Feed Materials Commentary
By Roger Dean
The projections for the 2018-19 harvest year have become steadily and adversely more weather-affected over the past three months; indeed, drought conditions lie at the centre of this edition. The International Grains Council’s Grain Market Report, issued
on 26 July and currently the latest available, showed wheat availability falling from 736.8 million tonnes to 721 million tonnes, a fall of 2.1 per cent. Significant downgrades for wheat and barley in the EU and the Confederation of Independent States are largely to blame for an 18 million tonne cut in the projection of total world wheat and coarse grains production in 2018-19, to a three-year low of 2,059 million tonnes. In addition, following what the International Grains Council calls ‘disappointing’ results being reported from the ongoing harvest, there is clearly potential for further output cuts in future editions of the Grain Market Report. Reflecting theses aspects, the International Grain Council’s Grain
and Oil Prices Index (GOI) rose by 3.2 per cent compared with the previous month, albeit it should be borne in mind that the GOI includes rice. The sharpest increases took place in barley – up by 10.7 per cent while wheat rose by 7.5 per cent. By comparison, maize rose by a more modest 2.3 per cent while soybeans increased by 2.8 per cent. In July, the GOI stood 1.7 per cent higher than a year-earlier with the greatest increases being recorded for maize and barley. Currently, IGC sees production of what it terms common wheat in
the EU at 131.2 million tonnes during the 2018-19 season, down by 5.2 per cent. Wheat production in Russia is reduced from IGC’s previous estimate of 70.9 million tonnes to 66 million tonnes, a reduction of 6.9 per cent; Ukrainian wheat production is also lower, as is wheat production in Australia. There are small increases in production projected for Canada and the US. Production by the major exporters, defined as Argentina, Australia, Canada, EU, Kazakhstan, Russia, Ukraine and the USA, is projected at 369.5 million tonnes, compared to June’s projection of 380.1 million tonnes, a reduction of 2.8 per cent As regards wheat consumption, IGC is projecting a small overall
reduction, largely in the shape of less wheat being used as feed. The cumulative effects of these changes are likely to see end-of-season what inventories falling from 255.6 million tonnes to 247.2 million tonnes, down from the previous projection of 255.6 million tonnes. IGC has factored in a very small reduction in their projection of
maize production during the 2018-19 run: 1,052.2 million tonnes as against 1,052.4 million tonnes. Comparison with the previous forecast for 2018-19 is difficult because IGC has already started to make projections for 2019-20; however, falls in Argentine and Brazilian maize production are seen as being countered by increases in production in Ukraine and the US. Increased consumption will mean that IGC is looking for a small
rundown in end-of-season inventories from 252.6 million tonnes to 249.4 million tonnes during the 2018-19 run. IGC is looking for an increase in production of soybeans of just
400,000 tonnes compared to their July projection, from 358.4 million tonnes to 358.8 million tonnes. This is largely accounted for by increased in output in Brazil. The latest USDA projections for grains and oilseeds in the 2018-19
marketing year, issued on 10 August, shows that crop prospects have significantly worsened since USDA’s previous, July assessment. This largely reflects, and continues to reflect, drought conditions. The
July edition of World Agricultural Production, published by the Foreign Agricultural Service (FAS) of the United States Department of Agriculture published a satellite diagram illustrating the extent of dryness in northern EU countries. Headlined EU Wheat: Dryness in Northern Countries Cuts Estimated Production by 4.4 Million Tonnes’, it showed areas of substantial dryness in North and Central Germany, Northern France, most of the UK and Ireland and much of Poland, besides Lithuania, Latvia and Estonia, during the eight days 26 June to 3 July. FAS reported that a lack of rainfall in most of northern Europe continued through the month of June, depleting soil moisture, accelerating crop development, and reducing potential yields. Estimated yields were reduced for the second straight month for Germany and Poland, while additional reductions were made this month for Sweden, Denmark, the Czech Republic, the United Kingdom, the Baltics, and Austria ‘due to dryness’. In the August edition of World Agricultural Production, a diagram showing Cumulative Precipitation between 15 June and 6 August as a percentage of normal rainfall indicated that much of the UK, Northern France and Western Germany as well as much of Southern Spain had up to 50 per cent less than normal rainfall during the period in question. FAS data for August shows EU wheat production at 137.5 million
tonnes, down 7.5 million tonnes compared to July’s forecast. The major loser is Germany, down 3 million tonnes from FAS’ July estimate. France is down 1.75 million tonnes while Poland shows a decline of 530,000 tonnes. The UK shows a decline of 0.5 million tonnes. The outcomes are not all negative; the July projections for Spain and Italy have been increased respectively by 1.1 million tonnes and 200,000 tonnes. While FAS has increased its projection of world maize production
from 1,054.3 million tonnes in July to 1,061.0 million tonnes in August, it has reduced its projection of EU maize production during the 2018-19 season to 59.8 million tonnes, down 1.7 million tonnes or 3 per cent from the preceding month’s projection. This reflects a slightly lower area planted to the crop in the EU, down 0.1 million tonnes from last month and last year, but down 9 per cent from the 5-year average. Yield is forecast at 7.22 tonnes per hectare, down 2 per cent from the July projection, down 3 per cent from last year, but up 1 per cent from the 5-year average. Taken together, the indications as regards wheat and maize are for
slightly firmer prices in 2018-19, reflecting slightly reduced supplies and a reduction in end-of-season inventories, as well as continuing drought conditions in a number of key producers. The position as regards soybeans is for an increase in end-of-season inventories relative to the projected crush; there should thus be less pressure on prices which, in consequence, may tend lower than in recent months.
FEED COMPOUNDER SEPTEMBER/OCTOBER 2018 PAGE 11
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