The document provides a summary of global grain and feed markets in November-December 2011. Key points include: - Grain prices have fallen sharply in recent weeks due to growing supplies and economic recession fears dampening demand. Wheat and maize prices are around 25% below 2012 peaks. - Large crops from Ukraine, Kazakhstan, and Russia have increased world wheat supplies and driven down prices through aggressive exports undercutting other suppliers. - Global wheat output is projected to be around 685 million tonnes for the 2011/12 season, well above consumption, increasing stocks. - Maize prices have also declined on expectations of larger US plantings and Latin American soybean crops filling demand. However, uncertainty remains around weather and

1. Digital Re-print - November | December 2011
Global Feed Markets: November - December 2011
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2. COMMODITIES
GLOBAL
GRAIN & FEED MARKETS
Every issue GFMT’s market analyst John Buckley reviews
world trading conditions which are impacting the full range of
commodities used in food and feed production. His observations
will influence your decision-making.
the two grain price booms of recent years per annum growth will continue in its feed and each year after that to 2015/16 . Will
At this early stage,
Lowest grain costs in over a year – bio-fuels. Is bio-ethanol - after a period
of relatively flat growth – about to start
demand for the next five years. That will
need 6/7m tonnes more grain fed in 2012/13
China’s domestic crops keep pace? Official
figures suggest they have so far but western
some pundits are mopping up any surpluses
G
as grain costs fall? US corn
looking for modest ROWING supplies and renewed which has maintained its highly unusual premium ethanol production has already
fears of global economic recession to wheat into latter 2012. been looking with the slide in
growth in next year’s cramping demand have slashed grain With wheat supplies far more abundant than maize prices (although the
prices again in recent weeks. As we maize and plenty of lower grade wheat from the scheduled ending of blending
US soyabean plantings go to press, market leaders wheat and maize milling quality problems mentioned above, feeding subsidies in 2012 might also
are a good 25% below their 2012 peak prices, of wheat to livestock is already expected to rise be encouraging a ‘make hay
and, given normal trading in some markets at their cheapest levels by about 14m tonnes to 126.4m – almost a fifth while the sun shines’ push in
in well over a year – and there may be more of total world wheat consumption. If wheat prices this sector). It’s interesting to
weather a possible downside to come. dipped seriously on their own loose fundamentals, note that the main growth in
Although the EU wheat market itself looks the rationale goes, feed demand would go even US corn ethanol production
larger crop. The in fairly fine balance this season (i.e. a forecast higher. Some of this feed gain for wheat is taking now is in exports rather than
marginal change in ending stocks), domestic consumption – so US
outlook for EU 2012 world wheat supplies have clearly feed corn users, traditionally
been moving into a surplus position the main outlet for maize, are
rapeseed output is as 2011 crop estimates continued to still paying relatively high prices,
grow, led mainly by the ‘Black Sea’ (CIS) not just to wean US drivers
uncertain at this stage countries. off dependence on foreign oil
What reaction should wheat prices but to help fill car vehicle fuel
with good weather offer to this ever loosening supply? Are tanks in Brazil and Europe.
they now cheap enough to reflect the Although the UK/European
boosting winger known ‘fundamentals?’ One might as grain ethanol industry has had
well ask, did they ever really merit going its well-publicised problems,
sowings in much of as high as they did in February of this year (almost place in the US, Europe and the former Soviet one might expect lower grain
$9/bu, about $330/tonne) on the bellwether Union, some if it a straight switch from maize in costs to have an impact here
western Europe but Chicago futures market. After all, while last year’s importing countries in Asia and elsewhere. too. The same applies to a
Russian crop failure and wet harvest/quality issues Looking to the medium/longer term for wheat, host of countries who had
too much rain delaying in Canada, Australia and Germany deservedly put first indications for 2012 crops suggest higher been thinking about using
a firework under the market, world wheat stocks planted acreage as farmers continue to respond to more grain as a renewable fuel
and downsizing fell by a mere 2.4% and remained at their fourth relatively high prices in Europe, the USA, probably source before rising grain costs
highest level of the past decade. other regions too – so even more wheat. spoiled things
plantings in Germany, This inevitably again begs the question, what Already some pundits are fretting about the Will broader feed demand
role did speculators really play in driving up wheat price of wheat descending to levels that leave in China and other emerging
normally the top and maize prices in 2008 and 2011? Did they over- farmers little or no profit as it did two seasons ago economies maintain the rapid
react to fundamentals and are they now doing the (Chicago wheat collapsed to $4.50s/bushel - $165/ pace of recent years in the
producer, and too little same now on the downside amid the ‘risk aversion’ tonne - as soon as December 2008 from a peak of current uncertain economic
generated by the bleak global economic outlook. $13 - $478/tonne in February of that year!). We climate? China has been the
moisture threatening (some of the selling of grain futures by ‘managed have consistently maintained in this column, ever biggest single factor driving up
money’ is also thought to be a cash raising exercise since the Russian crop failure that prices this time feedgrain demand in recent
