IGC GRAINS CONFERENCE 2012: London - 7 June for futher details see INTERNATIONAL GRAINS COUNCIL GRAIN MARKET REPORT EXPORT PRICES

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1 IGC GRAINS CONFERENCE 2012: London - 7 June for futher details see INTERNATIONAL GRAINS COUNCIL GRAIN MARKET REPORT GMR No May 2012 WORLD ESTIMATES million tons 08/09 09/10 10/11 11/12 est 12/13 forecast WHEAT Production Trade Consumption Carryover stocks year/year change Major exporters a) MAIZE (CORN) Production Trade Consumption Carryover stocks year/year change TOTAL GRAINS* Production Trade Consumption Carryover stocks year/year change Major exporters a) a) Argentina, Australia, Canada, EU, Kazakhstan, Russia, Ukraine, United States * Wheat and coarse grains million tons (milled basis) 07/08 08/09 09/10 10/11 est 11/12 forecast RICE Production Trade Consumption Carryover stocks year/year change Major exporters b) b) India, Pakistan, Thailand, Vietnam, United States MARKET COMMENTARY Uncertainty about the outlook for global grains and oilseeds production dominated market activity during May, resulting in heightened price volatility, also partly reflecting deepening worries about the world economy amid eurozone problems. There was an associated marked strengthening of the US dollar, contributing to movements in dollar-denominated export quotations. While prospects for world wheat production were initially considered mostly favourable, markets turned abruptly higher as crop perceptions deteriorated. US maize values slumped following bearishly interpreted official supply and demand data, including an above-trend rise in projected 2012/13 yields. An equally sharp rebound followed, boosted by tight nearby supplies and strength in wheat, but the market turned lower again, weighed by good early growing conditions. Rice prices in Thailand posted solid gains on intervention buying and fresh export sales. After recent strength, soyabean values were pressured by weaker external markets, especially crude oil and equities, with a stronger dollar and signs of slower demand from China weighing on US futures. Mostly because of a sharp drop in the sub-index for soyabeans, IGC s daily index (GOI) fell by 3% over the month. The average of ocean freight rates in the three grainscarrying sectors was pressed lower by a build of surplus Panamax tonnage Jan IGC DAILY INDEX (GOI) 15 Feb 06 Mar 26 Mar For further details go to: 13 Apr 03 May 23 May EXPORT PRICES US$ / ton, fob US HRW EU (France) US SRW WHEAT US Corn MAIZE Thai 100% RICE SOYABEANS US Soyabeans Jan 15-Feb 06-Mar 26-Mar 13-Apr 03-May 23-May 26-Jan 15-Feb 06-Mar 26-Mar 13-Apr 03-May 23-May 26-Jan 15-Feb 06-Mar 26-Mar 13-Apr 03-May 23-May 26-Jan 15-Feb 06-Mar 26-Mar 13-Apr 03-May 23-May

2 SUPPLY AND DEMAND IN 2011/12 GRAINS* World grains production in 2011/12 is placed slightly lower than last month, at 1,841m. tons (1,753m.). A further increase in projected feed wheat use helps to lift total world grains consumption by 3m. tons, to 1,841m., up by 3.1% compared with the year before. Because of sharply lower wheat stocks, the global grain carryover forecast is down by 8m. tons from the April GMR, to 371m., the same as the estimate for the end of 2010/11. Increases in wheat, maize and barley, boost the forecast of world grains trade (July/June) by 4m. tons, to 264m. RICE World rice production in 2011/12 is forecast to expand by some 15m. tons, to an all-time high of 462m., underpinned by bigger outturns in Asia. Owing to larger availabilities, global use is also seen increasing to a record, of 458m. tons (447m.), while the world 2011/12 carryover will increase to a nineyear peak of 99.6m. World trade in 2012 is expected to decline by 6%, to 33.1m. tons, on smaller deliveries to Far East Asian markets. OILSEEDS World soyabean production in 2011/12 is estimated at 236.9m. tons, a decline of 11% from last year, reflecting sharply reduced outturns in all key producers. Despite further growth in shipments to China, global trade is expected to fall for the second consecutive year, to 88.9m. tons (91.2m.). Strong demand from Asia and the EU is expected to boost world soyameal trade, to 57.4m. tons (56.9m.). OUTLOOK FOR 2012/13 GRAINS* The forecast of total global grains* production in 2012/13 is up by 4m. tons from last month, to 1,873m. (1,841m.), with a steep increase in maize only partly offset by a cut in the wheat crop. A very good start to the growing season means a huge US maize harvest is anticipated. World grains consumption is forecast to expand by 1.6%, to 1,871m. tons, led by a 15m. increase in feed use, to 801m. Growth in direct food use of grains is forecast to broadly match the global population increase, projected to climb by 1.1%, to 634m. tons. At 312m. tons, world industrial use is forecast to rise by 2.4%, compared with the 10-year average of 10%. The forecast of world grain carryover stocks at the end of 2012/13 is reduced by 10m. tons from last month, to 373m. (371m.). Maize carryovers are expected to increase for the first time in four years, mainly because of a recovery in the US. The forecast of global wheat stocks is reduced, partly due to smaller opening inventories. Even though stocks are forecast to fall in the EU, Australia and CIS, the jump in the US will boost combined carryovers in the eight major exporters by 9m. tons, to 135m. While world wheat trade is not expected to match the 2011/12 record, an increase in coarse grains shipments, mainly maize, will see overall grains trade post