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Sent by the Food and Agriculture Organization of the United Nations (FAO)

MONTHLY NEWS REPORT ON GRAINS

FAO Trade and Markets Division

MNR ISSUE 145 - August 2018

 

Market News

• Concerns over less milling wheat pose headache for Ukraine, Russia

• Australia’s East Coast drought to intensify as dry weather to linger for months

• Crop losses to pests will soar as climate warms, study warns

• Argentina wheat crop expectations mount, as sowing, yield hopes grow

• China’s July grain imports plunge as tariffs on US supplies bite

• IGC raises forecast for 2018/19 world maize crop

• German farmers to receive millions in federal aid

• Turkey plans to step up wheat purchases amid markets turmoil

• Brazil cuts 2017/18 maize crop estimate to 82.18 million tonnes

• China, Brazil and the future for US maize

 

Reports

• Food Outlook July 2018 - FAO

• International Trade by Commodity Statistics, Volume 2018, Issue 3 - OECD

Monthly Information Sources

•AMIS Market Monitor

•FAO Cereal Supply and Demand Brief - FAO

•Grain Market Report - IGC

Oilcrops Monthly Price and Policy Update - FAO

•Crop Monitoring in Europe - European Commission

•FAO Rice Price Update - FAO

•World Agricultural Supply and Demand Estimates - USDA

•Early Warning Crop Monitor - GEOGLAM

•Commodity Price Data - World Bank

•Food Price Monitoring and Analysis (FPMA) - FAO

•GIEWS Country Briefs – FAO

 

Market News

Concerns over less milling wheat pose headache for Ukraine, Russia

30 August - Reuters

 

Ukraine and Russia may have less milling wheat than previously expected this year after rain during harvesting hurt the quality of crops, potentially accelerating any curbs on exports from the Black Sea exporters, traders and analysts said. Kiev and Moscow have said there is no need to impose restrictions on wheat exports for now, but their agriculture ministries are closely monitoring activity of the main exporters for the 2018/19 marketing season. There are fears that strong milling wheat exports may help drive up the cost of bread in both countries where weak domestic currencies and poor crops have already inflated food prices. The rouble is near its lowest since April 2016 against the dollar, while Ukraine’s hryvnia is at its weakest since January. “Undoubtedly, both countries have grounds for controlling actual grain shipments,” Yelizaveta Malyshko at UkrAgroConsult said.

 

The ministries’ meetings with exporters came under the spotlight in ugust, causing a jump in global wheat prices as some traders expect curbs on grain exports in some form later in the season, which started on July 1. Traders said in August exports would speed up in September-December as traders bet on restrictions sometime after December. “There are fears (of restricting exports) through tightening of the various procedures - like all kinds of inspections,” a Ukraine-focused trader said. “This scenario is most possible. It could be if the milling wheat exports reach 6 million tonnes before the New Year.” Ukraine’s agriculture ministry has no immediate plan to review a memorandum agreed with traders this month allowing for the export of 16 million tonnes of wheat, including 8 million tonnes of milling wheat, this season, an official said this week. Russia could consider export curbs once exports reach 30 million tonnes of grain, including 25 million tonnes of wheat, in the 2018/19 season that began on July 1, traders have said. The agriculture ministry has denied export limits were under discussion and made no mention of milling wheat . Russia and Ukraine have already exported 6.4 million tonnes and 2.6 million tonnes of wheat, respectively, this season. Exports have been boosted by high global prices, weak local

currencies and an early harvest.

 

Initial crop tests in Russia show a decline in the share of milling wheat by 2.5 percentage points from a year ago to 65.2 percent. However, the share of milling wheat is significantly lower in some regions - 44 percent in part of Russia’s Central region - and the sourcing of wheat may become difficult for exporters unless Siberia shows a good quality crop in the coming weeks, SovEcon consultancy said this week. Any global price spike could spark exports and cause the Russian government to take counter measures if it sees a sharp domestic market move, a Russian industry source said. Domestic politics could also play a role as Ukraine’s presidential election is scheduled for the end of March. “I do not think the government will take any official step to limit sales in coming months, but if local wheat prices jump - they will do all their best to curb sales because no one wants to be accused of raising the price of bread on the eve of elections,” one trader said. Ukraine’s agriculture ministry is unlikely to impose any direct restrictions as it would draw it into a row with exporters, another trader said. “But it does not rule out the potential use of different unofficial methods for slowing exports if something goes wrong.” Several traders expect Ukraine’s milling wheat limit to be downgraded to 6-7 million tonnes from the current 8 million. The share of milling wheat in Ukraine’s crop may fall significantly from a year ago to about 40 percent, according to a senior agriculture official. The ministry has said food wheat accounted for around 60 percent.

