World Markets Overview
A mixed tone prevailed across world grain, oilseed and rice markets during the past month. While average maize and soyabean values weakened on a comfortable nearby supply outlook, wheat and barley prices moved higher on deepening worries about spells of dry, occasionally hot weather.
With crop forecasts being trimmed amid adverse weather, grains production in 2017/18 is expected to decline by 4% y/y.
Consumption is seen remaining high and stocks may contract for the first time in five years. Grains trade in 2017/18 is seen staying close to record levels, underpinned by strong shipments of wheat and maize.
Tied to a contraction in key exporters, global soyabean stocks are seen falling by 8% y/y in 2017/18. Trade is projected to rise to a new high of 148m t.
Rice trade is predicted to climb by 6% in 2017, remaining at a high level in the following year, on demand from buyers in Asia and Africa.
(Source: International Grains Council, Grain Market Report GMR 478 29th June 2017)
World Production Figures
(Source: International Grains Council)
EU feed wheat prices have dropped €3/t over the week, as a rise to a one-year high for the euro and favourable EU/Black Sea weather outweighs the strength in the US market.
Although the weather is currently favourable, the recent heatwave is seen to have caused some damage to the crop, with Strategie Grains lowering its projection for the French soft wheat crop to 1.6 million tonnes from their mid-June report.
UK new crop prices have fallen £2/t on the week, as the governor of the Bank of England triggered a rise in the value of sterling with a clear-cut suggestion that UK interest rates would need to rise. Old crop values seem to be easing as the potential of larger-than-expected old crop supplies, more optimism over new crop production, and waning consumer demand start to weigh on long-holders.
US spring wheat futures have soared to a three-year high as drought conditions in the northern plains increases the talk of greater crop abandonment and concerns over the availability worldwide of quality and high protein wheat supplies. Although some signs of support are starting to drift into the Chicago market on spread trading, quality issues in winter wheats and current favourable weather forecasts for US corn and soy crops continue to limit the gains in Chicago.
Although short-term weather forecasts remain favourable, the long-term forecast (which is hard to trust) brings hotter, drier weather back into the US Midwest, which could stress crops during their key development stages.
(Source: DG AGRI)
In the UK, the first winter barley has been cut and the yields have been between 2.5 and 4t/acre. Spring crops in the UK are looking average to good and the UK may be on track for a big surplus.
The French winter crop is approximately 40% complete. Overall yields and quality are average, however there are some areas achieving yields just below average with high nitrogen, which has made trade participants cautious. The spring barley harvest in France should start in a couple of weeks and expectations are for an average harvest at best.
In the Southern Hemisphere, plantings are advancing and conditions remain favourable in North and South America, however, rainfall is needed in Australia.
The rapeseed market has remained relatively stable this week with sterling/euro moves offsetting the volatility in the Matif rapeseed futures market. Harvest in France has started with yields and quality being reported as slightly above average and the first vessels are loading in the French bay destined for the North European crushing mills.
(Source: European Commission – DG JRC)
(Source: European Commission – DG JRC)
Grains production in 2017/18 is expected to retreat by 3% from the previous season’s record.
The first stocks contraction in five years is predicted, with maize likely seeing the biggest fall.
Grains trade will probably stay high in 2017/18; reductions for wheat and barley account for most of the small projected decline.
Global soyabean supplies are likely to stay elevated in 2017/18 but, due to rising uptake, stocks could contract by 9% y/y.
World Production Figures
With changes mainly for maize (corn), the forecast for total grains (wheat and coarse grains) production in 2016/17 is 8m t higher m/m (month-on-month), at a record 2,120m, up by 5% y/y (year-on-year).
However, because of an increased figure for consumption, especially for feed, the projection for carryover stocks is cut by 3m t, to 513m, still the largest ever.
At 2,053m t (-3% y/y), grains production expectations for 2017/18 are only a little lower m/m. Increased consumption from last time is mostly for industrial use, on upward revisions for maize-based ethanol in the USA and starch in China. This contributes to smaller ending inventory figures for those countries and the forecast for world total grains stocks is cut by 12m t from before, to 479m (-7% y/y). Only a small y/y retreat in trade is anticipated, to 346m t.