a further small rise, to 265m. tons (July/June). Maize trade is forecast to reach a new all-time high, at 101.7m. tons. Increased US shipments to Mexico will contribute to a recovery in sorghum trade, but small declines are projected for barley and oats. WHEAT: Global 2012/13 crop prospects remained mostly favourable during May, but adverse conditions lowered harvest expectations in the EU, Russia and Morocco, contributing to a 5m. tons cut in the world production forecast, to 671m. (695m.). Higher than previously forecast feed use slightly raises the projection of world consumption but, at 681m. tons, it is still expected to be 7m. lower than in 2011/12. World wheat stocks at the start of 2012/13 are placed 8m. tons below the projection in April s report, mainly because of higher than previously estimated feed use in the past year. Reflecting lower stocks at the beginning of the season and a cut in the production forecast, carryover stocks at the end of 2012/13 are 15m. tons lower than last time, at 191m. (202m.). Those in the major exporters are forecast to recede by 8.4m. tons, to 62.4m., including a draw-down from heavy opening levels in Australia, Kazakhstan and Ukraine. Reduced imports of feed wheat are expected to see world trade dip by 7.4m. tons from the anticipated 2011/12 record, to 135.7m. The share of global trade taken by Black Sea exporters may not be as high, with smaller crops seen restricting shipments by Russia and Ukraine. Export surpluses are expected to be smaller in the EU and Argentina, but increased production and reduced competition will likely boost sales by the US. MAIZE (CORN): With plantings and yields projected at new records, the global maize (corn) crop is forecast to increase by more than 5%, to 913m. tons. Early seeding has reinforced expectations for a huge US harvest. Assuming a significant rise in harvested area, and with yields forecast to match the 10-year trend, US production is projected at 355m. tons, up by 13% year-on-year. Compared to 2011/12, world availabilities are expected to be more comfortable and maize could replace some wheat in livestock feed rations. Feed use is forecast to rise by 5%, but growth in industrial consumption will be slower than in recent years, at around 2%. World stocks are projected to increase to their highest in three years, almost entirely attributable to the US. Firm demand and increased exportable supplies are expected to lift July/June trade to a new record of 102m. tons. * Wheat and coarse grains 2012

3 GMR May 2012 GMR CONTENTS (N.B: Text and tables highlighted in blue are available in electronic version only ) COMMENTARY Page no. Page no. GRAINS: SUPPLY AND DEMAND IN 2011/12 4 RECENT MARKET DEVELOPMENTS 16 General 4 Wheat 16 Wheat 4 Durum 17 Maize (corn) 4 Coarse grains 17 Barley 4 Maize (corn) 17 Barley 18 OUTLOOK FOR SUPPLY AND DEMAND IN 2012/13 4 Other coarse grains (sorghum, oats, rye) 18 General 4 Oilseeds 19 Wheat 5 Rice 19 Durum 8 Ocean freight rates 20 Coarse grains 8 Maize (corn) 8 NATIONAL POLICY AND OTHER DEVELOPMENTS 20 Barley 10 Latest national trade-related measures 20 Sorghum 12 Other national policy developments 21 Oats 12 Other developments 21 Rye 12 Cross-border farmland investment RICE: SUPPLY AND DEMAND IN 2011/12 12 MARKET FOCUS 21 Outlook for 2011/12 12 Industrial use of grains - update 21 Maize (corn): China domestic prices 22 OILSEEDS 14 Volatility in grains and oilseeds futures Outlook for 2011/12 14 markets - recent trends 23 Soyabeans 14 World trade in wheat flour Soyameal 15 Rapeseed/canola 15 GRAINS TABLES Table no. Table no. PRODUCTION SUPPLY AND DEMAND Total grains (wheat and coarse grains) 1 Total grains 18A All wheat 2 All wheat 18B Maize (corn) 3 Maize (corn) 18C Barley 4 Barley & sorghum 18D Sorghum 5 Oats & rye 18E Oats 6 Rye 7 Durum wheat: Supply and demand/production/trade 19 Totals by grain 8 TRADE RICE Total grains (wheat and coarse grains) 9 Production 20 All wheat 10 Trade 21 Maize (corn) 11 Rice: main exporters' progress reports 21A Barley 12 Supply and demand 22 Sorghum 13 Cumulative shipments by destination - All rice E Oats 14 Rye 15 OILSEEDS Shipments and sales Soyabeans: production 23 Rapeseed/canola: production 24 Recent reported sales (wheat and coarse grains) 16 Soyabeans: trade 25 Wheat: main exporters' progress reports 17A Soyabeans: main exporters' progress reports 25A Maize (corn): main exporters' progress reports 17B Soyameal: trade 26 Barley: main exporters' progress reports 17C Soyameal: main exporters' progress reports 26A Rapeseed/canola: trade 27 Monthly and quarterly grain shipments A Rapeseed/canola: main exporters' progress reports 27A Cumulative shipments by destination Cumulative shipments by destination Wheat B1 Soyabeans F1 Durum wheat B2 Soyameal F2 Maize (corn) B3 Rapeseed/canola F3 Barley B4 Malt B5 Sorghum B6 PRICES Oats B7 Weekly export quotations (and GOI) 28 EU: licences, import duties and export refunds Futures prices 29 Export/import licences C1 Historical volatility 29A Import duties C2 IGC GOI and sub-indices G TRQ import licences C3 OCEAN FREIGHT RATES CHINA Selected grain routes 30 Production D1 Trade forecasts D2 Trade progress report D3 Official trade data D4

