|††Global Market Analysis|
International prices becoming firmer
Deteriorating prospects for this year's production have been supportive to prices of coarse grains in recent weeks. Although demand, particularly for feed, is expected to remain subdued mostly as a result of the global economic slow down, international prices of coarse grains received some uplift from tightening supplies of feed wheat and a surge in soybean and meal prices. In May, the price of United States' maize (No. 2 Yellow, Gulf) averaged USD 180 per tonne, the highest since October 2008 but still some 36†percent below the peak reached in June 2008. Prices in the futures market have also increased sharply in recent weeks, helped by a sharp rise in energy markets and prices of soybeans. By the fourth week of May, the December 2009 contract at the CBOT hovered around USD†177 per tonne, the highest in six months. Tighter export supplies in South America are expected to boost sales from the United States and result in a significant decline in stocks in that country. This prospect is providing support to international prices while a weakening United States Dollar is also seen as sustaining high prices.
Table 4. World coarse grain market at a glance
* Jan-May 2009
Drought sharply reduces South America's main 2009 maize crops but prospects remain satisfactory elsewhere
With the first of the major 2009 coarse grain crops already gathered or currently being harvested in several countries around the world, FAO forecasts world output of coarse grains in 2009 at 1 098 million tonnes, 3.8†percent down from last year's record level but still the second largest crop in history. Africa is the only region where output is foreseen to increase in 2009, and most of that in drought recovering North Africa. Aggregate output in Asia should remain virtually unchanged from last year's satisfactory level but throughout the other regions, smaller crops are expected on account of drought or lower planted area after exceptional high levels last year.
Table 5. Coarse grain production: leading producers
|Country*||2008 est.||2009 forecast||2009 over 2008|
|United States of America||326.5||323.5||-1|
In South America, harvesting of 2009 main season maize crops started at the end of February and preliminary estimates indicate an aggregate production of some 75 million tonnes, about 18†percent below the 2008 record level. The sharp contraction is a consequence of reduced plantings and the prolonged drought that affected yields in several key producing areas. In Argentina for instance, maize production is forecast to fall by some 40†percent below the excellent harvests of 2008 and 2007 and 28†percent below the five-year average. A substantial decrease in maize production is also expected in Brazil where its first season's output is estimated at 33.7 million tonnes, some 16†percent below the previous year's record.
In Southern Africa, the 2009 maize harvest is underway and preliminary estimates point to a record high production. A reduction of 11†percent in South Africa from the previous year will be more than compensated by improved harvests underway in other countries, mainly Malawi, Zambia and Zimbabwe.
In the northern hemisphere, planting of the major 2009 coarse grain crops is advancing. In North America, according to the United States Department of Agriculture's (USDA) Prospective Plantings Report, farmers in the country are expected to further reduce the area of maize in 2009, but only slightly to 34.4 million hectares, after planting 34.8 million hectares in 2008. Moreover, as was the case last year, the area removed from maize is expected to be mostly marginal land, where better returns are expected from soybean crops - a surer option for farmers. In the ten key maize producing states, where the highest yields are generally achieved, aggregate maize area is actually forecast to increase slightly compared with last year. Based on these early planting indications, and assuming normal weather for the remainder of the season, maize output in the United States is forecast at 307 million tonnes in 2009, virtually unchanged from last year's crop, which stood as the second highest on record.
In Europe, maize output is also forecast to fall from last year's high level when a particularly large area was sown, but would still equate to the five-year average level. Production is seen to ease back among main producers in the European Union after large crops last year, and adverse spring weather in Ukraine looks set to limit output there quite considerably compared with 2008.
This year's maize crop in Asia is forecast just marginally below last year's bumper level at 230 million tonnes. Production in China, by far the biggest producer in the region, is expected to remain well above the average of the past five years at 163 million tonnes.
Regarding barley, the second most important coarse grain, global output is forecast to decrease in 2009 by almost 5†percent to about 147 million tonnes. In Europe, output is seen to fall by over 9†percent. Similar to the case of wheat, aggregate plantings are seen to ease back after last year's exceptional level with land put back to oilseeds or voluntary set-aside, while yields are assumed to return to average levels. In North America, barley production in Canada and the United States is also expected to be scaled down somewhat. By contrast, a sharp recovery is in prospect in North Africa, where output in Morocco is forecast at more than double last year's drought-reduced level.
World sorghum output in 2009 is forecast at about 61 million tonnes, down 6.7†percent from the previous year's crop. A forecast reduction of about 19†percent in the United States, by far the world's largest producer, accounts for most of the decrease. An average crop thereabouts has already been gathered in Australia, although down from the previous year's bumper level.
World trade in coarse grains in 2009/10 to remain flat
Forecasting coarse grain activity for the new season is subject to significant uncertainties at this time as key harvests in the northern hemisphere producing countries are still months away and final results will depend largely on weather developments, especially during the critical summer period. Nevertheless, world trade in coarse grains in 2009/10 is expected to reach 112 million tonnes, nearly unchanged from the 2008/09 estimate. Among the major coarse grains, world maize trade in 2009/10 is forecast to reach 85†million tonnes, up 4†percent from 2008/09 but this anticipated increase is likely to be offset by a 13†percent decline in barley transactions to 18 million tonnes. For other coarse grains, trade in sorghum, oats and rye is forecast to decline marginally, to 5.5 million tonnes, 2.5 million tonnes and 500†000†tonnes, respectively.
