COARSE GRAINS

PRICES

Sharp decline in international prices   

International prices of all coarse grains declined sharply in recent months, to well below their peaks in June. Favourable global crop prospects and ample supplies of feed wheat in world markets weighed heavily on prices. The downturn was further aggravated by the market expectation that a global economic slowdown could lower demand for coarse grains and that the steep drop in crude oil prices could also depress demand (for maize in particular) from the ethanol sector. In October, the benchmark United States maize (No. 2 Yellow, Gulf) price averaged USD 184 per tonne, 35 percent below the June high. The continuing strength in the United States Dollar also contributed to the decline in international quotations. By late October, the March maize futures at the Chicago Board of Trade (CBOT) hovered around USD 165 per tonne, down over 18 percent from the previous month. Having halved from their record levels of late June, Maize futures have fallen to their lowest levels since late 2007. 

Table 3. World coarse grain market at a glance

PRODUCTION

Record production in spite of smaller crop in the United States

FAO’s latest forecast for world production of coarse grains in 2008 now stands at an all-time high of 1 114 million tonnes, 3.3 percent above the record of  last year. Output of maize, the major coarse grain, is now set to reach 798 million tonnes, up almost 2 percent from 2007. The increase is attributed mostly to a strong recovery in Europe’s production after drought in 2007, although larger crops are also estimated in all other regions with the exception of North America. Record high crops have already been gathered in South America, where plantings increased and ideal weather conditions favoured above-average yields. In Southern Africa, where the 2008 maize harvests are also complete, the subregion’s aggregate output reached a new record. However, the high production level is mostly attributed to a large crop in the major producing country of South Africa, as aggregate output elsewhere in the subregion fell. In the northern hemisphere, in North America, the maize harvest was slow to get underway in the United States, where cool and wet conditions hampered crop maturation. As of mid-October, progress was still well behind normal pace. However, besides the delay, this season’s weather has been favourable for yields and output is now expected to be well above earlier expectations, although slightly below last year’s exceptionally high level. In Central America, large plantings, good weather and increased use of inputs, could lift the region’s maize production to a new record in 2008. In Europe, the maize harvest is still underway, and as predicted, output is turning out well up from last year's drought-reduced level. In Asia, the maize crop is forecast to increase marginally from last year's already high level, mainly on account of a larger crop in China (Mainland), by far the biggest producer in the region. Regarding barley, the second most important coarse grain, the latest forecast points to a 12 percent increase in the global production in 2008. Virtually all of the increase is attributed to European producers where, in addition to some area increase, yields recovered sharply in several of the eastern countries that were badly affected by drought in 2007. A recovery, after drought last year, is also expected in Australia. These gains more than offset an estimated reduction in 2008 barley output in Asia, because of adverse dry conditions affecting important producers in the Near East such as the Islamic Republic of Iran, Iraq and Turkey. The forecast of world sorghum output in 2008 remains virtually unchanged at some 64 million tonnes, about 3 percent up from last year. Larger outputs in the main African producing countries, most notably Nigeria, and in Brazil and Australia, are expected to more than offset generally smaller crops elsewhere, particularly an anticipated 7 percent reduction in output in the United States, the world’s largest producer.

TRADE

Coarse grains trade falls sharply below the record of the previous season  

After surging to a record volume in 2007/08, world trade (exports) in coarse grains in 2008/09 (July/June) is forecast to contract sharply to 114.5 million tonnes from roughly 130 million tonnes in 2007/08, driven by smaller trade in maize and sorghum. International maize trade in 2008/09 is forecast at 87 million tonnes, down almost 14 million tonnes from the record in 2007/08. World trade in sorghum is also forecast to drop sharply, to 5.5 million tonnes, down over 4 million tonnes from last season’s record level. However, trade in barley could expand by 3 million tonnes from the previous season to 18.5 million tonnes on the back of larger export availabilities and lower international prices. Trade in other coarse grains is expected to change little from last year’s levels, totalling roughly 3.5 million tonnes.

Except in Europe, coarse grain imports by most regions are expected to remain close to the previous season’s level. The sharp increase in imports by the European Union accounted for the bulk of the expansion in world trade in 2007/08, but a complete turnaround this season could result in an equally significant drop in imports by member states, which would be responsible for much of the decline in global coarse grains trade. The shortfall in feed wheat last season resulted in exceptionally large imports of maize and sorghum but following this year’s recovery in wheat production, the volume of coarse grains imports by the European Union is expected to return to more normal levels, implying a cut in their imports by some 17 million tonnes, or 77 percent, from the previous season’s high.

In Asia, aggregate imports may reach roughly 60 million tonnes, close to the previous season’s peak. Deliveries of maize and barley to the Islamic Republic of Iran are forecast to increase markedly following the drought induced production shortfall in the country. Much larger barley imports are also expected by the Syrian Arab Republic because of reduced production. The world’s largest barley importer, Saudi Arabia, is likely to purchase more barley from world markets this season, due to lower international prices and strong domestic demand. However, maize imports by the Republic of Korea are forecast to decline, mainly on account of larger substitute purchases of feed wheat. Smaller maize imports are also foreseen in Israel, as utilization of wheat and Distiller Dried Grains (DDG) for animal feed expands.  

