Digital Re-print - July | August 2010
Globalfeed markets - July | August 2010
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COMMODITIES
GLOBAL
GRAIN & FEED MARKETS
Every issue GFMT’s market analyst John Buckley reviews
world trading conditions which are impacting the full range
of commodities used in food and feed production. His
observations will influence your decision-making.
Cheap cereal offers dry up
or, at best, lower specific weights. meal-rich soya will more than make
Some eastern European and former up for disappointing Canadian and
Two key factors Soviet countries which (despite their EU rapeseed crop prospects and a
caused a shift of amid FSU/EU crop concerns emphasis on the middling milling and
feed grade wheats), often have some
good quality too, may also take a hit from dry For oilseed crops, the picture remains
probable flattening out in production
of some other oilseeds including
sunflowers. Provided the crush incentive
emphasis in the
W
weather/heat in terms of volume if not quality. much brighter. Record Latin American soya is there, there is ample if not excessive
orld prices of cereals, reckoning. And even if this year’s world wheat However, these crops are not yet in and it crops have been confirmed and, while a bit oilseed raw material to keep meal buyers
maize market as measured on the crop (details below) does fall, say, 10m or 15m is quite possible that some of the countries slower than expected coming to market, well supplied.
benchmark Chicago tonnes below the previously assumed level, the getting a bit too much of the sunny dry weather these will eventually fill the coffers to Meanwhile, for European grain and feed
during the last futures market – were carryover into 2011/12 season will still be ample, will also see some bonuses in terms of higher overflowing, resulting in stock buildups to customers, much of the benefit of cheaper
getting incredibly cheap during June – though probably no longer larger than this year’s. proteins – so it is maybe it bit early to worry record high levels during 2010/11. The US has international prices has been denied by the
month. One was maize edging towards three and wheat Maize, as the main constituent of global coarse/ about constant big hikes in price premiums meanwhile expanded its soyabean plantings chronic weakness of the euro. Thanks to the
to four-year lows under pressure from feed grain supply, is hardly in a squeeze either. demanded for top grade milling wheats. to a record level too. The massive influx of almost daily drip of worrying news about Euro-
an official update excessive stocks, uncertain forward Although US ethanol demand for this grain is still
demand for feed and expected large expanding, the growth rate has definitely slowed.
of US planted area world crops. But the picture has Demand for maize from the animal feed sector,
which came in
changed radically in the last few weeks
as those optimistic world wheat crop
while apparently higher than expected in the US Eco Dry – The new
Generation of Cereal Dryers
itself, is also subject to some caveats going forward
estimates have started to slide on amid still slack conditions in livestock markets
well below trade unexpected weather problems – first there. Export demand for US maize, especially
in Canada, then Europe itself and from some of the key Asian importers is also
expectations. The latterly in the former Soviet Union, looking less than stellar as the global economic
where coarse grain output could take recession threatens a ‘double-dip’ and many
other was a lower an even bigger hit from droughts and buyers show increasing interest in an abundance
heat-waves. of discounted feed grade wheat.
than expected US At the same time the US has not only found itself That said, the radical turn downwards in wheat
with less old crop maize stocks than it expected crop estimates is a caution to the bears, at the
quarterly stock (a legacy forewarned in earlier GFMT’s amid last least, a warning that markets may have become
year’s poor quality/lower energy value crop) but complacent about excessive supply bringing ever
estimate at June a much smaller than expected increase in planted cheaper prices. There is also the possibility that the
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1, the result of weather promising bumper yields. than expected earlier after Canada’s spring wheat ● Energy saving potential of up to 20 %
(drying maize using our continuous cooling column)
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Stocks of wheat, as our regular readers will sowings were held up and eventually downsized
feeders and ethanol be well aware, are still huge by any traditional by incessant wet weather. The US, which sowed
● gentle drying process
far less winter wheat this year, has also ● uniform drying temperatures reducing
consumers having had some problems with rain slowing hotspots
harvest and resulting in some lower ● minimized discharge of fines (canola, flax)
to use more of last than expected proteins and vomitoxin Contact us. We would like to discuss our dryer
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scares for soft wheats – though that innovations and new developments with you.
