Feed
Materials Commentary
By Roger Dean
Raw material prices may be said, in very broad terms, to reflect the available supply relative to demand, modified by factors such as the exchange rate, very relevant in the case of the UK where a significant proportion of feed ingredients is imported from the EU and the US. The latest available Grain Market Report (GMR), published by the
International Grains Council 0n 29 August 2019, has increased world grain production during the 2019-20 crop year from 2,148 million tonnes in the projection made in July to 2,159 million tonnes, an increase of 11 million tonnes or 0.5 per cent. The revised projection is also 17 million tonnes ahead of the provisional outcome for the 2018-19 crop year. The increase in total wheat and coarse grains output in 2019-20
is principally due to a projected increase in US maize output from 334 million tonnes to 342 million tonnes; this, last figure however, is down by 7 per cent compared with the previous growing season and it should be borne in mind that, as IGC puts it, ‘output prospects are still uncertain after a less than ideal growing season.’ IGC has reduced its estimate of soybean output, from the July
projection of 348 million tonnes to 344 million tonnes. The fall in world output in 2019-20 is as a result of what IGC describe as ‘a plunge’ in US production, occasioned by a heavy reduction in acreage and below- trend yields – which falling US output is only partly offset by increases elsewhere. Granted that it is early days for discussing crop prospects for 2019-
20, there appears to be no reason to expect a structural increase in grain and soybean prices at the present time. The latest available data from the United States Department of
Agriculture’s Foreign Agriculture Service (FAS) was released on 12 August. A further update was scheduled for 12 September and will be reported on in the next issue of this publication. FAS’ latest projection of world wheat production in 2019-20
envisages a 3.39 million tonne reduction compared to its previous, July, projection. However, this would leave world wheat production, at 768 million tonnes, well above the levels recorded in 2018-19. The major changes in FAS’ latest wheat projection include a 2
million tonne reduction in Turkish production, although this leaves total production unchanged from 2018-19. The area planted to wheat is estimated at 7.2 million hectares, down half a million hectares from last month’s projection, and down 400,000 hectares from last year; this reflects a shift to other crops. Yield is estimated at 2.64 tonnes per hectare, down by 3 per cent from last month’s projection. Early-season growing conditions were reported as ‘favourable’ but declined in May as dry conditions diminished yield and quality in a number of important wheat growing regions. FAS note that very recent reports confirm the month-to-month reduction in yield. Other significant reductions from the previous month’s projection
include a 1.3 million tonne reduction in the EU’s projected wheat crop. Nevertheless, this is ahead of last season’s outcome by 13.1 million
PAGE 16 SEPTEMBER/OCTOBER 2019 FEED COMPOUNDER
tonnes or 10 per cent from the previous season’s poor harvest. Wheat yields across the EU are estimated at 5.74 tonnes per hectare, up slightly from last month’s projection but up 7 per cent from last year, and above the 5-year average of 5.69 tonnes per hectare. The Russian wheat harvest, at 73 million tonnes, is reduced by 1.2
million tonnes or 2 per cent from FAS’ July projection but 2 per cent up on the preceding season. It should be noted that, as previously, the Russian wheat crop excludes output from Crimea. The total Russian wheat yield is estimated at 2.70 tonnes per hectare, down 4 per cent from last month’s projection and down 1 per cent from last year. Total area is estimated at 27.0 million hectares, up 3 per cent from last month. In sharp contrast, FAS is looking for a 1.6 million tonne increase is
US wheat output compared to the July production. At 53.9 million tonnes, the US wheat crop is estimated at its highest level since the 62.8 million tonne crop harvested in 2016-17. This reflects current crop conditions along with increased yields and the area planted to US wheat. The increase reflects increased production of both winter and
spring wheat while forecast durum wheat production is reduced by about 1 million bushels. Overall, and while it is difficult to delineate between wheats intended for bread making and animal feed, there is only a moderate indication of upward pressure on wheat prices during 2019-20. As regards maize, FAS is looking for an additional 3.1 million tonnes
in 2019-20, an increase over their July projection of just under 0.3 per cent and bringing projected world production to 110.8 million tonnes. The major contributor to this increase is Ukraine. Production of maize in that country is projected to rise to 36.5 million tonnes in 2019-20, an increase of 2.5 million tonnes or 7.4 per cent of FAS’ July projection and, according to FAS and other sources, a record. The current projection is also just under 2 per cent ahead of the previous growing season’s outcome. The current estimate of Ukrainian maize production is a reflection
of higher yields, at 7.45 tonnes per hectare, up 3 per cent from last month, but down 5 per cent from last year’s record. Ukraine’s estimated harvested area for 2019-20 has been increased slightly from 4.7 million hectares to 4.9 million hectares; this figure is based on final sown area data released by the Ukrainian Statistical Service. The total EU maize harvest is currently estimated at 64.8 million
tonnes, up by 600,000 tonnes or just under 1 per cent. Russian maize production has also been revised downwards by half a million tonnes or 3 per cent. The overall picture is for adequate supplies with end of season inventories of 307.7 million tonnes up by 8.8 million tonnes or just under 3 per cent. FAS’ August production of world soybean production in 2019-20
shows a reduction of 8.3 million tonnes or 2.3 per cent compared to their July projection. This picture is dominated by a sharp reduction in US soybean
output, down by 8.3 million tonnes or 7.3 million tonnes. Canada also shows a reduction on FAS’ July projection but by only 100,000 tonnes or 1.6 per cent. The sharply lower US projection is, in part, a reflection of trade
tensions between the US and China. The latest USDA survey data suggests that, although the average US soybean yield is unchanged at 48.5 bushels per acre, lower acreage is entirely responsible for the reduction of expected US production in FAS’ August estimate. As a result, end of season stocks are likely to be trimmed by 8.1 million tonnes or 7.2 per cent, suggesting some late season upward pressure on prices.
Comment section is sponsored by Compound Feed Engineering Ltd
www.cfegroup.com
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