 

Australia’s East Coast drought to intensify as dry weather to linger for months

30 August - NY Times

 

Australia's east coast will experience dry weather for at least the next three months, the country's meteorological bureau said on Thursday, intensifying a drought that has wilted crops and left farmers struggling to stay in business. In its latest three-month outlook, the Bureau of Meteorology said there was only a 30 percent chance rainfall would exceed average levels over much of the country's east coast during spring, which runs from September to November.

 

If the drought gets worse, Australia's agricultural sector will suffer further crop losses, while farmers will also be forced to slaughter livestock in greater numbers as they struggle to find enough food or water to keep them alive.

 

The bureau also raised the prospect of dry weather in the country's west, which has so far escaped drought conditions, bringing new concerns for Australian food manufacturers. Unable to source enough grain from the east coast, some food producers have started to import supplies from Western Australia, where recent favorable weather had encouraged farmers to sell leftover supplies. But the bureau said the west coast - the country's largest agricultural producing region - will also experience drier than average weather over the next three months, tightening national supply yet further.

 

"East coast farmers have largely written off wheat crops this year, but the issue could be the situation in the west," said Phin Ziebell, agribusiness economist, National Australia Bank. "Some had been calling for a crop in excess of 10 million tonnes (in Western Australia), but if the forecast materializes, the figure will be under threat." Production of wheat from the world's fourth-largest exporter is already expected to hit a decade low this year, although output from the west is expected to cushion the decline in the east. The bureau also said it saw a 50 percent chance of an El Nino weather event, which can bring warmer weather and dry conditions to Australia and could extend the dry weather into 2019. "An El Nino basically means that as we get into summer there'd be less chance of having those recovery rains that we need and we may have to wait till autumn in 2019 to start seeing some recovery rains in the drought areas," said Andrew Watkins, manager of long range forecasts at the Bureau of Meteorology.

 

Crop losses to pests will soar as climate warms, study warns

30 August - The Guardian

 

Rising global temperatures mean pests will devour far more of the world’s crops, according to the first global analysis of the subject, even if climate change is restricted to the international target of 2C. Increasing heat boosts both the number and appetite of insects, and researcher’s project they will destroy almost 50% more wheat than they do today with a 2C rise, and 30% more maize. Rice, the third key staple, is less affected as it is grown in the tropics, which are already near the optimal temperature for insects - although bugs will still eat 20% more. Rising heat stress on crops is already expected to cut cereal yields by about 10% for 2C of warming, but the new research indicates rising pest damage will cause at least another 4-8% to be lost. With 800 million people chronically hungry today and the global population rising towards 10bn, increasing pest destruction will worsen food security. “For many, many people in the world there is already a shortage of food, so it is not like we can afford to spare [more΁,” said Prof Curtis Deutsch at the University of Washington, US, who led the work͘ “ lot of people in the world, the most vulnerable, can’t afford to give up anything͘”

 

The UK is the worst affected of significant wheat producers, with pest losses expected to more than double from 5% to 11%, and Canada will suffer the biggest increase in maize losses, from 6% to 10%͘ The world’s biggest growers will also see a major impact, with China’s wheat losses rising 50% and and US maize losses going up by a third͘ The losses are likely to be underestimates as the scientists did not consider factors such as increased transmission of crop diseases carried by insects, or losses after harvest when the grain is stored. The research also did not assess the risk of population explosions of insects that can wipe out crops, due to the complexity of such events. Action by farmers to try to avoid new pest losses is unlikely to be successful, said Prof Rosamond Naylor at Stanford University, US, and one of the research team͘ “Increased pesticide applications, the use of [resistant] genetically modified crops and practices such as crop rotations will help control losses from insects. But it still appears that under virtually all climate change scenarios, pest populations will be the winners͘”

 