4 GMR May 2012 IGC GRAINS: SUPPLY AND DEMAND IN 2011/12 * : UPDATE GENERAL World grains production is placed slightly lower than last month, at 1,841m. tons (1,753m.). A further increase in projected feed wheat use helps to lift total world grains consumption by 3m. tons, to 1,841m., up by 3.1% compared with the year before. Because of sharply lower wheat stocks, the global grain carryover forecast is down by 8m. tons from the April GMR, to 371m., the same as the estimate for the end of 2010/11. Increases in wheat, maize and barley, boost the forecast of world grains trade (July/June) by 4m. tons, to 264m., a jump of 21m. compared with the year before, mainly due to strong gains in wheat and barley purchases for feed. because of an anticipated rise in feeding of wheat and new crop maize. Due to a higher crop estimate and increased carry-in, 2011/12 ending stocks forecast up slightly, at 129m. tons (133m.), including 39m. (42m.) in the four major exporters. 2011/12 trade estimate increased by 0.3m. tons, to 94.2m. (93.2m.). Imports by the EU and North Africa have recently been higher than expected, but shipments to Japan have slowed compared to last year. BARLEY The forecasts of global barley production and consumption are little changed from last month, at 134.5m. tons and 135.8m., respectively. World barley trade is placed 0.5m. tons higher than before, at 19.0m., including higher malting barley imports by the EU and China. WHEAT The forecast of world wheat production in 2011/12 is unchanged from last month, at 695m. tons (653m.) Because of increased feed use, the forecast of total consumption is raised by 4m. tons, to 688m. (657m.), including upward revisions in Australia, China, the EU, South Korea and the US. Together with lower than previously estimated inventories at the start of the season, higher use results in an 8m. tons cut in the carryover stocks forecast, to 202m. (195m.). Those in the eight major exporters are placed 4.7m. tons lower than before, at 70.8m. (71.7m.), including reductions in Argentina, Russia, Ukraine and the US. The forecast of world wheat trade in 2011/12 is lifted by 3.5m. tons, to 143.1m. (125.8m.), mainly because of continued strong demand for low/medium grades for feed. Imports are raised for China, Mexico, Japan, South Korea, the Philippines and Vietnam. Exports are placed higher than before for Argentina, Australia and India. MAIZE (CORN) World production estimate increased by 1m. tons, to 866m. (829m.), as upward revisions in Brazil and sub-saharan Africa offset a reduction for Argentina. Consumption estimate up by 1m. tons, to 870m. (844m.), mainly reflecting increased forecasts for sub-saharan Africa (food) and the EU (feed). US feed/residual demand lowered * Wheat and coarse grains OUTLOOK FOR SUPPLY AND DEMAND IN 2012/13 * GENERAL The forecast of total global grains* production in 2012/13 is up by 4m. tons from last month, to 1,873m. (1,841m.), with a steep increase in maize only partly offset by a cut in the wheat crop. Total harvested area is placed 0.8m. ha lower than before, at 538m. Although maize harvested area is higher, with the world total seen expanding to a new record, including increases in the US and China, winter wheat crops in some regions have been affected by recent adverse weather, especially in the EU and CIS. Spring wheat sowing progressed at a faster than normal pace in the US, but conditions in some US winter wheat areas have recently turned less favourable than before. A very good start to the growing season means a huge US maize harvest is anticipated, with an upward revision for China, close to the previous year s record. With winter wheat planting underway in the southern hemisphere, better price prospects for other crops are expected to cap plantings in Argentina and Australia. World grains consumption is forecast to expand by 1.6%, to 1,871m. tons, led by a 15m. increase in feed use, to 801m. Rising meat consumption, especially in developing countries, will lift global feed needs but, after the past year s elevated level of wheat use, greater availabilities will likely see some switch back to maize. Growth in direct food use of grains is forecast to broadly match the global population increase, projected to climb by 1.1%, to 634m. tons. The expansion of world industrial use of grains is expected to remain much slower than the very rapid pace seen in the past decade, when maize use in the US ethanol sector surged. At * Wheat and coarse grains 4

5 IGC GMR May m. tons, global industrial use is forecast to rise by 2.4%, compared with the average in the past 10 years of 10%; the total includes 165m. tons (+2%) for ethanol (including non-fuel uses), 110m. (+4%) for starch and 36m. (+2%) for brewing. The forecast of world grain carryover stocks at the end of 2012/13 is reduced by 10m. tons from last month, to 373m., only slightly higher than their anticipated end- 2011/12 level. Maize carryovers are expected to increase for the first time in four years, mainly because of a recovery in the US, with better production prospects lifting the projection for that country compared with the April report. However, this is outweighed by a reduced figure for global wheat stocks, mostly due to smaller opening inventories resulting from higher than previously expected feed use in 2011/12. Even though grain stocks are forecast to fall in the EU, Australia and CIS, the jump in the US will boost combined carryovers in the eight major exporters by 9m. tons, to 135m. While world wheat trade is not expected to match the 2011/12 record, an increase in coarse grains shipments, mainly maize, will see overall grains trade post a further small rise, to 265m. tons (July/June). Maize trade is forecast to reach a new all-time high, at 101.7m. tons, boosted by more ample export availabilities, including