Changing Perspectives: GFMT visits the Home Grown Cereals Authority (HGCA) Grain Market Outlook Conference

8/10/2019 Changing Perspectives: GFMT visits the Home Grown Cereals Authority (HGCA) Grain Market Outlook Conference

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Digital Re-print -November | December 2014

Changing Perspectives: GFMT visits the Home

Grown Cereals Authority (HGCA) Grain Market

Outlook Conference

www.gfmt.co.uk

Grain & Feed Milling Technology is published six times a year by Perendale Publishers Ltd of the United Kingdom.All data is published in good faith, based on information received, and while every care is taken to prevent inaccuracies,the publishers accept no liability for any errors or omissions or for the consequences of action taken on the basis ofinformation published.Copyright 2014 Perendale Publishers Ltd. All rights reserved. No part of this publication may be reproduced in any formor by any means without prior permission of the copyright owner. Printed by Perendale Publishers Ltd. ISSN: 1466-3872

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The growing dominance of maize One billion tonnes by 2016?

The prospects for wheat and maize production around the world

are currently changing; according to the USDA we could be lookingat a record level of maize production of one billion tonnes by 2016.

In recent years, 2010, 2011, 2012, we became very used to maize

being a ball driver in the market, however, disappointing US maize

yields really tensed up the supply of feed grains around the world.

The dominant maize exporters, the US, Argentina, Brazil and

Ukraine count for about 80 percent of global maize exports. If we

compare that to the wheat market, the top four exporters only

count for 63 percent of the market thus concentrating the risk in

fewer parts of the market.

The focus remains on the US as a key player and a dominant

force in supply of this feed grain to the world market. In light of the

US maize demand, there has been a recovery in exports to absorb

extra production as ethanol plateaus.

China is one area we currently need to be aware of; currently

Chinas policy towards maize is changing explained Watts. In termsof soybean where there is no room to be self sufficient, China is

generally very happy to interact with the world market. On the

other hand, when it comes to wheat and rice, where there is a huge

desire to be self-sufficient, China dips in and out of the market as

and when required. China is however becoming more and more

accommodating of the fact they will have to interact with the global

grain market. We saw a lot of this last year after China had imported

over three and a half million tonnes a yield of maize, at this point in

time it stands at only 73,000 tonnes. In all, China is very good in the

feed grain market and has a huge amount of influence, but it is not

consistent and it very much depends on what the need is.

"The market no longer has to

be concerned about spot

supply of feed grains, however,

the market remains more

than aware that as marketcountries grow - we are only

ever one weather event

away from not being able

to meet global demand"

Jack watts, Lead Analyst, AHDB/HGCA

November - December 2014 | 31GRAIN&FEED MILLING TECHNOLOGY

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The global wheat situationAlthough it is not possible to generalise about the wheat situation

this year, the headline figure suggests that the world is looking at

record wheat production met by growing demand. Although we are

starting to see demand creep in and levels build up, this is still giving

us a surplus and a fairly stable stocks to use ratio at the headline

level. It is quality not quantity that is the issue said Watts. Looking

at Canada in particular, the issue will be one of logistics. Canada is

our latest, almost case study example of challenging logistics around

the world said Watts.

The global grain trade is set to increase by 20 percent, however,

demand growth is currently dislocated from production growth.

Logistics are required to deliver and move such grain. Over time,

logistics, both port logistics and internal logistics are going to be an

incredibly important factor of delivering price signals to the farm.

India and China are set to take a back seat this year. Farmers

there will experience different price signals to the rest of the world.

Indian wheat is set to become more of a political beast, as opposed

to a market beast due to minimum support prices and the National

Food Security Act.

Global Wheat importers and exportersThe focus tends to always be placed on where Egypt have

imported from, however, as Watts stated, the import market is

incredibly diverse and Egypt only represents a very small part of that

market. China remain in the top ten, yet, as outlined above and In

Watts analysis, self-sufficiency does remain to be the number one

objective. We should expect to hear more about Iran over courseof the next year. Due to the changing political situation going on in

that part of the world it is becoming more acceptable to westernimporters.

On the export side of things, since 2007 there has been a growing

global obsession when the world nearly ran out of wheat. There is

a keen interest to understand, where are all the stocks? remarked

Watts. The US remains an area of intense interest; the world loves

US wheat stocks described by Watts as essentially the comfort blan-

ket for the world. If there is ever an issue we are generally assured

by the fact that we can buy US wheat, we know what it is and that

we can get it exported.

It is forecasted that there might be a rise in export stocks in the

US however we cannot have a certain level of confidence about this

at the present time. The rest of the season must progress forwards

first. Eyes are focussed upon Australia and El Nino weather impacts.

It was a dry September and as a result, Australian wheat crop is not

going to fall in half. The possible flip side to El Nino could potentially

mean a break in the long running drought for key US states who

are producers of Soft Red Winter, Hard Red Winter and Hard Red

Spring. Wetness back in these US states could spike up production.

Global Barley PerspectivesThere is a contrast In terms of supply and demand for barley.

Production has been lower and the stocks to use ratio is actually

looking quite tight. The UK produced 7 million tonnes of barley for

the second consecutive year. We have not done so since 1996/1997.

Placing barley in its global context means that Australia is more

important to the barley market than the wheat market; however,

there is a reluctance of Australian farmers to come forward beforethey commit. In Canada, barley has been the biggest loser. It was

typically a powerhouse In terms of production and exports. This is

now coming to an end. There is now a niche developing in the global

market with regards to barley that someone could exploit.