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year’s lower quality situation seems to be improving as
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heatwaves and a prolonged drought Schmidt-Seeger GmbH
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36 | July - august 2010 Grain &feed millinG technoloGy Grain &feed millinG technoloGy PREVIOUS PAGE NEXT PAGE July - august 2010 | 37
COMMODITIES
zone indebtedness, the common currency While cereal markets had probably become the latter’s strength to the list of reasons abandoned acres. With some trade estimates conditions that were producing some possible Canadian, Black Sea or European
recently sank to its lowest level in almost four oversold – and farmers certainly needed some (weak euro, better export demand, lower ranging down to as little as 7.3m ha (versus worryingly low proteins. These seem to losses not yet factored in, this would not
years versus the US dollar – in which most respite from the endless decline in crop values than expected domestic crop) why EU prices last year’s 9.9m), there is talk of a total wheat have improved somewhat since the harvest make much of a dent in the huge 2010/11
commodities are traded internationally. Since – current supply/demand balances offer no should have a pre-harvest rally. The firm EU crop as low as 18.5m compared with recent moved north under clearer skies. The US surplus stock which the IGC estimated over
the start of this year, whatever has gone on in justification for a return to the bull markets export price, of course, spills over into the hopes of 24.5m and last year’s 26.5m tonnes. soft red winter harvest was also challenged 200m tonnes in late June. Overall, then, wheat
for cereals, let alone oilseed value of domestic grain too. As always with Canada, the proportion of by showers causing quality problems including
products. Lower than expected At the lower end of the scale, the ‘Black top grade bread wheats in the total harvest greater incidence of vomitoxin in some states.
wheat and coarse grain crops will Sea’ exporters had been offering much will depend on weather in the run up to crop Among other key milling wheat producers,
probably mean firmer prices in cheaper wheat with milling (grade 4) recently maturity and harvest. However, on current Australia still seems to be on course for its
the season ahead than would have down to just $160, about $15 cheaper than pointers, supply from this source does look third large crop in a row with a developing
been expected a month or two the EU, and feed grades as cheap as $138. likely to fall and this has already driven export La Nina climate phase expected to bring
ago. But, barring a late weather However, in recent weeks that has all prices of CWRS sharply higher. adequate rains. Argentina sowed a lot more
upset in the USA, supplies remain changed amid worrying reports coming out Offsetting that slightly, the USDA did wheat for its next crop and could expand
large enough to keep this rally of the former Soviet Union about heat and keep its US spring wheat sowing forecast output to about 12/14m tonnes from last
in check. drought affecting production on this year’s at a surprisingly high 5.63m ha against trade year’s unsually poor 9.6m. If the growing
the international cereal, oilseed and product smaller sown areas. The Russian crop is now ideas it would lop this figure. This crop is in season goes well, this important breadwheat supplies should be more than adequate to
markets, this has added almost 15% onto Euro- Commodity highlights - seen about 49/51m tonnes compared with the best condition seen for many years and, supplier could have twice as much for export meet demand – though some questions about
quoted prices - although the effect has been 57/60m earlier and last year’s 61.7m while if the weather continues to co-operate, it as last year’s measly 4.5m. quality remain to be answered by harvests in
ameliorated in recent weeks by a partial rally in World wheat crop still over-rated? Ukraine’s could be down from 20m to 18.5m should yield well in terms of both quantity and Turning briefly to demand, world wheat some key producing countries.