prospects for some to margin recent huge losses on US and other were more likely to come halfway rather than all years, raising its consumption
global stock-markets). the way back to those lows. One reason is that by 43% or 44m tonnes in
southern/eastern Many traders and analysts think wheat prices costs of production have risen – inputs, land etc the past decade to account
would even now be far lower than the recent $6/ all saw an above-inflationary jump when the base for 56% of world growth in
member states. bushel (about $220/tonne) recently trading in prices for grains doubled. this sector. Recent Chinese
Chicago, were it not for the high price of maize Another reason is the other factor behind official forecasts suggest 4-5%
36 | november - december 2011 Grain &feed millinG technoloGy Grain &feed millinG technoloGy november - december 2011 | 37

3. COMMODITIES
from its September highs Grains Council suggest world plantings for considerably and current projections are for tonnes. However the global out-turn will, as
of �209. It’s hard to believe 2012 will increase by 1.6% top 224.6m ha, the a bigger crop than last year’s. EU sowings usual, depend more on weather and yields
that this market was trading biggest rises in North America and the CIS. are also seen up amid generally favourable than acreage changes. Yields, for example, fell
�281 in February when ‘skies Although total US area could be as much as weather in northern member states but some 3.3% in 2010 but recovered by almost 7% this
the limit’ pundits talked of 7% higher, questions linger over the impact of dryness issues in the south/east. Driven by this year, achieving a record average 3.1 tonnes/
an assault on �300. UK feed dry planting conditions affecting about 30% year’s good crops and successful exports (at ha. That’s all the more remarkable when
wheat has also dropped to of the key hard red winter crop, the biggest still relatively high prices), Russia is expected to one considers the challenges faced by late
about £143 from February component in US expor ts and domestic sow about 5% more. First tentative estimates sowing in Canada, droughts and heatwaves
highs of £214/tonne. breadwheat use. Recent rains have helped for 2012 output have been around 690/695m in Western Europe and other weather issues.
Despite drought threats
analysts think this has been at the expense to the US hard red winter crop, expor t
of running down reserve stocks and that prices for this grade dropped to $284/tonne
imports, especially of maize, will play a
far larger part from next year onwards.
in mid-November compared with $310 at
the time of oir last review. Quality spring Silo Construction & Engineering
However, China has a habit of springing wheats had been the firmest sector after the
surprises on the market. While it has been USDA revised down its US crop estimate in
Modular square bins
buying far more foreign maize this year, it November, pushing fob value up from $390 more than 100 years a reliable partner
has not yet lived up to the bullish import to $409/tonne. However, these too appear
forecasts of the US Grains Council and to be easing on lack of domestic and export Feed mills Silos
others. There is also the possibility that demand a these levels and reports of much Flourmills Bulk handling systems
its own economy may slow, putting the better quality from this year’s Canadian crop.
brakes on its expanding meat consumption. Most of the credit for cheaper wheat goes Pet Food plants Electric control &
Another question is whether US demand to the ‘Black Sea’ former Soviet producers Aqua feed mills Automation systems
for feedgrains - running 10/12% lower for who have raised their combined wheat Premix & concentrate
the past two seasons – will perk up next output by 31.5m tonnes, 13m more than plants
year under these economic conditions? most pundits expected back in the summer.
Cereal Processing
Mixed messages have been coming from Relentless, aggressive sales by Russia and
plants
the livestock sectors, more encouraging for latterly both Ukraine and Kazakhstan have
cattle and pigs than for poultry. European virtually dominated the world import markets, Oil seed processing
grain feeding is also down about 7% still undercutting US and European grain by as
from its 2008/9 level. Will that pick up much as $30/50 per tonne, depending on
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keep stocks from getting too tight before Ukrainian quotas, duties etc. the international
season’s end. Latin American soya crops Along with gradually descending maize
have meanwhile gone in quickly and are prices (to which wheat has pinned its fortunes feed & food industries •
getting good weather, promising earlier this year), this intense export competition has consultancy & engineering firms •
than usual, possible record harvests next been the biggest factor driving down Chicago machine & plant designers •
spring. US soya exports are already down and European grain futures markets.
amid Latin American competition from the Wheat output is also up this year by more www.sce.be
region’s huge 2011 crops which left record than expected in Europe and China (about CRAFTMANSHIP IN THE ANIMAL FEED AND FOOD PROCESSING INDUSTRY
stocks to dispose of this autumn at a time 2m tonnes each), India (+5m), Canada (1m).
when the US usually has the market to Even a 5.7m tonne crop decline for the leading
itself. This, along with the drop in grain exporter, the USA, has been overwhelmed by
prices and the macro-economic gloom has the staggering 40m tonnes added to output
brought soya costs down sharply too and, if elsewhere. As a result, world wheat output is
all goes well with the Latin American crops currently expected to finish 2011/12 at about
in the next few months, further price cuts 683m tonnes but it would not be surprising
might not be ruled out. to see that creep up over 685m when all
the Black Sea crops have been fully counted.
