Feed
Materials Commentary
By Roger Dean
In its Grain Market Report dated 22 November, the latest currently available, the International Grains Council (IGC) reduced its global estimate for total grain production in 2018-19 to 2,079 million tonnes, a reduction of 1.7 million tonnes from the previous month’s estimate of 2,080.7 million tonnes. This latest estimate represents a decline of 0.8 per cent compared to IGC’s previous estimate of global grain production, published 25 October. Global wheat production in 2018-19 of 728.5 million tonnes
reflected small reductions in EU wheat production – down by 200,000 tonnes – and in Ukrainian wheat production, down by a proportionately greater reduction of 500,000 tonnes. IGC puts world maize production in 2018-19 at 1,073.4 million tonnes, just 300,000 tonnes less than in its October estimate, with EU production down by 600,000 tonnes and with US production downgraded to 371.5 million tonnes, a reduction of 3.9 million tonnes. This is counter-balanced by an increase in Ukrainian maize output to 3.5 million tonnes, equivalent to an increase of 11.7 per cent. IGC has recently started to publish estimates of world soybean
supply and demand. In its latest publication, total soybean production for 2018-19 is estimated at 367.4 million tonnes, two million tonnes less than in IGC’s October assessment. The world’s three major exporters of soybeans (the US, Brazil and Argentina) show a collective reduction in soybean production compared to IGC’s October assessment, of 2.2 million tonnes of which the bulk consists of reduced estimates for the US. Argentina shows a small, 200,000 tonne increase. While there are few changes in the supply and demand situation as
regards wheat and maize, the reduction in the anticipated US soybean harvest is likely to exert the most significant effect on prices as the 2018-19 season advances. The IGC has made its initial estimate for a number of countries
as regards the outlook for 2019-2020. Its initial projection for the area harvested area to wheat in 2019-20 is for a rise of about 1 per cent. Although gains are anticipated in the EU, Russia, the USA and India, ‘inclement weather’ in the early part of the growing season is of ‘some concern’. The area sown to rapeseed may expand, despite an anticipated heavy fall in the EU. In the monthly Production, Supply and Distribution (PSD) report,
published on 11 December by the United States Department of Agriculture’s Foreign Agricultural Service, global wheat output in 2018- 19 was put at 733.4 million tonnes, a marginal reduction of 100,000 tonnes from its preceding assessment. The most significant contributor to this decline was a half-million tonne reduction in Australian wheat production. At 17 million tonnes, the Australian wheat harvest is predicted to be down by 500,000 tonnes or 3 per cent) from November’s
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estimate and down by 4.3 million tonnes or 20 per cent from last year. Harvested area is expected to amount to 10 million hectares, 0.8 million hectares lower than USDA’s November assessment and down 2.25 million hectares - 8 per cent - from last year. The Australian wheat yield is forecast at 1.7 tonnes per hectare, 17 per cent below the 5-year average, reflecting ‘persistent dryness and subsoil moisture deficits in major portions of Australia’s winter crop region’, with rainfall well below average since sowing operations commenced in May. The next estimate of Australian wheat production should yield more accurate data as the harvest is due to be completed by the end of 2018-19. USDA has uprated its estimate of maize production in 2018-19 by
960,000 tonnes to 1,099.9 million tonnes. This reflects a combination of changes. USDA estimates Ukraine maize production at a record 35 million tonnes, up by 1.5 million tonnes from its November estimate and up by 10.9 million tonnes from last year. It is also 4.1 million tonnes above the previous record crop harvested in 2013. Yield is estimated at 7.78 tonnes per hectare, 4 per cent above last month’s estimate and a massive 43 per cent above last year; this reflects high yield attributed to favourable growing conditions throughout the season. The estimated area harvested to maize is unchanged at 4.5 million hectares. The yield reported by the Ministry of Agrarian Policy and Food as of December 4, 2018 was 21 per cent above the previous high for that date. The Ukrainian estimate contrasts dramatically with South Africa
where USDA’s latest estimate of maize production is down by a million tonnes, compared to its November estimate. This reflects the area planted to maize; at 2.4 million hectares, this is down 0.2 million hectares or 8 per cent from the previous estimate and down 0.23 million hectares or 9 per cent from last year. Planting is currently underway but behind schedule due to below-average rainfall during the last quarter of 2018. Yield is forecast at 5 tonnes per hectare, slightly above the 10-year trend; critically, this assumes normal weather for the remainder of the growing season. USDA has upgraded its estimate of soybean production in 2018-19
to 369.2 million tonnes, an increase of 1.7 million tonnes. The major contributor to this is a 1.5 million tonne increase in Brazilian output. At a record 122 million tonnes, this is up by 1.5 million tonnes from the previous monthns estimate and up 1 per cent from the previous year. Harvested area is estimated at 36.2 million hectares, down 3 per cent from last month, but up 3 per cent from last year. The area planted to soybeans continues to expand for the thirteenth successive year. While there is no indication in the USDA data of any imminent upward pressure on prices. Another significant contributor to the price of raw materials is the exchange rate, given the fact that a proportion of raw materials used by the feed industry in the UK are imported, particularly as regards the protein content of the ration. On 16 April 2018, a pound purchased $1.4328 or €1.1582; on Christmas Eve, the rates had fallen, respectively, to $1.2649 and €1.1099. It is likely that, in the continuing uncertainty surrounding Brexit,
that sterling will come under further pressure. In addition, there is talk of an El Niño event in 2019 which, if it occurs, is likely to manifest its effects in the shape of unusual weather and follow-on impacts on agricultural production.
Comment section is sponsored by Compound Feed Engineering Ltd
www.cfegroup.com
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