the common currency and a downturn for the Recent weather problems in Canada, tonnes. Kazakhstan, often a useful source quality. However, the US hard breadwheat consumption is expected by the International
dollar amid a massive EU debt rescue package Europe and the FSU have resulted in the of harder/quality breadwheats is meanwhile export benchmark (DNS) is still rising to Grains Council to rise from 649m to 658m Less maize supply than
and renewed US economic gloom.. US Department of Agriculture lopping 7.5m expected to produce only 11m tonnes this reflect the threat to Canada’s crop, reaching tonnes, largely in the feed sector and
If there is a plus side to these economic tonnes off its world wheat crop estimate and year against earlier hopes it would repeat a 19-week high of $296/tonne in mid-July. especially in Asia. That should be easily thought
worries it is the quelling of speculators’ recent reports from the countries concerned last year’s 17m tonne crop. All of these US hard red winter bread wheat – the accommodated if the crop reached the IGC’s Two key factors caused a shift of emphasis in
enthusiasm to invest in perceived riskier suggest there may be more ‘downside’ before figures are well down on USDA forecasts, largest component of US wheat exports – projected 664m tonnes. Even if we knock the maize market during the last month. One
assets – a group in which commodities like all the crop numbers are counted. However, suggesting that at least 8.5m tonnes more has had a shaky start to harvest under damp off, say, 10m to 15m tonnes to account for was an official update of US planted area which
grains figure prominently. This is likely to with world wheat stocks still riding at 8-year to come off the world wheat crop forecast.
remain the case while Euro-zone anxiety highs – and likely to stay loose well beyond Fortunately for consumers, the Black Sea
persists, especially with the US economy still the end of the new season, there is nothing in Region is going into 2010/11 with fairly large
showing signs of faltering and the Chinese,
seen as the engine of global economic
recovery, trying to rein in their own growth.
the overall wheat balance to explain the still
huge premium or ‘contango’ quoted on the
forward futures markets. Chicago May 2011,
stocks for the second year running (about
19m tonnes) which should be be used to
supplement exports. Readers may recollect
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38 | July - august 2010 Grain &feed millinG technoloGy Grain &feed millinG technoloGy PREVIOUS PAGE NEXT PAGE July - august 2010 | 39
COMMODITIES Back in 1900, a Swiss man invented muesli. Our passion for the finest flakes and
grains has just as long a tradition. Buhler has mastered the entire process from
came in well below trade expectations. The forecasts for world total import demand for of cottonseed, peanuts, palm kernels and
the kernel to the flake, and from oats, millet, barley, and spelt to corn and soy. Talk to
other was a lower than expected US quarterly this grain only about 3.5m tonnes higher for sunflowerseed, new USDA forecasts indicate. us – we’ve developed equipment and methods that are highly effective at every
stock estimate at June 1, the result of feeders 2010/11 than in the past season. While the US is heading for another big, possib
and ethanol consumers having to use more of Overall, world corn production in 2010/11 ly record soyabean crop this year, Argentina is stage of the process, with high yields, unparalleled cleanliness and outstanding
last year’s lower quality crop to get the same is expected to grow from last season;s expected to reduce sowings this autumn (for
end result. With yield prospects still bright, 809m to about 832m tonnes, slightly ahead harvest spring 2011) while both the major Latin product quality. We owe all this to the inventor of the breakfast cereal. And to muesli
the US corn crop is now seen just 3.3m tonnes of consumption needs of 831m. About 10m American producers are expected to see their
lower than in June at 336.4m tonnes. With the tonnes of that is expected in China so if anything yields retreat somewhat from this year’s high lovers all over the planet.
above reduction in starting stocks (still bigger major does go wrong with that crop, analysts levels. The result could be a world soya crop
than last year’s), total availability will be about will have to make some big changes to this of around 251m tonnes – about 8.5m less than
world balance. At this stage that looks the current season’s record level. As far as soya
unlikely, especially after recent good users are concerned this need not present any
rains. A snapshot of other major maize problems as this season’s supply was in record
suppliers shows some mixed trends. surplus. USDA estimates about 65.4m tonnes Bühler AG, Grain Milling, CH-9240 Uzwil, Switzerland, T +41 71 955 11 11, F +41 71 955 66 11
Europe’s own crop is now seen at just will be carried into the new season compared milling@buhlergroup.com, www.buhlergroup.com
under 57m tonnes versus last year’s with just 43.7m last year – so the total soya
55.8m but it has recently been exposed supply will actually be even larger. That means
to some potentially damaging heatwaves that, as long as the crush incentives are there,
and dryness so a downward revision adequate raw materials will be available for all
would not be surprising. USDA was the meal production the market needs. At this
6.4m tonnes under earlier forecasts but only recently forecasting the FSU countries would stage, USDA estimates world meal demand will
about 1.5m below the 2009/10 supply. This in hoist output from 17.9m to 21.4m tonnes but grow from 159m to 168m tonnes. Even then,
itself is not statistically significant enough to that too looks less likely now after the extreme stocks of the raw soyabeans at the close of the
move prices. Neither is the anticipated rise of heat in Russia in the past month. Ukraine new season could still be record large.