The current economic slow down is likely to impinge significantly on world trade in coarse grains. This is because demand for coarse grains is largely driven by developments in the livestock sector which, in turn, is very sensitive to economic conditions. In addition, the financial crisis, particularly the difficulties in obtaining letters of credit and financing, will contribute to slowing or even stagnating demand by traders and feed manufactures. On the positive side, the prospects for lower supplies of feed wheat as an alternative to maize, coupled with a tightening meal market, increase the attractiveness of major coarse grains. This is especially the case in Asia, the leading market, accounting for nearly one-half of world trade in coarse grains. In this region, total imports are forecast to increase, albeit slightly, to an all time high of 60 million tonnes in 2009/10. Higher maize imports in the Republic of Korea and barley purchases by Saudi Arabia are likely to more than offset declines in maize and barely inflows to the Islamic Republic of Iran.
In Africa, total imports could be smaller in the new season compared with 2008/09. Aside from small reductions in purchases by several countries in northern Africa on account of higher anticipated production, the bulk of the expected decrease is foreseen to occur in the Sub-Saharan region, mostly in response to good output prospects, especially in Kenya, Mozambique, and Zimbabwe. Total imports by countries in Latin America and the Caribbean are forecast to remain unchanged from the previous season's level. Mexico, the region's largest importer, is seen to buy more maize due to a likely reduction in its domestic production but Venezuela is forecast to cut its procurement sharply because of the country's record maize output this year. Elsewhere, in Europe, total imports could be slightly higher in the European Union compared with 2008/09 because of reduced supplies of feed wheat and anticipated reductions in barley and maize crops.
Based on current import prospects for 2009/10, export supplies are expected to be sufficient in spite of the anticipated sharp reductions in maize availabilities in Argentina as well as lower supplies of barley in the Russian Federation and Ukraine. However, maize shipments from the United States are forecast to increase, making up for most of the decline in Argentina and anticipated smaller shipments from the Republic of South Africa. Despite lower production, Brazil is likely to export as much maize in 2009/10 which could match the 2008/09 record and solidify its position as the world's third largest maize exporter after the United States and Argentina. Maize exports from China (Mainland) could increase slightly while India is likely to ship at least as much maize as it did in 2008/09. In the shrinking global barley market, small increases in exports from Australia and Canada are likely to offset a possible reduction in sales from the European Union.
Feed use stagnates but some growth is expected in food and industrial utilization
Based on the preliminary forecast for world production of coarse grains in 2009, total utilization of coarse grains in 2009/10 is forecast at 1 118 million tonnes, up only 1†percent, or roughly 11 million tonnes, from the estimate for 2008/09 and around 1†percent above the ten-year trend.
In contrast to the sharp year-on increase in feed utilization witnessed in 2008/09, early indications for 2009/10 do not point to any expansion in feed utilization of coarse grains and is accordingly forecast to remain close to 640 million tonnes. The economic recession in the United States and several other industrial countries is expected to impact the consumption of meat and other animal products with direct negative effects on the demand for feed grains. As a result, total feed utilization in developed countries is set to shrink, led by the United†States where the contraction may approach as much as 3†percent. By contrast, feed utilization in the developing countries could expand by a modest 1.6†percent, mainly driven by continued demand growth in China.
Global food consumption of coarse grains is forecast to increase to 194 million tonnes, up 1.3†percent from 2007/08. This growth is most evident in Africa, particularly in the Sub-Sahara region where production is set to rise and where maize in particular has become more accessible in a number of countries.
The expanding use of maize for ethanol production, particularly in the United States, remains the principle driving factor behind growth in the industrial usage of coarse grains. Total utilization of coarse grains for the production of ethanol was some 110 million tonnes in 2007/08 and this is likely to increase to 119 million tonnes in 2009/10. This represents an increase of nearly 8†percent which, although significant, would be below the annual growth rate of well over 30†percent in previous years. Based on an official report from the United States, maize used as feedstock for production of ethanol in the United†States is expected to approach 94 million tonnes in 2007/08, up 22†percent from the previous season, and increase to 104 million tonnes in 2009/10, up another 11†percent supported by the rising federal renewable fuels mandate.
World stocks could decline sharply amid falling production and higher utilization
Based on the preliminary forecasts for production in 2009 and utilization in 2009/10, world coarse grain stocks by the close of seasons in 2010 are forecast to reach 201 million tonnes, down 7†percent, or 16†million tonnes, from their opening level. At this level, the world stocks-to-use ratio for coarse grains is expected to reach 17.8†percent, slightly below the 2008/09 level but significantly above the low of 15 to 16†percent in the previous seasons which triggered the sharp increases in international maize prices as well as the prices of other coarse grains.
The reduction in total world inventories in 2009/10 and the resulting lower stocks-to-use ratio mostly reflects prospects in the United States. Production in the country is expected to remain close to 2008 while exports and utilization are rising, the latter driven by higher industrial demand. Total coarse grains stocks in the United States are forecast to reach 33 million tonnes, down 27†percent from their opening level and the smallest level since 2004 when they stood at 29 million tonnes. While ending stocks in the European Union are expected to remain unchanged from the season's beginning, smaller levels are anticipated in Argentina and Canada mostly due to falling output. On balance, the major exporter's stocks-to-disappearance ratio (i.e. domestic consumption plus exports) is forecast to drop from 16†percent in 2008/09 to a three-year low of 13.5†percent in the new season. Elsewhere, higher stocks are anticipated in a number of countries, most notably China, Malawi and Morocco, driven largely by favourable crop prospects. By contrast, reduced harvests and rising domestic consumption could result in large stock declines in Brazil, Mexico and the Russian Federation.
|GIEWS||††global information and early warning system on food and agriculture|