Upgrades for South America lift the 2016/17 global soybean outturn forecast by 5m t m/m, to a record of 350m, up by 11% y/y and more than 60m above the prior five-year average. The Council’s projection for 2017/18 production is unchanged from April, at 348m t, a fractional y/y fall. However, a higher figure for opening stocks results in an upward revision to total supplies, which is channelled to increased consumption and carryovers. Nevertheless, inventories are still expected to tighten, mainly in some exporters. Trade is seen rising by 4% y/y, to a fresh peak.
The incorporation of official data for India raises the forecast for world rice output in 2016/17 to a record of 484m t (+2% y/y). The 2017/18 crop outlook is maintained at a high of 487m t. But, due to increased total use m/m, aggregate end-season stocks are predicted fractionally lower than previously, at 119m t, albeit steady y/y. Within the total, major exporters’ inventories could fall by 9% y/y. Traded volumes in 2018 are projected little changed from April, at 41m t.
The IGC Grains and Oilseeds Index (GOI) rose by 2% m/m, including net gains for all the sub-Indices.
The following is a summary of the International Grain Council’s Market report on the outlook for 2017/2018 published on the 25th May 2017.
Total grains production in 2017/18 is expected to decrease by 3.2% to 2,053m t (-1m t m/m) from the record harvest of 2016/17 (2,120m t, +8m t m/m).
World total consumption was raised by 7m t to 2,086m t (-1mt y/y) including
• 692m t for food (+1.3%). 927m t for feed (-0.3%)
• 349m t for industrial use (+1.0%)
• Reflecting larger consumption, ending stocks estimate was reduced to 479m t (-12m t m/m; -6.6% y/y)
World wheat production is projected to reach 736m t (≈ m/m; -2.4% y/y), an above average level.
Small reductions m/m to the US and EU estimates were offset by an increase for India (+1m t to 96.5m t; +12% y/y, a new record). Harvest neared completion in India with improved yields and quality vs. past 2 years.
Wheat consumption is projected at 738m t (≈ both m/m and y/y), matching last year’s record level, incl. 504m t for food use (+1.6%) and 144m t for feed (-5.3%).
World ending stocks are seen at 239m t (-2m t y/y), slightly below the record of 2016/17. While stocks would decrease by nearly 11m t to 68m t in the major exporters, inventories would further accumulate in China reaching 99m t (+8.8%; i.e. 41.6% of world total).
Assuming average yields, world production is forecast at a 5-year low of 143m t (-4.6% y/y) as higher output in North Africa would only partly offset losses elsewhere, incl. Australia (9m t, -35%).
The EU crop is estimated at 60m t (+0.5%), UKR at 8m t (-21%) and RUS at 17m t (-2.5%).
With somewhat tighter supply barley consumption is seen decreasing to 145m t (-1.5%), incl. 98m t for feed use. Uptake by the animal sector is projected at a record of 11.8m t in Saudi Arabia, while feed use would decline to below 2m t in China.
EU Cereals Trade 2016/2017 (as of 24th May 2017)
15.6m t imported to date (18.9m t last year; 13.9m t two years ago)
• 2.99m t soft wheat
• 1.59m t durum wheat
• 10.5m t maize
• 0.39m t barley
33.7m t exported to date (44.2m t last year; 45.1m t two years ago)
• 22.8m t soft wheat
• 4.8m t barley
• 1.34m t durum wheat
• 2.03m t maize
So far, the EU is a net cereal exporter of 18.1m t, against 25.3m t last year and 31.2m t two years ago.
IFA Inputs Project Team Leader John Coughlan has called on the trade to immediately pass through the significant drop in wholesale fertiliser prices to farmers.
Coughlan said, “International wholesale CAN prices have fallen by €30 to €35/t over recent weeks. However, many farmers are not seeing this as importers and many of the larger merchants attempt to maintain prices at artificially inflated levels in an effort to boost profit margins.”
“Demand for fertiliser has increased significantly as the silage season gets into full swing. Keenest quotes for bagged CAN this week are ranging from €215/t to €218/t delivered. Pasture Sward / 27-2.5-5 and Cut Sward / 24-2.5-10 prices have also moved lower with keenest quotes at €318/t for Pasture and €8/t – €10/t over for Cuts. Buyer groups and individuals purchasing significant volumes are achieving further discounts on these prices.”
