed sector, especially in the EU, and by sluggish growth in brewing demand. While higher than previously forecast, carryover stocks are set to remain tight, particularly in the EU and North America. The projection of world trade is raised by 1.2m. tons, to a three-year high of 17.8m., with a steep upturn in buying by Saudi Arabia. 

BARLEY: SUPPLY AND DEMAND

RICE

Due to increases in Asia’s biggest producers, China and India, global rice output is projected to rise by 3% in 2011/12, to 463m. tons. The record outturn will be accompanied by a further expansion in demand, to 460m. tons (449m.), but the 2011/12 carryover is still expected to increase by 4%, to 99m. Much of the forecast rise in global stocks will be due to increases in the major exporters, notably in India and Thailand, seen 14% higher, at a record 32.7m. tons. World trade in 2012 is forecast to contract by 7%, to 32.2m. tons, owing to significantly reduced purchases by key Asian buyers, including Bangladesh and Indonesia. 

RICE: SUPPLY AND DEMAND

OILSEEDS

As a result of smaller outturns in all key producers, world soyabean production in 2011/12 is expected to fall to 246.5m. tons, down 8% from the previous year. Solid demand from Asia, particularly China, will prompt some further growth in world trade in 2011/12, to 91.7m. tons (91.3m.). Global soyameal trade is forecast at a record 58.4m. tons, 3% higher than last year due to increased buying by Far East Asian countries. 

SOYABEANS: PRODUCTION AND TRADE


OUTLOOK FOR 2012/13

WHEAT: The world wheat area is expected to expand by 1.5% for the 2012/13 harvest, including gains in North America and the CIS. While crops are mostly developing well in the northern hemisphere, dryness continues to raise concerns about prospects in parts of the US and Ukraine. The average yield may not match the previous year’s high and global production is therefore projected to fall by 15m. tons, to 680m. However total supplies will be bolstered by a large carryover from the year before. Bigger maize and barley crops will likely reduce use of feed wheat, but it is nevertheless expected to remain relatively high. Growth in direct food demand is forecast to be sustained at the long-term trend while gains in fuel ethanol production will lift use in the industrial sector. Only a modest decline in world wheat carryovers is projected at the end of 2012/13. Because of reduced feed wheat demand, global trade is forecast to show a small decline (see text for IGC’s first wheat supply and demand forecast for 2012/13).

COARSE GRAINS: With plantings soon to commence in the northern hemisphere, the global maize area is forecast to increase by 0.6% to a record 167m. ha. The first official forecast in the US is for a 2.1% increase in plantings. World barley sowings are set to increase by 8% from last year’s low level, with the spring barley area in particular to expand after a very harsh season for winter crops.

February 2012

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