In Africa, total coarse grain imports are forecast to rise slightly, to 16.7 million tonnes. Most of the anticipated increase is in the form of maize imports by Egypt and Kenya, and barley imports by Tunisia. By contrast, following a recovery in its maize production, South Africa is expected to reduce international procurement and resume its position as the largest maize exporter in Africa. Among countries in Latin America and the Caribbean, imports by Mexico, the region’s largest importer of coarse grains, are forecast to rise, especially for maize and sorghum. Mexico was initially expected to import less this season because of favourable domestic production prospects but the latest forecast puts Mexico’s output at nearly the same level as in 2007; therefore more supplies will be needed to meet the strong growth in domestic food and feed demand. Imports by Brazil could be halved, given its record maize crop this year. Smaller maize imports are forecast for Cuba, largely on account of high international prices.

As a result of weaker world import demand compared with the previous season, several exporting countries will cut their shipments in 2008/09. The most significant reductions will be felt by the major exporters, in particular the United States, the world’s largest exporter, which is forecast to ship at least 15.5 million tonnes, or 22 percent, less coarse grains this season compared with the last. Smaller shipments are also anticipated from Argentina, the European Union, and Canada. The lower export forecast (mostly barley) from Canadaand the European Union also reflects stiffer competition from Ukraine and the Russia Federation, which hold exceptionally large export supplies, following a recovery in their production. Larger crops could also boost sales from Australia and South Africa. By contrast, exports from Brazil, China (Mainland) and India may well fall below previous season’s levels.  

UTILIZATION

Total utilization in 2008/09 expanding at a slower pace

World utilization of coarse grains in 2008/09 is forecast to reach 1 109 million tonnes, up 3.3 percent, or 36 million tonnes, from the previous season. While this growth is above the ten-year average, it remains well below the almost 6 percent rate of expansion experienced in 2007/08.

High coarse grains prices, particularly during the first half of the current marketing season, are partly responsible for the expected reduction in feed utilization, which is forecast at 634 million tonnes, 4.5 million tonnes, or nearly 1 percent, less than the estimated level in 2007/08. Large supplies of feed wheat as well as non-grain alternatives such as DDG are also considered important factors behind the forecast decline in coarse grains feed usage in 2008/09. In addition, feed demand is seen to be contracting, in view of the possibility of an economic slowdown that could lead to substantial rationing of consumer demand in the leading markets of North America and Asia. In the developed countries, following a 4 percent expansion in 2007/08, total feed utilization in 2008/09 is forecast to decline by 2.5 percent. In the United States, the largest world market, coarse grain use as feed may drop by as much as 13 percent, against a growth of 9 percent in the previous season. This sharp contraction would more than offset the anticipated combined increase in the European Union, Ukraine and the Russian Federation. By contrast, feed utilization of coarse grains in the developing countries is forecast to continue expanding, albeit at a slower rate (1.7 percent) than in the previous season (3.5 percent). Among the largest markets, it may grow in China, Brazil and Mexico, by around 2 percent, and in India, by over 1 percent. However, in several developing countries (Ethiopia, the Islamic Republic of Iran, Iraq and the Sudan) feed use could decline sharply because of high prices and/or reduced domestic supplies.

Total food consumption of coarse grains is forecast to reach 188 million tonnes, up 1 percent from the previous season. The increase would be mostly concentrated in developing countries situated in Africa and Central America, where domestic supplies are expected to recover following larger local crops. The forecast increase would allow the annual per caput food consumption of coarse grains in the developing countries to remain steady at around 29 kg.

Unlike food and feed utilization, industrial use, especially for production of biofuels, is expected to demonstrate a sharp expansion in 2008/09. Most of the increase is expected to be again driven by larger maize use for the ethanol sector in the United States, which in 2008/09 is forecast to reach roughly 101 million tonnes, up by as much as 25 million tonnes, or 33 percent, from the already high level in 2007/08.

STOCKS

Marginal increase in world ending stocks  

World stocks of coarse grains for seasons ending in 2009 are currently forecast at 172 million tonnes, up 3 million tonnes from their opening level. As a result, the world stocks-to-use ratio for coarse grains is expected to approach 16 percent, which would be around one percentage point above the estimated ratio in 2007/08, but still below the ten-year average of more than 18 percent. However, the major exporter's stocks-to-disappearance ratio (i.e. domestic consumption plus exports) could decline slightly, to 11 percent, down one percentage point from 2007/08 and below the ten-year average of over 15 percent. The decline is mainly driven by expectation for lower ending stocks in the United States.

Among the major coarse grains, maize stocks, which represent almost 70 percent of total coarse grains inventories, are forecast to drop to 124 million tonnes, down 3 million tonnes from the opening level. The expected decline in maize carryovers is largely driven by a sharp reduction in the United States, where stocks could be drawn down by some 14 million tonnes to balance a lower production in 2008 and an expected increase in total utilization. Part of the anticipated decrease in maize stocks in the United States is expected to be offset by increases in several other countries; notably China (up 6 million tonnes), Brazil, (up 3 million tonnes), and South Africa (up 1.5 million tonnes). World ending barley stocks are forecast to increase to 30 million tonnes, from nearly 26 million tonnes at the start of the 2008/09 season. This increase would mostly reflect larger carryovers in the European Union (up 3 million tonnes), the Russian Federation and Ukraine (up 1 million tonnes in each country). World sorghum inventories are also forecast to increase slightly (by 1 million tonnes), to just over 7 million tonnes. Most of the increase in expected in the United States and Mexico, more than offsetting a decline in the Sudan, Africa’s second largest sorghum producer after Nigeria.