5m tonnes in next season’s US ethanol usage managed to export over 5m tonnes in each Where soya supply and prices go, the rest of
of maize which will be neatly offset by lower of the past two seasons and has become an the oilseed/meal complex must follow. Most of
feed/residual demand. US exports are also important subsidiary supplier. In the southern the other oilseeds are forecast in larger supply
seen unchanged in 2010/11, so stocks carried hemisphere, Argentina and Brazil both expect in 2010/11, the main exception being rapeseed.
into 2011/12 will be less than 3m tonnes below slightly smaller crops but current thinking is that Canada’s crop, earlier thought capable of
those brought into this season. both will keep exports up at last year’s good reaching 12m tonnes has been planted late on
A third factor pushing up maize value levels, Brazil maybe even exporting more as it smaller than expected area after incessant rains
recently has been the steep rise in wheat prices draws down large carryover stocks too. and could be lucky now to scrape 10m. The
which maize has been obliged to follow as a Among the other coarse grains, world EU harvest, planted on a larger area is also
competing feed ingredient. However, whereas barley production prospects have been seeing stress from droughts and heatwaves
Chicago wheat has risen by as much as $1.73/ marked down sharply in recent weeks to and too much rain in some eastern member
bu ($63/tonne) or 40%, maize has only gained account for potential crop losses in Europe states with the current forecast of 20.6m (v last
57c ($22/tonne) or about 17%. This seems and the former Soviet Union. Total output year’s 21.5m) seen open to further reduction.
to underline the US trade’s fairly sanguine is seen around 135m tonnes compared with However, by drawing on stocks and importing
appraisal of the domestic balance – that 142.5m earlier, last year’s 149m and 2008/9’s more whole rapeseed, the EU is expected to
supplies will be adequate to meet demand. 155m tonnes. World barley producers are keep crush and meal production close to the
Maize prices have also been anchored carrying about 5m tonnes more stock into past season;s high levels.
by a sense of anti-climax after all the hoo- 2010/11 than they managed the previous This year’s record South American soyabean
hah two months ago about China emerging year but with world consumption expected production has helped to keep prices down
as a mega-buyer of US corn. In the event, to exceed output by about 9m tonnes, the in Europe in recent months. Since May, meal
China’s own crop appears to be doing much stock figure will shrink by almost 6m tonnes in Hamburg has declined from about $292/
better than thought earlier, when cold and in 2010/11 to a three-year low of about 27m. tonne for nearby deliveries to $282 and as
dryness threatened a potentially poor result. Apart from these tighter supply balances, low as $273 at one point. Euro-quotes have
Although USDA’s forecast looks a bit high barley prices will also be forced to rise with been also fallen but at a slower pace during the
at 166m (and last year’s Chinese crop may the trend in EU and world wheat prices. period of extreme euro weakness. Cheaper
well have been 10m below the official 155m meal in Europe has contrasted with a stronger
figure), this second largest world consumer of Oilmeals/proteins US market, where tight old season soyabean
maize is showing no sign of concern about the supplies and strong Chinese demand have forced
adequacy of supply. So far it has bought about WORLD OILSEED supplies will show no crushing well below year-ago levels. Under
2m tonnes from the US, probably as insurance growth in the new season ending August 2011 current conditions of good supply, meal prices
when the crop was looking vulnerable. Ideas as smaller South American soyabean crops are expected to stay fairly stable until the
that it might take another 5m or 6m over the and disappointing Canadian and EU rapeseed autumn when Latin American producers reveal
next six months are being played down, leaving production more than offset higher output their sowing plans.
The solution behind the solution.
40 | July - august 2010 Grain &feed millinG technoloGy PREVIOUS PAGE NEXT PAGE
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