The research, published in the journal Science, started with well-established knowledge about how rising temperature affects insects͘ “Warmer temperatures increase insect metabolic rates exponentially [and΁ increase the reproductive rates,” said Deutsch͘ “You have more insects, and they’re eating more͘” The team then added data on today’s pest losses and used a range of climate change models to estimate future losses - all showed significant damage. Overall, losses were found to increase by 20-50% for 2C of warming above pre-industrial levels and 40%-100% for 4C. The latter will be reached this century if carbon emissions are not cut soon͘ “The overall picture is, if you’re growing a lot of food in a temperate region, you’re going to be hit hardest,” said Scott Merrill at the University of Vermont, another member of the team. Europe’s breadbasket is among the hardest hit, with 11 nations predicted to see a rise in pest losses of 75% or more͘ “France will get a double whammy,” said Merrill, as it is a top five producer of both wheat and maize. Another big wheat producer, Russia, will see losses rise from 10% to 16% with 2C of warming.

 

Across the globe, an extra 200m tonnes of grain are expected to be eaten by insects in a 2C warmer world. The research was deliberately conservative and so did not allow population explosions of pests to take place in the computer simulations, as it’s difficult to model how these develop, but such explosions cannot be ruled out. Deutsch noted that warmer winters have led the pine bark beetle to kill off forests across North merica:

 

“They just come out gangbusters in the spring͘ You can see the damage to space͘” “It is an example of what can happen when you have huge tracts of land that are essentially single crops species with one major pest,” he said͘ “That is similar in many respects to what agriculture has produced - miles and miles of a single plant͘”

 

He also said insect population explosions are seen in fossils from warming periods in the Earth’s past͘ Markus Riegler, at Western Sydney University in Australia and not part of the research team, said the new work was the first global analysis͘ “The results show that insects will cause significantly increased grain loss across many regions of a warmer world,” he said͘ The work used data on 38 insect species but Riegler said the results should be verified for more pests in future. “The substantial increases in pest damage forecast call for action on climate change [emissions΁ and adaptation,” he said͘ “Everyone must be involved in change: farmers, industries, policymakers and wider society͘”

 

Argentina wheat crop expectations mount, as sowing, yield hopes grow

24 August - Agrimoney.com

 

Argentina nudged higher its estimate for domestic wheat sowings, extending a broadly favourable run of news on the crop - which some see potentially producing a record harvest, in contrast to results in other major exporting countries. rgentina’s farm ministry raised by 60,000 hectares to 6.26m hectares its estimate for the country’s wheat sowings for the 2018-19 crop, harvesting of which will start around November. The increase is being spurred by the “desire of producers to make up for” the weak results from autumn-harvested crops, such as maize, earlier this year, after drought setbacks. The ministry edged lower by 300,000 tonnes to 46.3m tonnes its estimate for rgentina’s 2017-18 maize output taking to 6.2m tonnes the year-on-year decline in production.

 

The 2017-18 soybean crop was pegged at 37.78m tonnes - up 300,000 tonnes on last month’s estimate, but down more than 17m tonnes year on year nonetheless, However, the ministry also highlighted behind the rise in wheat sowings the “good” recharging of soil moisture levels after the drought, and the strength of prices. The International Grains Council overnight estimated Argentine wheat export prices at $241 per tonne on an FOB (free on board) basis, up 26% year on year. By comparison, Argentine sorghum export prices were down 3% year on year, maize values down 5% year on year and soybean prices down 10%. The wheat crop “is emerging and developing without major issues”, the ministry added. The comments came as the IGC raised by 600,000 tonnes to 19.6m tonnes, a record high, its forecast for Argentine wheat output in 2018-19, saying that “amid robust prices and abundant soil moisture, sowings in Argentina exceeded 6.0m hectares for only the second time since 2004-05.

 

“Potentially strong returns” have been seen as encouraging use of inputs such as fertilizers, as farmers seek to boost yields, with “recent cool, showery weather” also beneficial, the council said. Rabobank on Thursday flagged the potential for even higher output saying that “excellent soil moisture and non-threatening conditions” have handed the crop “a 20m-22m tonne output potential”. However, one potential threat to the crop is dryness in northern areas, where the Buenos ires grains exchange, in a briefing overnight, said that a “large proportion” of crops were developing “without adequate soil moisture”. This shortfall “could negatively impact yield potential” in this region, with dryness extending into northern Cordoba. The exchange estimated at 50.1% the proportion of the overall Argentine wheat crop rated “good” or “excellent”, down 0.6 points week on week, and by 17.6 points year on year. rain shortfall was highlighted too by Reuters’ Lanworth division in a briefing on Wednesday, although for the central wheat belt states of Córdoba, Buenos Aires and Santa Fe - responsible for more than 80% of domestic wheat output - which were “still showing five- year low soil moisture” levels. However, with rains arriving in “dry Córdoba and Santa Fe”, Lanworth raised by 211,000 tonnes to 19.71m tonnes its forecast for 2018-19 Argentine wheat output.

