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wet conditions in eastern Australia that threatened to render at least a third of that country’s wheat crop unfit for flour milling. In January, better US wheat export prospects emerged while a USDA winter wheat acreage report suggested that, at 29.6 million acres or four per cent up on 2010, plantings had been lower than expected, reflecting very dry autumn planting conditions. IGC reduced their estimate of world maize production by a

million tonnes and end-of-season stocks by the same amount. Concerns in world markets were said to reflect worries about reduced official US end-of-season stock projections and questions as to whether maize plantings for the 2011-12 crop would be sufficient to prevent a further fall in US inventories. IGC also noted, in common with other observers, that markets were ‘nervous’ about worrying reports from Argentina regarding what was referred to as a ‘damaging’ drought likely to result in lower yields for both maize and soybeans, a dryness attributed to the current La Niña event. As for soybeans, continuing high prices were attributed, despite

ample current stocks, to sustained heavy demand from China but more recently due to a lower official US supply estimate. The impact of recent upward moves in the crude oil prices was also cited as an influence. IGC has also made a first tentative guess at prospects for

2011-12. The global wheat area is projected to rise by about three per cent as a result of high world prices. Assuming yields are about average, this would make for production of around 670 million tonnes compared to IGC’s current estimate for 2010-11 of 647 million tonnes. IGC also reckon that the northern hemisphere outlook for grains crops ‘generally appears favourable at this early stage’. There’s many a slip ‘twixt cup and lip, however and, in the wake

of developments in the current crop year, markets were watching for the United States Department of Agriculture’s February assessment of world grain markets with perhaps more than usual interest. And USDA duly delivered what one source called a ‘shocker’. Markets had been expecting USDA to reduce US end-of-season maize stocks by around seven million bushels. Instead, USDA cut its estimated end-of-season inventory not by seven million but by seventy million bushels - to what one trader described as ‘a very tight’ 675 million bushels. This would leave US end-of-season stocks at more than a billion bushels below those of 2009-10, raising the spectre of the supply pipeline starting to suck before the commencement of the 2011 US harvest. Amid expectations that the market might go limit up following

USDA’s report, the March and July futures contract finished sharply up at the end of the first day’s trading following the announcement. Doomsayers pointed out that the estimated 675 million bushel end- of-season stocks represented a stocks-to-usage ratio of just five per cent which matches the record low set in the 1995-96 season. USDA left its 2010-11 soybean and wheat carryover projections

unchanged from last month but, while the markets had expected USDA to slightly trim their wheat and soybean projections, the report reflected the fact that high prices have not slowed usage. Markets also stressed the fact that the maize projections emphasised the need for markets to raise wheat and soybean in order to bid for acres which might otherwise be planted to maize; thus the


effects of USDA’s maize projection were seen as spilling over into neighbouring new-crop soybean and wheat futures. Indeed, the effect on the London futures market was to send the May 2011 contract up by £3.75 to £212.75, a move that took ex-farm prices above £200. Ominously, however, the biggest increases came in 2012 contracts, with several delivery months rising by £5. There is a further fly in the ointment that may also have been

factored into the market’s calculations. At 115.1 million tonnes, China is the world’s largest wheat producer (unless you take the EU-27 into account). It is reported that 5.16 million hectares representing two-thirds of China’s wheat production have been hit by the drought and that this development has pushed domestic Chinese wheat prices to record levels. Over the next few weeks, markets will be watching the situation very closely indeed.

GM DEADLOCK Although the United States Department of Agriculture left its February assessment of the soya complex largely unchanged from its predecessor, the knock-on effects of the downgrading of end-of-season maize inventories was expected to support prices, if only to assure sufficient US soybean acreage in the face of booming maize prices. In fact, the Chicago market came under early pressure as a

result of reports of weak export markets and talk of improved growing conditions in South America. This led to profit taking, the latter exacerbated by investment funds pulling out of the market. Nevertheless, soybean prices remain uncomfortably high as pig and poultry producers can attest. No. 2 yellow soybeans FOB Gulf averaged $556 in January and showed signs of going higher in early February. US No. 2 yellows CIF Rotterdam were quoted at $572 in January, $137 or 31 per cent more than twelve months previously. Brazilian soymeal CIF Rotterdam was quoted at an average of $457 in January. Nearer to home, UK produced HiPro ex-mill Liverpool was quoted at an average of £381 for January although I thought I detected some incipient weakness in February. All this has inevitably led to higher finished feed prices to the

great dismay of pig and poultry producers. And it would appear that recent developments in Brussels are not going to be much help. Last October, the EU Commission completed drafting legislation allowing up to 0.1% of unapproved genetically modified material in imports of animal feed to the European Union. I understand that the new regulation requires EU Customs authorities testing grain cargoes to approve feed for import provided the concentration of any unapproved GM material discovered is below 0.1%. The limit would only apply to GM feed materials that have been approved in the exporting country and for which an EU approval is pending. The draft regulation was duly presented to the Standing

Committee on the Food Chain and Animal Health in November 2010 where it was agreed that the technical discussion would continue at the Committee’s next meeting on 8 – 9 February 2011. There, it was put to a vote and, to the disappointment, not to say intense irritation of EU feed manufacturers, the Committee failed to reach a qualified majority. There was opposition to the plan from a number of member states including France; the result was that SCFCCAH was unable to reach a qualified majority on the proposal after two

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