larger purchases by Japan, China, the EU and South Korea. Increased US shipments to Mexico will contribute to a recovery in sorghum trade, but small declines are projected for barley and oats. forecast, to 671m. (695m.). Higher than previously forecast feed use slightly raises the projection of world consumption but, at 681m. tons, it is still expected to be 7m. lower than in 2011/12. World wheat stocks at the start of 2012/13 are placed 8m. tons below the projection in April s report, mainly because of higher than previously estimated feed use in the past year. Reflecting lower stocks at the beginning of the season and a cut in the production forecast, carryover stocks at the end of 2012/13 are 15m. tons lower than last time, at 191m. (202m.). Those in the major exporters are forecast to recede by 8.4m. tons, to 62.4m., including a draw-down from heavy opening levels in Australia, Kazakhstan and Ukraine. Reduced imports of feed wheat are expected to see world trade dip by 7.4m. tons from the anticipated 2011/12 record, to 135.7m. The share of global trade taken by Black Sea exporters may not be as high, with smaller crops seen restricting shipments by Russia and Ukraine. Export surpluses are expected to be smaller in the EU and Argentina, but increased production, and reduced competition, will likely boost sales by the US WHEAT: SUPPLY AND DEMAND m. tons m. tons < World consumption < World production Stocks: major exporters* > TOTAL GRAINS*: SUPPLY AND DEMAND ,900 1,850 1,800 1,750 1,700 1,650 m. tons m. tons < World consumption < World production Stocks: major exporters** > /04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 (f'cast) *Argentina, Australia, Canada, EU, Kazakhstan, Russia, Ukraine, United States ,600 1, PRODUCTION 1,500 1,450 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 (f'cast) **Argentina, Australia, Canada, EU, Kazakhstan, Russia, Ukraine, United States SUMMARY WHEAT Global 2012/13 crop prospects remained mostly favourable during May, but adverse conditions lowered harvest expectations in the EU, Russia and Morocco, contributing to a 5m. tons cut in the world production 25 0 World wheat production in 2012/13 is forecast at 671m. tons, 5m. down from last month, with an increase in US output more than offset by reductions for the EU, Russia, South America and Morocco. Despite a 1.0% increase in the global harvested area, to 220.3m. ha., production is 24m. tons lower than the previous season s all time high, as yields, though projected slightly above the five-year average, are unlikely to match the 2011/12 record. For table see: In the EU, warm and wet weather was favourable for crop development, especially in France, Germany, Poland and the UK. However, dry conditions persisted in southern Europe, notably in Italy and 5

6 GMR May 2012 IGC Greece, stressing crops and reducing irrigation reserves. In the aftermath of the severe frost in February and overly dry spring weather, the production forecast is reduced by 1.9m. tons, to 131.2m. (138.2m.), reflecting crop damage in France, Germany, Hungary and Poland. The total wheat area is forecast at 24.6m. ha. (26.0m.), 0.3m. lower than before and the smallest in nine years. In Kazakhstan, planting made good progress in major north-central regions, helped by warm weather and adequate soil moisture. The area is projected slightly lower than in 2011/12, at 13.5m. ha. (13.8m.) and, with yields expected to decline to around average levels, production is forecast one-third below last year s record, at 15.0m. tons. In western Russia, recent drier than normal conditions have reduced soil moisture across the Volga District and southern regions, while beneficial rains in central and northern areas were favourable for crop development. Spring wheat planting in the key western Siberia regions progressed at a faster pace than last year. The total harvested area is projected 6% higher than in 2011/12 due to increased plantings and reduced winterkill but, because of recent dryness, production is forecast 3m. tons lower than before, at 55.0m. (56.2m.). In Ukraine, widespread rains aided crops in northern and western regions, but south-eastern areas received little precipitation and, combined with high temperatures and drying winds, continued to harm winter crop prospects and the germination of spring grains. Based on a projected 28% fall in the harvested area, to 4.8m. ha., and assuming below average yields, production is forecast at a five-year low of 14.0m. tons (22.1m.). In Western Canada, above normal temperatures and light precipitation speeded spring fieldwork across the Prairies. Favourable planting conditions and perceived good price prospects are expected to boost the total wheat area by some 10%, to 9.6m. ha., including a 13% increase in the durum area. On the basis of normal growing conditions and average yields, production is forecast at 26.0m. tons (25.3m.). In the US, continued warmer than normal weather accelerated crop development by up to three weeks. While most winter wheat stayed in very good condition, officially estimated at 58% good/excellent as at 20 May, and much better than last year s 32%, crop prospects were reported to have deteriorated in some Hard Red Winter (HRW) areas. Spring wheat sowing was almost completed, well ahead of last year, when only 50% had been sown, and compared with the five-year average of 78%. Total wheat plantings are officially placed 3% higher than in 2011/12, at 22.6m. ha. (22.0m.), including 16.9m. (16.4m.) of