 

China’s July grain imports plunge as tariffs on US supplies bite

23 August – Blackseagrain

 

China’s grain imports plunged in July after Beijing imposed hefty tariffs on shipments from the United States as part of its trade conflict and as rising international prices curbed buying, customs data showed on Thursday. China brought in 220,000 tonnes of sorghum in July, down 62.5 percent from 588,364 tonnes a year ago, data from the General Administration of Customs showed. The imports were also below June’s 450,000 tonnes, when buyers scooped up U.S. cargoes amid a temporary easing of the Sino-U.S. trade tensions. The customs figures do not give a country by country breakdown, but China imports almost all of its sorghum from the United States.

 

Thursday’s data also showed China took in 330,000 tonnes of maize in July, down 63.7 percent from last year. China’s wheat imports last month also slid 43.03 percent from a year earlier to 140,000 tonnes. China imports one-third of its maize and wheat from the United States, according to customs data. “Two factors were at play.

 

On one hand, international prices have jumped as major producers were expecting lower output,” said Cherry Zhang, analyst with Shanghai JC Intelligence Co. Ltd. “On the other hand, the Sino-U.S. trade war curbed buying grains from the U.S.,” Zhang said. Maize futures in Chicago rose 7.4 percent from the day the tariffs went into effect on July 6 to the end of the month while wheat futures gained 9.8 percent over the same period. Beijing in May dropped an anti-dumping probe on U.S. sorghum, as well as a requirement for a 178.6 percent deposit on the value of shipments, when it appeared the two countries were resolving their trade issues.

 

However, China on July 6 imposed 25 percent tariffs on a list of U.S. products including sorghum, maize and soybeans in response to American duties on a list of Chinese products levied earlier that day. China brought in 600,000 tonnes of barley in July, down 16.2 percent from a year earlier, according to the data. China’s pork imports in July were at 88,163 tonnes while sugar imports in the same month increased more than 300 percent to 250,000 tonnes, the data showed.

 

IGC raises forecast for 2018/19 world maize crop

23 August - CNBC.com

The International Grains Council on Thursday raised its forecast for world maize (maize) production in the 2018/19 season, largely driven by an improved crop outlook in the United States. The inter-governmental body, in a monthly update, put world maize production in 2018/19 at 1.064 billion tonnes, up 12 million from its previous projection. The IGC saw the U.S. maize crop in 2018/19 at 370.5 million tonnes, well above its previous forecast of 359 million and now almost on a par with last season's 371 million. The annual Pro Farmer Midwest Crop Tour this week has projected above average maize yields in several states including Illinois, Nebraska, South Dakota, Indiana and Ohio.

 

A drawdown in global maize stocks, however, is still seen with global consumption upwardly revised to 1.105 billion tonnes, up from a previous forecast of 1.098 billion. "Because of tighter supplies, use of wheat and barley are seen falling, likely transferring some demand to maize (maize), particularly in the livestock sector," the IGC said. The IGC also reduced its forecast for world wheat production in 2018/19 by 5 million tonnes to 716 million tonnes while consumption was also cut by 5 million tonnes to 734 million. "Because of adverse weather there are further cuts to crop estimates in the European Union and Australia," the IGC said. The IGC cut its forecast for the EU's wheat crop to 135.8 million tonnes from a previous forecast of 139.9 million, driven by downward revisions for crops in Germany, Denmark and Britain. European farmers are counting the cost of a summer heatwave that has shrunk cereal harvests and shrivelled pastures, leaving some farms struggling to survive and shutting the EU out of lucrative export markets. Major wheat exporter Australia has also been suffering from drought, with parts of the country's east coast suffering the driest conditions in living memory. The IGC cut its forecast for Australia's wheat crop to 20.5 million tonnes from 22.5 million. The inter-governmental body also raised its forecast for global soybean production in 2018/19 by seven million tonnes to 366 million, "reflecting an upgraded outlook for U.S. yields."