Main commodity highlights That’s about 20/25m more than predicted in
July. Wheat consumption on the other hand is
since our last review seen rising this season by about 23m tonnes.
Wheat – further price cuts possible That’s above the long term trend, thanks to
European markets in recent weeks the boom in wheat feeding, but it will still lag
have taken much of their lead from the production by enough to add at least 6m,
US markets, especially the Chicago futures, maybe 10m or more (when all the CIS crops
where nearby wheat deliveries during are in) to global ending stocks by mid-2012.
November were trading at some of their These are already forecast at a 10-year high
lowest levels since July 2010. of around 203m tonnes, a stock/use ratio of
The Paris futures market fell to a new 30% about 15.6 weeks supply.
low of �179/tonne on the front month Early forecasts from the International
38 | november - december 2011 Grain &feed millinG technoloGy Grain &feed millinG technoloGy november - december 2011 | 39

4. FACTORS IN THE MONTHS AHEAD crop), world output is up by 30m tonnes
this season against a consumption rise of
• How much maize will the US sow next
spring? Probably more than this year
• Big Ukrainian and Kazakhstan crops are 22m. As in the USA, this will still leave world • Will Ukraine sow even more maize next
stepping up their 2011/12 exports, willing 2011/12 ending stocks (next September) spring on land vacated by failed/unplanted
and able to fill the ‘cheap wheat’ vacuum about 7m-8m tonnes down and very low winter wheat and bartley crops?
Solution Engineering in Bulk Handling
once Russia starts to wind down its own in relation to consumption needs. This is • Global economic problems continue to
aggressive 2011/12 campaign. more encouraging for die-hard maize bulls erode consumer confidence, negative
• But can landlocked Kazakhstan get the grain and demands a larger world maize crop next for meat/feed demand and a continuing
out fast enough through Russia (clogged year. Currently, pundits are predicting the US restraint on grain & oilseed prices
with its own record grain traffic) or Ukraine will sow more maize next spring but,
(heading the same way as it markets record as always, area will depend on relative
maize versus wheat exports). And how corn prices versus soyabeans and on the
much quality milling will Ukraine actually weather, which can cause huge shifts in
have as opposed to lower/feed grades? acreage to soyabeans if maize planting
gets delayed.
Until these uncer tainties are
resolved, in second quarter 2012, there
is always the possibility of another
bull run on maize prices and where
maize goes, wheat must follow. For
the moment, however, the competition
from South American and the former
Soviet Union is setting a low world
import price, considerably below US
fob and Chicago futures levels. So is
• Will the Ukraine and the USA yet pull the abundance of feed wheat mentioned
reasonable 2012 crops out of a challenging above.
dry autumn/early winter period? US maize exports are falling behind
• Will the US plant a lot more spring wheat official forecasts amid the competition
in 2012 to make up for this year’s shortfalls? and while these only make up about 12% • Speculators’ interest in commodities – likely
of US maize disposals (the rest split mainly to be more evident in maize due to the tight
Coarse grains – between feed and ethanol), this has been forecast US/world ending stocks for 2011/12
Unlike wheat, maize is still a fairly tight weighing on prices. – spring planting time could see them return
market on paper. The US crop has turned For the EU itself, maize supplies have been as buyers if the weather plays up
out smaller than expected, lower than last boosted by a record crop around 64.7 tonnes • Ethanol competition for maize supplies –
year’s by 3.5m tonnes and about 8m under compared with last year’s 55.8m. Demand could resurge if maize costs continue to
estimated domestic and export needs. The is expected to expand by about 2m tonnes, fall – helping prices find a bottom
tighter ending stocks resulting, their lowest for using up all the extra supplies but imports
decades in terms of consumption, are keeping will drop away sharply from the past season’s Oilmeals cheaper too
some of the speculative money on board in unusually large 7m, probably to about half Since our last review, soya meal prices have
the Chicago futures market (although much that level. come down by about 15% on the US market,
of it jumped ship on the most recent price putting them about 26% below their August
drop in November).
Another restraint on maize prices is the
FACTORS IN THE MONTHS AHEAD highs and at their cheapest level since June
last year. Meal prices have fallen as soyabean
relatively looser foreign supply. Thanks to • China’s maize ‘deficit’ remains a live issue. supply prospects have improved – the lifting
record crops in the former Soviet Union and If maize prices fall further it may take a lot of a threat of tight US end-season stocks and
expected big harvests in South America next more imported maize after all – bullish for a far better outlook than expected for the
year (not to mention the EU’s own record prices coming Latin American crops.
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