IGC Grain Market Report
25 May 2012
IGC Grain Market Report - 24th May 2012
Uncertainty about the outlook for global grains and
oilseeds production dominated market activity during
May, resulting in heightened price volatility, also
partly reflecting deepening worries about the world
economy amid eurozone problems.MARKET COMMENTARY
There was an associated marked strengthening of the US dollar, contributing to movements in dollar-denominated export quotations. While prospects for world wheat production were initially considered mostly favourable, markets turned abruptly higher as crop perceptions deteriorated. US maize values slumped following bearishly interpreted official supply and demand data, including an above-trend rise in projected 2012/13 yields. An equally sharp rebound followed, boosted by tight nearby supplies and strength in wheat, but the market turned lower again, weighed by good early growing conditions. Rice prices in Thailand posted solid gains on intervention buying and fresh export sales. After recent strength, soyabean values were pressured by weaker external markets, especially crude oil and equities, with a stronger dollar and signs of slower demand from China weighing on US futures. Mostly because of a sharp drop in the sub-index for soyabeans, IGC’s daily index (GOI) fell by 3% over the month. The average of ocean freight rates in the three grainscarrying sectors was pressed lower by a build of surplus Panamax tonnage.



EXPORT PRICES


SUPPLY AND DEMAND IN 2011/12
GRAINS*
World grains production in 2011/12 is placed slightly lower than last month, at 1,841m. tons (1,753m.). A further increase in projected feed wheat use helps to lift total world grains consumption by 3m. tons, to 1,841m., up by 3.1% compared with the year before. Because of sharply lower wheat stocks, the global grain carryover forecast is down by 8m. tons from the April GMR, to 371m., the same as the estimate for the end of 2010/11. Increases in wheat, maize and barley, boost the forecast of world grains trade (July/June) by 4m. tons, to 264m.
RICE
World rice production in 2011/12 is forecast to expand by some 15m. tons, to an all-time high of 462m., underpinned by bigger outturns in Asia. Owing to larger availabilities, global use is also seen increasing to a record, of 458m. tons (447m.), while the world 2011/12 carryover will increase to a nineyear peak of 99.6m. World trade in 2012 is expected to decline by 6%, to 33.1m. tons, on smaller deliveries to Far East Asian markets.
OILSEEDS
World soyabean production in 2011/12 is estimated at 236.9m. tons, a decline of 11% from last year, reflecting sharply reduced outturns in all key producers. Despite further growth in shipments to China, global trade is expected to fall for the second consecutive year, to 88.9m. tons (91.2m.). Strong demand from Asia and the EU is expected to boost world soyameal trade, to 57.4m. tons (56.9m.).
OUTLOOK FOR 2012/13
GRAINS*
The forecast of total global grains* production in
2012/13 is up by 4m. tons from last month, to
1,873m. (1,841m.), with a steep increase in maize
only partly offset by a cut in the wheat crop. A very
good start to the growing season means a huge US
maize harvest is anticipated.
World grains consumption is forecast to expand by
1.6%, to 1,871m. tons, led by a 15m. increase in feed
use, to 801m. Growth in direct food use of grains is
forecast to broadly match the global population
increase, projected to climb by 1.1%, to 634m. tons.
At 312m. tons, world industrial use is forecast to rise
by 2.4%, compared with the 10-year average of 10%.
The forecast of world grain carryover stocks at the
end of 2012/13 is reduced by 10m. tons from last
month, to 373m. (371m.). Maize carryovers are
expected to increase for the first time in four years, mainly because of a recovery in the US. The
forecast of global wheat stocks is reduced, partly due
to smaller opening inventories. Even though stocks
are forecast to fall in the EU, Australia and CIS, the
jump in the US will boost combined carryovers in the
eight major exporters by 9m. tons, to 135m.
While world wheat trade is not expected to match the
2011/12 record, an increase in coarse grains
shipments, mainly maize, will see overall grains trade
post a further small rise, to 265m. tons (July/June).
Maize trade is forecast to reach a new all-time high,
at 101.7m. tons. Increased US shipments to Mexico
will contribute to a recovery in sorghum trade, but
small declines are projected for barley and oats.
WHEAT: Global 2012/13 crop prospects remained
mostly favourable during May, but adverse conditions
lowered harvest expectations in the EU, Russia and
Morocco, contributing to a 5m. tons cut in the world
production forecast, to 671m. (695m.). Higher than
previously forecast feed use slightly raises the
projection of world consumption but, at 681m. tons, it
is still expected to be 7m. lower than in 2011/12.
World wheat stocks at the start of 2012/13 are placed
8m. tons below the projection in April’s report, mainly
because of higher than previously estimated feed
use in the past year. Reflecting lower stocks at the
beginning of the season and a cut in the production
forecast, carryover stocks at the end of 2012/13 are
15m. tons lower than last time, at 191m. (202m.).
Those in the major exporters are forecast to recede
by 8.4m. tons, to 62.4m., including a draw-down from
heavy opening levels in Australia, Kazakhstan and
Ukraine. Reduced imports of feed wheat are
expected to see world trade dip by 7.4m. tons from
the anticipated 2011/12 record, to 135.7m. The
share of global trade taken by Black Sea exporters
may not be as high, with smaller crops seen
restricting shipments by Russia and Ukraine. Export
surpluses are expected to be smaller in the EU and
Argentina, but increased production and reduced
competition will likely boost sales by the US.
MAIZE (CORN): With plantings and yields projected
at new records, the global maize (corn) crop is
forecast to increase by more than 5%, to 913m. tons.
Early seeding has reinforced expectations for a huge
US harvest. Assuming a significant rise in harvested
area, and with yields forecast to match the 10-year
trend, US production is projected at 355m. tons, up
by 13% year-on-year. Compared to 2011/12, world
availabilities are expected to be more comfortable
and maize could replace some wheat in livestock
feed rations. Feed use is forecast to rise by 5%, but
growth in industrial consumption will be slower than
in recent years, at around 2%. World stocks are
projected to increase to their highest in three years,
almost entirely attributable to the US. Firm demand
and increased exportable supplies are expected to lift
July/June trade to a new record of 102m. tons.
Wheat and coarse grains
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May 2012
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