 

German farmers to receive millions in federal aid

22 August - DW.com

 

As the exceptionally dry summer slowly recedes, the extent of harvest losses for German farmers has become fully apparent. The federal government has agreed to step in with financial assistance. It's been a long, hot summer in Germany, but for the country's farmers at least, there is some relief at the end of it: The federal government has agreed to provide up to €170 million ($197 million) to make up for business losses brought about by the unusually dry weather. Julia Klöckner, the CDU politician who serves as the minister for food and agriculture, announced the news at a press conference on Wednesday, following discussions with the cabinet. The German government has designated the drought crisis as one of "national dimensions", opening up the legal pathway to federal aid, rather than just aid provided at state level. Combined with state assistance, around €340 million in emergency government aid will go to the most severely affected farmers. State governments will provide just over half the total amount of financial assistance, with federal assistance expected to come in at between €150 million and €170 million, Klöckner said. Since the extent of the widespread crop damage wrought by the heatwave in Germany became apparent last month, farmers have been calling for emergency aid to offset losses. The German Farmers ssociation (DBV) said aid of at least €1 billion was required and while the figure agreed to by the government comes in well short of that, this is still the first time since 2003 that the German government has provided emergency federal aid to farmers following a drought crisis. The grading of the crisis as one of "national dimensions" is a reflection of the crop damage farmers have had to endure during a freakishly long dry spell that has endured in much of the country since May.

Although the government's official annual harvest report is not expected until later this week, the long-standing fears about the widespread crop losses have largely been confirmed. According to DBV surveys, this year's grain harvest is 26 percent lower than the annual crop yield from the previous five years. DBV President Joachim Rukwied said this week that eight of the 16 German federal states had already suffered financial damage of around €3 billion as a result of the drought. Many farmers in particularly badly affected regions in Germany's north and east have reported harvest losses ranging from 50 percent all the way up to 80 percent or higher. As well as the damage to individual crop yields, the drought has had a knock-on effect in other agricultural areas. As a result of feed shortages, some dairy farmers have had to slaughter their cows much earlier than they had planned to, leading to an increase in milk prices in some regions. But representatives of farmers' associations said there would be only moderate price hikes despite the crisis situation. With the well-being of more than 10,000 farming businesses nationwide estimated to be at serious risk as a result of the drought, some form of government assistance was widely anticipated.

 

The general threshold for government assistance in a weather crisis is when a business has had more than 30 percent of its annual production destroyed. At Wednesday's press conference, Klöckner said only businesses that had suffered losses to this extent could count on assistance. Federal and state governments will now begin a process of determining which businesses are most in need of financial assistance, Klöckner said. Matin Qaim, professor of international food economics and rural development at the University of Göttingen, told DW that while this summer has been a very unusual one when compared with the past, it will become less and less unusual over the coming years. However, he said that while such summers will have an increasing impact on food production, he is much more concerned about poorer global regions than he is about wealthy European countries such as Germany. "When we have a few of these years in a row then we will certainly have a serious food security problem but I am much less concerned about Germany because people in Germany are rich enough that even if food prices go up, they can afford enough food. "I am much more worried about the poor people in Africa and south Asia where hunger and poverty is severe already, even in an average year, and will certainly go up when food prices go up. "Unfortunately we are complaining here but all our climate models are saying that the negative impact of climate change will be much more severe on agriculture in tropical regions of south Asia and Africa than in Europe. That means the biggest negative impact will be on people who are already poor."

 

Turkey plans to step up wheat purchases amid markets turmoil

17 August - Bloomberg

 

Rising prices and the collapse of the lira are prompting Turkey to tap international markets to secure wheat supplies and ward off food-price inflation as part of efforts to get the nation’s economy under control͘ The Turkish Grain Board is planning to issue international tenders to buy the grain, according to an official at the country’s state buyer͘ The purchases may be made immediately after next week’s Bayram national holiday, he said͘ Benchmark wheat prices in Chicago have climbed by about a third this year amid concerns over supplies after drought and extreme weather hurt crops in the top grainexporting nations.