winter wheat. The durum area is projected at 0.9m. ha., up by 62% from last year s lower than normal level, mainly in North Dakota, where plantings are expected to double. The harvested area is projected by the Council at 19.5m. ha. (18.5m.) and, taking into account improved yield prospects, the production forecast is raised by 1.0m. tons from before, to 59.0m. (54.4m.). Winter wheat production is forecast 13% higher by the USDA, at 46.1m. tons (40.7m.), due to a 33% increase in HRW output, while production of Soft Red Winter (SRW) and White varieties is expected to decline. WHEAT: US WINTER WHEAT PRODUCTION BY CLASS m. tons 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 (f'cast) Source: USDA White SRW HRW Planting got underway in Argentina, with rains helping to rebuild subsoil moisture levels in the key Buenos Aires province. However, the area sown is forecast to fall by as much as 15% due to an expected switch to more profitable crops, and production is projected to drop to 12.5m. tons (13.4m.). In China, warm conditions with scattered rains were beneficial for spring wheat development in the Northeast. The total wheat area is projected to be similar to last year, at 24.3m. ha., including 22.7m. sown to winter varieties. Based on average yields, production is forecast at 116.0m. tons (117.9m.). In India, combining made good progress across northern and central growing areas. The harvested area is expected to be slightly higher than last year, at 29.6m. ha. (29.4m.), with production projected at a record 90.0m. tons (86.9m.). Ideal growing conditions kept Iran s crop prospects above average, with production forecast 7% higher than last year, at 14.5m. tons. Mostly beneficial weather boosted the outlook for Syria s production, forecast at 4.0m. tons (3.9m.), up by 0.4m. from previously. While crops in Turkey have benefited from generally ample soil moisture, below normal temperatures delayed crop development and restricted spring fieldwork in central and eastern 6

7 IGC GMR May 2012 areas. The wheat area is forecast 6.5% higher than last year, at 8.2m. ha. and, assuming average yields, production is placed at 18.5m. tons (18.8m.). In North Africa, warmer than normal weather accelerated wheat maturation, with larger crops forecast in Algeria and Tunisia, at 3.2m. tons (2.8m.) and 1.6m. (1.3m.), respectively. Harvesting started in southern and western Morocco but, because of drought, output is projected to fall by over 40%, to 3.3m. tons, with some fields reported to have been abandoned. Aided by dry weather across the south-east, planting commenced in Australia, with areas projected 3% lower than last year, at 13.7m. ha, due to more attractive price expectations for other crops. Production is forecast to drop by 12% from last year s record, to 26.0m. tons (29.5m.). Planting is underway in South Africa s key producing regions, helped by ample moisture. Production is forecast the same as last year, at 1.9m. tons, as better yields are expected to compensate for a slight decline in the harvested area. WHEAT: SUPPLY & DEMAND m. tons 09/10 10/11 11/12 12/13 (est.) (f'cast) Opening stocks Production Total supply Total use of which: Feed Industrial Food Closing stocks Trade a) a) July/June CONSUMPTION World wheat consumption is forecast to fall by 7m. tons in 2012/13, to 681m., with a drop in feed use from the previous year s record outweighing growth in the food and industrial sectors. At 128.8m. tons, global feed wheat demand is placed 13.1m. below the estimate for 2011/12, but is still about 10m. above the average in the past ten years. Even though world maize supplies are expected to increase, wheat will likely remain a competitively-priced feed ingredient in some countries. While per capita use is expected to stay broadly steady, population growth is forecast to lift direct use for human food by 1.0%, to 465.2m. tons. World industrial use is forecast to expand by 6.3%, to 20.4m. tons, boosted by an increase in ethanol production in the EU. STOCKS World wheat carryover stocks at the end of 2012/13 are forecast to recede by 11m. tons, to 191m., with most of the drop in the major exporters. Because of higher than previously forecast use during 2011/12, which sharply cut the level of opening inventories, and lower projected production, the global stocks figure is around 15m. tons lower than in the end-april GMR. Combined carryovers in the eight major exporters are placed 7.3m. tons lower than previously, at 62.4m., a fall of 8.4m. year-on-year. In part the drop from last year reflects an expected contraction from high opening levels in Australia, Kazakhstan and Ukraine. A fall to 18.9m. tons (20.3m.) is forecast in the US, but stocks in Argentina, Canada and the EU are projected to show little change. In China, because of a tight outlook for maize supplies, higher than previously forecast feed use of wheat results in a 6.2m. tons cut in projected carryover stocks, to 52.5m. (55.7m.). After another bumper harvest, stocks in India are projected to increase to 22.5m. tons (20.5m.), mostly in centrally-held reserves, with these expected to stay much higher than minimum desired levels. TRADE World wheat trade in 2012/13 is forecast to decline by 7.4m. tons from the previous year s anticipated record, to 135.7m., still the third highest global trade figure ever. Most of the drop from the previous year is due to an expected lower level of feed wheat trade, contained by increased availabilities of maize. Trade in feed wheat is forecast to