Feed
Materials Commentary
By Roger Dean
In its May edition of Grains: World Markets and Trade, the United States Department of Agriculture outlined its initial view of global grain supply and demand during the 2018-19 harvest year. USDA understandably observed that, ‘due to spring planting still underway in the Northern Hemisphere, and being several months away in the Southern Hemisphere, these projections are highly tentative’. In May, USDA projected a significant decline in world wheat
production during 2018-19 from the record 758.38 million tonnes harvested during 2017-18. Production in 2018-19 is estimated at 747.76 million tonnes, 10.62 million tonnes or 1.4 per cent less than during the preceding season. A major component of this reduction was constituted by Russia which, at 72 million tonnes, was down by almost 13 million tonnes or 15.3 per cent from the current estimate of the preceding 2017-18 season. There were also significant reductions in the projected harvests in a number of other countries. Against this initial prediction of a smaller global wheat crop in
2018-9, USDA predicts global wheat consumption at 753.89 million tonnes, an increase of 10.08 million tonnes or 1.4 per cent ahead of the preceding season. This includes a 3 million tonne or 2.6 per cent increase in Chinese consumption. As a result, global end-of-season stocks are projected to fall by 6.13 million tonnes or 2.3 per cent with significant declines in the US (down by 3.15 million tonnes or almost 11 per cent) and the EU (down by 2.6 million tonnes or almost 20 per cent). The ratio of end-of-season stocks to consumption, at 35.1 per cent, was slightly lower than in the preceding season, albeit at its second highest level during the previous five years. USDA’s initial look at the situation as regards maize during the
2018-19 season contrasted with that for wheat in that global production is projected at 1,056.07 million tonnes, 19.4 million tonnes or 1.9 per cent ahead of the 2017-18 season. Major increases were projected for South American countries – Argentina by 8 million tonnes or 24.2 per cent and Brazil by 9 million tonnes or 10.3 per cent. China was also projected to harvest an additional 9.1 million tonnes or 4.2 per cent. After taking predicted consumption into account, world end-of-season maize inventories are projected to shrink by 35.7 million tonnes or 18.3 per cent with Argentina recording the only significant increase in end-of-season inventories. All other countries, including the US, show significant double-digit falls in maize inventories, including China, albeit data regarding the latter should be treated with caution. In its June edition, USDA updated its initial look at the 2018-19
harvest year prospect. Again, USDA notes that ‘because planting is still underway in the Northern Hemisphere and remains several months away in the Southern Hemisphere, these projections are highly tentative.’ Total wheat production was reduced by a further 3.07 million tonnes, largely reflecting a further reduction in the Russian harvest
PAGE 18 JULY/AUGUST 2018 FEED COMPOUNDER
and a million-tonne reduction in the EU’s wheat crop. Russian wheat production is lowered by 3.5 million tonnes to 68.5 million tonnes; this reflected drier-than-normal conditions during the spring in winter wheat areas and excessive wetness in spring wheat regions which lowered plantings. USDA has also reduced EU wheat production by a million tonnes to 149.4 million tonnes; this appears to be a reflection of dry conditions this spring for winter wheat in Germany and Poland. In addition, India’s wheat production has been increased by 2 million tonnes to 97.0 million tonnes; this prediction is based on record yields and supported by reports of ‘higher procurement’ for the 2018-19 crop compared to last year. USDA has reduced projected 2018-19 world wheat consumption
by 3 million tonnes; this primarily reflects reduced use of wheat for feed by Russia and the EU. Global end-of-season wheat inventories have been increased by 1.83million tonnes to 266.16 million tonnes but are still below last year’s record of 272.4 million tonnes. As regards maize, total production during the 2018-19 season
has been reduced by 4 million tonnes, of which the bulk consists of a downgrade in Russian prospects. This reflects Russian government data ‘indicating lower-than-expected planted area’. USDA’s initial, May evaluation of soybean prospects for 2018-19
envisaged a global crop of 354.54 million tonnes, 17.84 million tonnes or 5.3 per cent ahead of the 2017-18 season. This largely results from a significantly larger Argentine harvest, reflecting that country’s continuing recovery from the drought of 2017-18. The latest projection of supply and demand for grains and soybeans
available from the International Grains Council for the 2018-19 season was issued on 24 May. IGC’s projection for total production of grain in 2018-19 was raised by 2 million tonnes to 2,089 million tonnes compared to IGC’s April projection, with increases for wheat, maize and barley, but a decrease for sorghum. The figure for grain consumption was reduced although, with reduced opening inventories, the projection of end-of- season stocks was lowered by 4 million tonnes to 556 million tonnes, down by 47 million tonnes compared to the 2017-18 outcome. IGC’s May projection has reduced the 2017-18 world soybean
outcome forecast by 3 million tonnes to 336 million tonnes, reflecting an upgrade for Brazil counterbalanced by reductions for Argentina, India and Paraguay. Reflecting the latest adjustments for key producers, the 2018-19 world outturn projection has been raised slightly to a peak of 356 million tonnes. The outcome is that world end-of-season stocks are seen as ‘broadly steady’, at 40 million tonnes, unchanged from IGC’s April assessment. Although it must be stressed that the projections both from the
USDA and the IGC are based on preliminary indications that, as USDA notes, make the assessments ‘highly tentative’, there appears to be little cause for raw material buyers to suffer apoplexy. From the supply and demand point of view, markets seem to be broadly in balance, albeit there is always the possibility of a shock administered by the elements. More pertinent would seem to be the likelihood of external shocks in that markets have already reacted to the possibility of trade wars involving major players in the markets for feed raw materials. An obvious candidate is the world market for soybeans where the US and China are major players and soybean values have already been responding to the threat of tariffs being raised.
Comment section is sponsored by Compound Feed Engineering Ltd
www.cfegroup.com
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