 

A correction in prices over the past two weeks has already attracted major importers to the market, with the world’s biggest buyer, Egypt, taking the unusual step of accelerating purchases by tendering for two deliveries.  Turkish flour millers, local traders and the state grain board met Wednesday to assess the market situation, the official said. While the board, known as the TMO, hasn’t decided on the timing and the quantity of the wheat purchase, it’s working on the tender procedures, he said. Turkish importers are under extra pressure after the lira renewed its slide Friday to trade near a record low against the dollar as a deepening rift with Washington plunges the economy into turmoil. Turkey has undertaken a series of measures to try to stabilize prices and rein in double-digit inflation. To shore up wheat supplies, the government has allocated 750,000 metric tons of imports to be duty-free until May 2019. The decree is a step toward "attaining price stability in the market," the board’s Chairman Ismail Kemaloglu said in a tweet earlier this week͘  

 

The TMO has also started the process of selling domestic wheat stockpiles, the official said. The move may forestall hikes by domestic sellers, who are seeking to raise prices in lira to match more expensive dollar-denominated grain. “Domestic prices are expected to increase after Bayram in line with international prices,” said Gulfem Eren, chairwoman of Turkey’s Grain Suppliers  ssociation͘ The purchases by the TMO would be part of an effort secure supplies for local companies and curb inflation, Veysel Kaya, the founder of Sunseedman, a consultancy and brokerage based in Edirne, Turkey͘  ll signs point to TMO being “at the scene with the international tenders soon,” he said͘ Turkey, the world’s top flour exporter, imported about 6͘2 million tons of wheat in the year ended June, according to International Grains Council estimates.

 

Brazil cuts 2017/18 maize crop estimate to 82.8 million tonnes

9 August - S&P Global Platts

 

Brazil will produce 82.18 million mt of maize in the current 2017-18 crop, federal crop agency Conab said Thursday, down from 82.93 million mt in the agency's July estimate and sharply lower than the record 97.84 million mt produced in 2016-17. The most relevant cut was for the second, or winter crop, currently being harvested and affected by adverse weather in several regions. Conab said the second crop, also known in Brazil as "safrinha", is now projected at 55.35 million mt, down from 56.02 million mt estimated in July and 67.38 million mt produced in 2016-17. "The low performance of the second crop is due to a combination of a smaller planted area and bad weather in Parana state, the second-largest maize producer in Brazil of the second crop," Conab said in the report.

 

The agency also cut its estimate for the first of summer crop to 26.83 million mt, down from 26.91 million mt and from 30.46 million mt in 2016-17. Conab kept expected maize exports from the current crop at 30 million mt, unchanged from its July report, but down from 30.83 million mt exported from the 2016-17 harvest. Several analysts have been pegging Brazil's maize exports around 28 million mt, as a result of the lower crop and higher costs of domestic truck freight. Brazil is world's second-largest maize exporter, only behind the US.

 

China, Brazil and the future for US maize

1 August - OpenMarkets

 

It’s hard to imagine the world running short on maize when you consider the massive size of the U.S. maize crop. The U.S. maize belt, the granary to the world, sweeps across at least six Midwestern states, often covering about 90 million acres of planted area. Thanks to research, maize yields are staggeringly high — typically more than 170 bushels per acre — and is used in a mind-boggling array of products, including to fatten livestock, as well as to make high fructose maize syrup, ethanol, and plastics. As uses for the crop grow, so does demand, in the United States and in key markets around the world. But the number of acres American farmers are devoting to maize is under pressure this year, while weather in South America is only adding to the tensions in the market. “ dverse weather in South  merica and lower planted acres have been pushing maize prices up along with a huge growing demand base for Chinese maize-based ethanol,” says Shawn Hackett, a frequent commodity commentator and president of Hackett Financial Advisors. Maize futures strengthened in the first half of the year, with prices holding in and around $4 a bushel. Talk of a trade war between China and the United States, and uncertainty over NAFTA has taken some wind out of its sails. Hackett believes a weather scare in the United States, along with the woes in Brazil - the world’s second largest exporter of the grain — could easily push prices above $5 a bushel. Other analysts echoed the sentiment that maize prices could face upward pressure in the months and years ahead.  Barron’s article in April caused a stir when it envisioned the price doubling to $8 a bushel over the next few years, a perch not seen since 2012, when a severe drought hit the U.S. “ n unusual confluence of factors could propel prices higher over the next couple of years,” Barron’s suggested. “These include declining output, an ethanol-led demand surge in China, and likely brutal weather.”