fall by around 6.5m. tons, to 11.3m., including smaller purchases by the EU and South Korea. While imports of lower grade wheat for feed by some nontraditional buyers are expected to recede, demand is expected to remain strong in some countries, including in China. The overall volume of food wheat trade (including milling wheat, flour and durum) is expected to be little changed from 2011/12. Imports by Iran may not be as high, but smaller crops are expected to lift purchases by Brazil and Morocco. Because of reduced crop expectations, export forecasts for the EU and Argentina (July/June) are revised lower, to 14.2m. tons (16.8m.) and 8.0m. (11.0m.), respectively. The forecast of Russia s exports is 2.0m. tons lower than before, at 17.0m. (21.5m.), due to a reduced outlook for production. A below-average crop will restrict exports by Ukraine, projected at a five-year low of 4.0m. tons (5.3m.). Despite a likely fall in production, large opening stocks are expected to keep Australia s export surplus at a relatively high level, with shipments (July/June) forecast at 21.5m. tons (22.0m.). Reduced competition from other countries, and also taking into account an increased production forecast, is projected to boost demand for US wheats, with exports (July/June) 7

8 GMR May 2012 IGC placed 2.5m. tons higher than before, at 31.0m. (27.3m.). DURUM World durum production in 2012/13 is forecast to fall by 2%, to 35.9m. tons, with better crops in North America outweighed by lower outturns in the EU, Kazakhstan and Morocco. Together with low stocks at the start of the season, a reduced harvest will see total global availabilities shrink to a 10-year low. World consumption is forecast to contract by around 2%, to 36.0m. tons, nevertheless, carryover stocks at the end of 2012/13 are expected to show a further small decline, to 7.1m. (7.3m.). In the US, planting of an increased area progressed rapidly during May and will likely be virtually finished by the end of the month; planting had only just started at this time last year because of wet weather. Production is forecast to nearly double, to 2.5m. tons. Planting conditions are also much better than last year in Canada and, with area seen rising by 13%, production is forecast to increase to 4.5m. tons (4.2m.). Although durum area in the EU is estimated to be close to the previous year s level, unfavourable weather has affected yield prospects, particularly in Spain. Total production in the EU is forecast to fall by 10%, to 7.4m. tons. With yields not expected to match last year s exceptional results, a smaller crop, of 2.1m. tons (3.0m.), is forecast in Kazakhstan. While good results are expected in Algeria and Tunisia, production in Morocco is forecast at a fouryear low, of 1.2m. tons (1.7m.), due to inadequate rainfall during the growing season. After having slumped to an expected eight-year low during 2011/12, world trade in durum is forecast to rebound to an above-average 7.5m. tons (7.1m.) in 2012/13. A smaller domestic crop is forecast to lift EU imports to 2.3m. tons (2.0m.), while its exports are projected to halve, to 0.7m. In Morocco, durum import duties have been suspended until the end of December 2012; because of lower production, imports are forecast to increase to 0.9m. tons (0.6m.). livestock feed rations. Feed use is forecast to rise by 5%, but growth in industrial consumption will be slower than in recent years, at around 2%. World stocks are projected to increase to their highest in three years, almost entirely attributable to the US. Firm demand and increased exportable supplies are expected to lift July/June trade to a new record of 102m. tons. MAIZE (CORN): SUPPLY AND DEMAND m.tons 09/10 10/11 11/12 12/13 (est.) (f'cast) Opening stocks Production Total supply Total use of which: Feed Industrial Food Closing stocks Trade a) a) July/June PRODUCTION Maize planting in the northern hemisphere is almost complete. World harvested area is forecast to reach a record 170m. ha (168m.), including above-average increases in the US, the EU, Ukraine and China. Forecasts for the southern hemisphere remain tentative, but plantings in South America are projected to be lower because of expected strong competition from soyabeans. Global yields are forecast to rise to an average 5.4 tons/ha., a new record, with production projected at an all-time high of 913m. tons (866m.); the forecast is 13m. higher than in April, reflecting increased projections for the US, China and Brazil. For table see: US MAIZE (CORN): AREA, YIELDS, PRODUCTION SUMMARY COARSE GRAINS MAIZE (CORN) With plantings and yields projected at new records, the global maize (corn) crop is forecast to increase by more than 5%, to 913m. tons. Early seeding has reinforced expectations for a huge US harvest. Assuming a significant rise in harvested area and with yields forecast to match the 10-year trend, US production is projected at 355m. tons, up by 13% year-on-year. Compared to 2011/12, world availabilities are expected to be more comfortable and maize could replace some wheat in m.tons m.ha < Production Yield > Harvested area > 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 (f'cast) / / / tons /ha 8