“No farmer should order a load without first enquiring about the price. It is evident from recent survey results that some farmers are being charged up to €30/t extra where they don’t bargain for a price before placing the order.”
BRIEFING NOTE ON FERTILISERS
6 FEBRUARY 2017
CAN Price increase 30 Jun 2016 – 12 Jan 2017 – €/t €64
CAN % Price increase 30 Jun 2016 – 12 Jan 2017 – 43%
• The continued rise in input costs coupled with static or falling commodity prices is eroding EU farmers’ incomes.
• This cost price squeeze has resulted in the deterioration of the terms of trade for EU farmers and is affecting the competitiveness of EU agriculture.
• Fertiliser, according to Eurostat, is one of the most significant input costs for European producers estimated at €19.2bn in 2014.
o For many countries, it is the single biggest cost.
o For Irish farmers, it is the 2nd biggest expenditure item estimated at €565m both in 2014 and 2015.
• Agricultural Input Cost Indices (1995-2016) from many EU Member States including Ireland shows that fertiliser prices have increased at almost double the rate to other inputs over the last 2 decades.
• This is as a result of protection measures afforded to domestic EU fertiliser manufacturers who operate in a highly-concentrated market.
o Customs tariffs of up to 6.5%
o Anti-dumping duties on ammonium nitrate – ranging from €28.88/t to €47.02/t
• The consequence is a clearly dysfunctional market due to the non-existence of competition.
• The International Food Policy Research Institute (IFPRI) study commissioned by IFA last February clearly demonstrates that:
o The EU fertiliser industry has high levels of concentration.
o EU fertiliser prices are among the highest in the world.
o The abolition of tariffs and duties on non-EU fertilisers would generate €1bn in savings to EU farmers creating a minimum of 17,000 (worst case scenario) and up to 100,000 additional jobs mainly in the agri-food sector.
• The IFPRI report states that, “Based on the observed data, prices in Western European countries actually increased by 123%, while prices in Brazil decreased by 65%; this further suggests that additional factors, such as price fixing and cartels, might be operating in highly concentrated markets such as Western Europe and calls for the need to further examine pricing behaviour and potential market power exertion in the industry. “
• Member State annual savings arising from the abolition of duties and tariffs.
o France €176m
o Germany €172m
o Poland €111m
o Spain €107m
o UK €96m
o Italy €56m
o Ireland €32m
• The application of customs tariffs and non-EU fertiliser imports coupled with anti-dumping duties on ammonium nitrate from Russia is putting EU farmers at a significant competitive disadvantage.
• This is clearly evident in the world grain market where the EU’s main competitors (e.g., producers in the Ukraine and Russia) have access to cheaper fertilizer.
• In recent years, grain from the Baltics / Black Sea region has become increasingly competitive, displacing grain from traditional origins such as France etc. in key export markets.
• In light of the rapidly deteriorating terms of trade for EU farmers, the Commission must remove the anti-dumping duties and customs tariffs on non-EU fertiliser imports.
• EU farmers did not reap the full benefit from the fall in fertiliser prices last season as the price drop came in the latter part of the year when many farmers had purchased the bulk of their requirement.
• In recent weeks EU manufacturers, have pushed through significant wholesale price increases for ammonium nitrate (AN) and calcium ammonium nitrate (CAN):
– CAN (France) + €72/t
– CAN (Germany) + €64/t.
• In summary prompt and decisive action is needed by the EU Commission to eliminate of anti-dumping duties and customs tariffs as:
o EU fertilizer producers’ profitability grows year on year while farmers’ incomes decline
o Substantial and sustained price decreases in energy only partially being reflected in farm gate fertiliser prices.
Grain prices calmed this week after a tumultuous period as markets reacted to the surprise election of Donald Trump, a weaker US dollar and the latest USDA report calling a record US corn yield.
Irish dried grain prices have edged a little lower in line with international prices.
Dried barley spot €153 – €155/t, Jan-Feb €157 – €158/t, harvest 2017 €158/t.
Wheat spot €163 – €165/t, Jan-Feb €168 – €170/t, harvest 2017 €168/t.
Maize spot €174/t, Jan-Oct €175/t, harvest 2017 €175/t.
Soya spot €355/t, Jan – Oct €357/t.
Oat trade is very slow. Indications on an export price indicated at €150 – 153/t delivered port.