 

All the talk of strong demand and constrained supply is being felt in maize futures markets. Open interest - the number of open futures positions at a given time — surged throughout May and June 2018, topping a record 2 million contracts on June 6 at CME Group. Maize is a 141-year-old contract, but the ten highest all-time open interest levels were racked up in June. Open interest is a closely watched way of measuring the infusion of money into a market. A rising flow of open interest usually reflects more hedging. A key demand driver for maize in the medium term is China’s plan requiring that its gasoline include 10 percent ethanol, which is made from maize. Barron’s estimated China could need another 36 million tons of maize a year to make ethanol. And this move comes at a time when China’s maize production is on the wane after elimination of a government price support system.

 

Two years ago, Bloomberg posted an article outlining a possible maize clash between the United States and Brazil, where the two maize powers would battle for market share amid abundant supplies. Today, Brazil and Argentina are suffering through a prolonged drought, imperiling prospects for maize harvest. Brazil maize production is expected to fall 12 percent to 87 million tonnes from last year, according to U.S. Department of Agriculture data. Yield per acre estimates was slashed 9 percent from 2017.

 

American farmers are facing their own challenges in 2018. They battled an unusually long, cold spring as they struggled to get the crop in the ground. The USDA in June estimated that 89 million maize acres were planted in 2018, down 1 percent from 2017. Meanwhile, domestic demand for maize is consistently strong, analysts say, which pares what’s left over for export. As a result, maize ending stocks are under siege — Rabobank forecasts stocks will fall by 14.5 percent this year. ll this is bullish for prices in the medium term. “We are going through this cycle where farmers have suffered the last several years and we’ve been watching acreage overall contracting,” says Sterling Liddell, vice president and senior global analytics specialist for RaboResearch. Hackett, the analyst, believes commercial maize buyers are keeping a close eye on the market and could move early to lock in lower prices, especially if the Brazil crop comes up short as many expect.

 

“I think the market is waiting to see if Brazil is going to deliver or not,” he says. “If it’s pretty clear that they’re going to come up short I do not think the buyers are going to wait around for next year. They’re going to want to get ahead of the curve.” Brazil production, according to the latest USDA government forecast, is expected to fall 10 percent in the current marketing year to 89 million metric tons, mainly due a reduction in the planted area and a return to average crop yields.  Brazil’s fields devoted to maize are expected to shrink to 16.4 million hectares from 17.6 million the previous year. The USDA noted that the planted area for maize for its first crop of the year has been under pressure from farmers switching to soy. A lot may depend on how Brazil weather and a fluid trade situation play out. Nevertheless, market players are keeping a watchful eye as the pieces of the puzzle slowly fall into place.

 

Reports

 

Food Outlook July 2018 - FAO

 

Food Outlook is a biannual publication (May/June and November/December) focusing on developments affecting global food and feed markets. The sub-title "Global Market

 

Analysis" reflects this focus on developments in international markets, with comprehensive assessments and forecasts on a commodity by commodity basis.

 

International Trade by Commodity Statistics, Volume 2018, Issue 3 - OECD

 

This report covers a wide range of statistics on international trade of OECD countries and provides detailed data in value by commodity and by partner country.

 

Monthly Information Sources

AMIS Market Monitor

FAO Cereal Supply and Demand Brief - FAO

Grain Market Report - IGC

Oilcrops Monthly Price and Policy Update - FAO

Crop Monitoring in Europe - European Commission

FAO Rice Price Update - FAO

World Agricultural Supply and Demand Estimates - USDA

Early Warning Crop Monitor - GEOGLAM

Commodity Price Data - World Bank

Food Price Monitoring and Analysis (FPMA) - FAO

GIEWS Country Briefs - FAO

 

The main purpose of the MNR is to provide links between the FAO Secretariat and the Members of the

Intergovernmental Group (IGG) on Grains, as well as the general public. To unsubscribe, send an email to:

mailto:MNR-L-signoff-request@LISTSERV.FAO.ORG

 

The MNRs are sent electronically on the last working day of the month except in July and December.

Useful links

 

Previous issues of the MNR

FAO World Food Situation

FAO Grains website

 

Food and Agriculture Organization of the United Nations

www.fao.org/economic/est

 

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