9 IGC GMR May 2012 In the US, warm and dry weather in key producing States allowed rapid planting, with crop emergence ahead of both last year and the five-year average. The planted area is officially placed at 38.8m. ha., up by 4.3% from last year and the highest since 1937, as farmers responded to high prices and favourable crop insurance rates. The good start to the season is likely to result in reduced abandonment and the harvested area is forecast to increase by 6.5%, to 36.2m. ha. Based on a 10-year trend yield of 9.8 tons/ha., production is forecast 13% higher than a year ago, at a record 355.0m. tons, up by 5.0m. from last month. Canada s harvested area is forecast to increase by 17%, to 1.4m. ha., the second highest on record. Based on trend yields, production is forecast at 12.0m. tons (10.7m.). Warm weather during May across much of the EU resulted in the early completion of maize planting. Improved soil moisture was reported in north-western, central and eastern growing areas, but dry conditions continued in southern Europe, notably in Italy and Greece, where irrigation supplies were depleted. Harvested area is forecast to increase by 6%, to 9.4m. ha., with some farmers replacing damaged winter grains with maize in France, Hungary and Romania. However, production is forecast to be only fractionally higher than last season, at 65.4m. tons (65.1m.), due to a return to trend yields. In Ukraine, sowing was almost complete by mid-may. Due to rising demand and good profitability, area has increased sharply in recent years, rising from 1.1m ha. in 2001/02 to an estimated 3.5m. in 2011/12. Reflecting solid export demand and the replanting of some frost-damaged winter grains, this year s area is forecast to increase by a further 31%, to about 4.6m. ha. Average yields are projected to be lower than last year s record, but still above average, with production forecast at a record 24.0m. tons (22.8m.). Abundant soil moisture was beneficial for crop development in southern China, while warmer weather with showers helped planting in north-eastern regions. Due to high prices and some farmers switching from cotton and soyabeans, harvested area is forecast to increase to 34.4m. ha. (33.4m. ha.). Assuming yields of 5.5 tons/ha., equal to the five-year average, production is forecast at 189.0m. tons (191.8m.), 3.0m. higher than previously. Korea, Vietnam and Japan. In Brazil, strengthening meat demand in both domestic and export markets is forecast to lift feed use to 46.0m. tons (44.2m.). Local demand for poultry is expected to be higher, while meat exports, including pork to China, may also increase. There are reports that cattle producers are feeding more grains due to reduced pastureland. In the EU, feed use is projected to increase by 0.7m. tons, to 51.2m., with more expected to be used in industrial feeds. US feed/residual use is forecast to climb sharply, to around 130.0m. tons (115.6m.), including stronger demand from poultry and pork producers, but the residual element will also increase because of the larger crop m. tons MAIZE (CORN): CONSUMPTION 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 (f'cast) Other Food Industrial Feed At 2%, growth in industrial use is forecast to be the slowest since 2001/02. In the US, a small rise in sweetener and starch production is expected, but maize used for fuel ethanol is seen steady, at 127.0m. tons. However, fuel ethanol processors in the EU, Canada and Argentina are expected to use more maize. The expansion of industrial use in China is expected to remain strong, due to solid demand for starch sweeteners and baiju, a distilled alcoholic beverage. 900 MAIZE (CORN): SUPPLY AND DEMAND m. tons m. tons < World consumption < World production Stocks: major exporters* > 80 CONSUMPTION Because of larger global supplies and strong demand, especially for livestock products and starch, total consumption is forecast to increase by 4% in 2012/13, to a record 902m. tons (870m.), including 515m. (489m.) for feed and 253m. (248m.) for industrial processing. A projected record US crop will lift exportable supplies, with maize potentially displacing some low/medium grade wheat in feed rations. Feed maize demand is forecast to rise in Far East Asia, including China, South /04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 (f'cast) *Argentina, Brazil, Ukraine, United States

10 GMR May 2012 IGC STOCKS Global stocks at the end of 2012/13 (respective marketing years) are forecast at 141m. tons (129m.); the first year-on-year increase since 2008/09. The projected gain is almost entirely attributable to a recovery in the US carryover, with inventories in other major producers and consumers projected to be unchanged or slightly lower. Helped by a projected bumper crop, US closing stocks are forecast to rebound to 36.8m. tons (21.6m.). At 11%, the projected stocks/disappearance ratio compares to 7% in 2011/12 and 8% in 2010/11, but is in line with the five-year average. Ending stocks in the four major exporters (Argentina, Brazil, Ukraine, US) are forecast at 53.1m. tons (38.5m.). offset by a smaller import projection for Mexico, where purchases may drop to 9.5m. tons (11.0m.) because of a larger local crop and a rebound in sorghum imports MAIZE (CORN): CHINA TRADE (JULY/JUNE) m. tons net exporter net importer Exports Imports 20% 15% 10% 5% MAIZE (CORN): MAJOR EXPORTERS STOCKS TO DISAPPEARANCE RATIOS Stocks/Disappearance (%) 25% Brazil USA Ukraine Argentina /04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 (f'cast) Marketing year (September/August) exports by the US are forecast to increase to 47.0m. tons (43.2m.). Ukraine is expected to continue to provide stiff competition on world export markets, with shipments in the year ending September 2013 forecast at 14.0m. tons, similar to the 2011/12 total. Exports by Argentina in 2012/13 (March/February) will be capped by smaller availabilities and shipments are forecast to decline to 12.5m. tons (15.7m.). In contrast, a record crop in Brazil could see exports rising to 11.0m. tons (8.4m.). 