Overall, it is likely that increasingly competitive crops, such as

oilseeds and maize, could be marginalising the barley crop. Policy

could also be an influencing factor. Wheat export policies pushed

Argentine farmers toward barley from wheat. Now, the clampdown

on the barley area and disappointing results for Argentine farmers are

reversing the trend. China is prioritising wheat and maize production

over barley. Chinese feed barley imports are being supported by

artificially high maize prices, making barley a cheaper alternative feed

grain.

The European Grain MarketEurope has experienced a wet summer, however, this has pro-

duced a double whammy. Firstly, from a yield point of view France

and Germany, benefitting from the summer moisture have been

able to boost crop yields. However, in turn, this has caused issues

for French wheat quality. Although 20 million tonnes was produced,

Peter Kendall, AHDB Chair

Sergey Feofilov,Director General of UkrAgroConsult

(Left to Right) Dr Julian McGill, Senior Economist at LMCInternational, Sergey Feofilov, Director General of UkrAgroConsult,Dr Patrcia Lus-Manso, Agriculture Research Director for Plattsand Jack Watts -Lead Analyst (Cereals & Oilseeds) AHDB/HGCA

John Tipples (Chairman, HGCA) stepped down after sevenyears as HGCA chairman. With a farming background,

having attended the annual HGCA Grain Market Outlookconference for over a decade he stated that he hoped theconference played some small part in helping farmingbusinesses with the challenges faced in the global marketplace. The grain industry is one that works well together,it is a vibrant industry and although this year is goingto be tough facing lower prices, the outlook has to bepositive when growing feed for an increasing population

32 | November - December 2014 GRAIN&FEED MILLING TECHNOLOGYF


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only seven and a half million tonnes of wheat produced in France

was grade one French wheat, about a third of what we normally see

produced. There is 17 million tonnes of grade three wheat in the

market place up from 4 or 5 million tonnes previously.

Therefore, there has been a real shift in European wheat quality.

There is usually always an assumption that French wheat is at an

exportable standard and this year is really challenging that. Therefore

how much wheat crop has been downgraded to feed is an issue,

although, what can be defined as feed wheat and milling wheat is a

constantly moving grey area remarked Watts. The issue for the EU

market is not one of quantity, but one of quality. Have strong yields

come at the expense of quality? Furthermore, Non-EU exports are

likely to be higher priority for EU exporters this season.

The UK situationWatts confirmed that In terms of the UK situation, if there would

ever be a story in years to come regarding the grain market for 2014

it will be how UK wheat production has moved from one extreme to

the other. There has been a huge surge in production. 2014 has seen

the largest upswing in UK wheat production we have ever seen year

on year. This will set the challenge and gauntlet for what the market

has to achieve over the remainder of this marketing season. With

regards to barley, this year there are higher opening stocks, with a very

big surplus to deal with. This will be the biggest supply and demand

balance to deal with in modern times in a post-intervention era. The

UK also remains competitive on the world stage when it comes to

barley exports.

Key messages for the year aheadOverall, there has been another big surplus this year. The market

no longer has to be concerned about spot supply of feed grains

said Watts. However, the market remains more than aware that as

market countries grow we are only ever one weather event away

from not being able to meet global demand.

However, the market will only be able to respond as and when

that weather event happens. It is not possible to speculate said

Watts, the only way forward is to utilise effective risk management.

On the whole, Watts analysis demonstrated that the wheat market

has become a complex picture, however it is impossible to generalise

when it comes to forecasts.

The success ahead in 2014/2015 has already been determined,

effective price management in conjunction with this is whats needed.

Also lying ahead of us is the issue of un-marketed grain and how we

are going to price it, information is the key and coupled with this,

timely info confirmed Watts.

Ukraine-Its Importance and influenceSergey Feofilov (Director General, UKrAgroConsult) spoke about

the importance and influenceof Ukraine in global grain mar-

kets. With Ukraine being one

of the major key exporters,

the world is currently await-

ing to see what the political

developments will mean for

the grain market outlook in

2015. Ukraine is currently the

third biggest exporter of corn

in the world, the sixth biggest

exporter of wheat, the fifth

biggest exporter of barley (in

2008-2010 Ukraine was the

worlds number one) and is

currently the number one big-

gest exporter of sunflower oil.

However, the key chal-

lenges for Ukraine are cur-

rently climate warming (the

climate can be very unpredict-

able), political risks, low global

development rates, intensified

competition and the adequacy

of export logistics. Ukraine is

located ideally for exports and

the climate and soil are almost

idea for farming. In 2013,approximately 6 million tonnes

per hectare was produced,

in comparison to almost ten

million tonnes per hectare

produced by the US, and just

less than eight million tonnes

per hectare in Argentina. The

grain outlook for 2014/15 for

exports is set at approximately

33, 430 thousand tonnes, up

on 31, 920 thousand tonnes

in 2013/14. The main export

regions in 2013/14 by des-

tination saw 46 percent of

the total 19.5 million tonnes

going to the EU, 14 percent

to Egypt, and 11 percent to

Korea. Other destinations

included Japan, Iran, Israel,

Tunisia, and China.

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Changing Perspectives: GFMT visits the Home Grown Cereals Authority (HGCA) Grain Market Outlook Conference