Feed
Materials Commentary
By Roger Dean
The latest data on world supplies and use of wheat, maize and soybeans are those published by the United States Department of Agriculture on 8 February 2018. USDA published its first estimates of world supply and demand
for grains and soybeans during the 2017-18 harvest year in May 2017. For wheat, these data projected a continuing recovery from the very poor outcome that characterised the 2012-13 harvest year: a sharp fall in worldwide wheat production and, significantly, a marked fall in the ratio of end-of-season inventories to projected wheat consumption worldwide. This ratio is represented by the statistic Days Consumption Equivalent (DCE). USDA’s initial projection in May 2017 represented a DCE of 128 compared with the 2012-13 outcome of 94, the second lowest ratio on record after the 76 DCE recorded in 2007-08. Since May 2017, USDA’s view of world wheat prospects in 2017-
18 has steadily improved with production currently expected to reach 758.25 million tonnes compared with USDA’s original projection of 737.83 million tonnes. The improvement has come about as a result of increased yield prospects worldwide, from 3.39 tonnes per hectare to the current 3.45 tonnes. In its February 2018 update, USDA has increased its projection of world wheat production by 500,000 tonnes for Argentina and 481,000 tonnes for Ukraine, by 2.9 per cent and 1.8 per cent respectively. As regards maize, USDA’s current forecast of world production
stands at 1,041.73 million tonnes during the 2017-18 harvest year, compared to 1,033.66 million tonnes in the original May 2017 projection. This represents a slight decline on the 2016-17 outcome and, given the continuing robust development of world usage of maize, suggests that world maize values will remain relatively strong compared to wheat. This view is reinforced by the fact that the latest estimate of DCE for maize in 2017-18, at 70, is significantly down from the DCE of 81 recorded for the preceding season, albeit a DCE of 70 compared favourably with those recorded during much of the preceding decade. It suggests that for the rest of the current harvest season, maize values are likely to remain relatively firm, although developments in the southern hemisphere could influence the outcome. As regards countries, the most significant decline is projected to
take place in Argentina, with production of 39 million tonnes, down by 3 million tonnes or 7 per cent on USDA’s January assessment and down 4.9 per cent from the 2016-17 outcome. USDA’s projection of Argentine maize yields of 7.5 tonnes per hectare is 7 per cent below last month’s yield and 10 per cent lower than last year with both early and late-planted crops affected by heat and dryness. USDA has reduced its latest projection of soybean production by
PAGE 18 MARCH/APRIL 2018 FEED COMPOUNDER
1.65 million tonnes compared to its January projection. This reflects significant changes in South America. Output in Brazil has been increased by 2 million tonnes compared to USDA’s previous projection while Argentine output has been reduced by an equivalent amount. Brazil soybean production for 2017-18 is estimated at 112 million
tonnes, up by 2 million tonnes or 2 per cent from USDA’s January assessment but down by 2 per cent from the 2016-17 record. This reflects a harvested area estimated at a record 35 million hectares, unchanged from USDA’s previous estimate but up 3 per cent from the previous season. Yield is estimated at 3.20 tonnes per hectare, up 2 per cent from last month’s projection but down 5 per cent from last year’s record harvest. Argentina soybean production for 2017-18 is currently estimated at
54 million tonnes, 4 per cent less than in USDA’s January estimate and 7 per cent below last year. The area planted to soybeans is estimated at 18.5 million hectares, down 1 per cent from USDA’s previous assessment but still up 1 per cent from 2016-17. Yields are expected to be good, despite what USDA describes as ‘prolonged dryness’. Forecast yields are averaging around 2.92 tonnes per hectare, down 2 per cent from last month and down 7 per cent from last year. Dry soils have reportedly delayed planting of both second-crop soybeans and late-sown first crop soybeans. Dryness appears to have been a factor in reduced production
in Paraguay with projected production down by 200,000 tonnes or just over 2 per cent from USDA’s January projection. Dryness is also implicated in USDA’s estimate of soybean production in India for 2017-18 at 9.5 million tonnes, down by 5 per cent from USDA’s January forecast and down by a whopping 17 per cent from 2016-17. Harvested area is estimated at 10.5 million hectares, unchanged from last month, but down nearly 8 per cent from last year. USDA report that the year-on-year decrease is due to farmers switching to cotton and pulses. Yield is estimated at 0.90 tonnes per hectare, down about 5 per cent from USDA’s January assessment but 4 per cent above the 5-year average. However, dry conditions during the planting season ‘negatively impacted vegetative growth and pod development’. Self-evidently, one significant element in the feed materials story
is the exchange rate between sterling and the US dollar and the euro. The latter stood at an average of €1.2646 in June 2016; following the Brexit referendum, it fell to €1.1884, a depreciation of just over 6 per cent, and it fell further in succeeding months. Against the US dollar, sterling weakened from $1.4209 in June 2016 to $1.3141 in the following month; it reached a low point of $1.2329 in October before strengthening in the run-up to 2018. It is reasonable to expect that, in the continuing uncertainty of the Brexit negotiations, sterling will remain vulnerable to speculative activity about the eventual outcome. This would potentially result in an increase in the sterling value of imported feed materials of which the feed industry is a major user, particularly as regards protein sources. The International Grains Council’s latest Grain Market Report
is expected to be published towards the end of February and will be summarised in the next issue of this publication.
Comment section is sponsored by Compound Feed Engineering Ltd
www.cfegroup.com
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