0% 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 (f'cast) SUMMARY BARLEY TRADE Due to projections for stronger animal feed demand and more ample exportable supplies, global maize trade in 2012/13 (July/June) is forecast to increase to a record 101.7m. tons (94.2m.). Reflecting very strong growth in domestic demand, China has become a regular importer in recent years. However, because of underlying uncertainties about supply and demand, exact import needs remain difficult to determine. Stocks appear to have tightened and, with near-record local prices boosting the price competitiveness of imported supplies into southern China, Sinograin and private feed mills have recently been large buyers of US maize. Imports are projected to increase to 7.0m. tons in 2012/13, up by 75% from the year before. With the March 2011 earthquake capping use, imports by Japan were below average in 2011/12. Assuming a pickup in demand, July/June imports are forecast to increase to 16.0m. tons (14.8m.). Elsewhere in Far East Asia, more attractive prices are forecast to lift imports by South Korea to 8.0m. tons (6.7m.). Shipments to the EU are forecast at 6.0m. tons (4.8m.), with larger supplies in Ukraine likely to be competitively priced. Gains elsewhere are partly Global barley production is forecast to be 3% higher in 2012/13, at 138.2m. tons, including bigger harvests in the EU, Ukraine, North America and Argentina. However, the rise in global availabilities will be contained by low stocks at the start of the season. With world barley use expected to show a modest increase, only a small recovery in carryover stocks is forecast at the end of 2012/13, to 28.9m. tons (27.4m.), including tight inventories in the EU, US and Canada. World barley trade is forecast to decline to 18.2m. tons (19.0m.), including reduced imports by the EU and Saudi Arabia. PRODUCTION World barley production in 2012/13 is expected to show some recovery compared to the poor crops of the previous two years. With larger outturns expected in the EU, Ukraine, Canada, the US and Argentina, overall output is forecast to increase to 138.2m. tons, up by 2.8% year-on-year. Global harvested area is forecast to increase by as much as 7%, to 53.5m. ha., matching the five-year average, including a rise in the EU, the CIS, North America and Argentina. For table see: 10

11 IGC GMR May 2012 BARLEY: SUPPLY AND DEMAND m. tons 09/10 10/11 11/12 12/13 (est.) (f'cast) Opening stocks Production Total supply Total use of which: Feed Industrial Food Closing stocks Trade a) a) July/June, excluding malt Spring crop development in the EU benefited from warmer weather and increased soil moisture. Reduced winter barley area, mainly resulting from worse than average frost damage, is expected to be more than compensated by increased plantings of spring varieties. Total area is forecast to increase by 3%, to 12.3m. ha., including 8.1m. (7.2m.) of spring barley. Reflecting improving prospects in France and Germany, the production forecast is up by 0.6m. tons from before, to 52.4m. (51.8m.). increase by 8%, while yields should be better than last year. In Canada, attractive prices and improved planting conditions compared to last year is forecast to result in a 22% increase in area, to about 3.2m. ha. Assuming average abandonment and yields, production is projected to grow by 15%, to 9.0m. tons. US planting progressed quickly during May and was almost finished by the middle of the month in the five key producing States. Because of increased acreage, production is forecast to be 26% higher than last year, at 4.3m. tons. Australia s barley area is expected to fall slightly, to 3.9m. ha. (4.0m.), as some farmers switch to more profitable canola. Production is projected to decline by 5% from 2011/12, to 8.2m. tons. CONSUMPTION World barley consumption in 2012/13 is forecast to increase by 0.7%, to 136.7m. tons. Only a small rise in global feed use is projected, to 90.7m. tons, with a fall in the EU, due to a tight supply outlook, offset by gains in other countries, including in Russia, Ukraine and Saudi Arabia. World industrial use is forecast to grow by 2.4%, to 29.5m. tons, mainly for brewing, with only a small rise in use for ethanol. BARLEY: SUPPLY AND DEMAND m. tons BARLEY: WORLD PRODUCTION Other Australia Asia NAmerica m. tons m. tons < World consumption < World production Stocks: major exporters* > CIS /04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 (f'cast) EU /04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 (f'cast) *Argentina, Australia, Canada, EU, Kazakhstan, Russia, Ukraine, United States 0 Planting of Russia s predominantly spring-sown crop accelerated, aided by warmer than normal weather and adequate soil moisture in western areas and in Siberia. However, the Volga District and southern regions require more precipitation. Because of high prices and growing domestic feed requirements, area is expected to expand by nearly 20%, to about 9.2m. ha. Production is forecast at 16.5m. tons (16.9m.), down by 1.5m. from before because of dry conditions in some southern areas. In Ukraine, production is expected to climb by more than 20%, to 11.0m. tons. Due, in part, to the replanting of some frost-damaged winter crops, area is forecast to STOCKS Despite improved availabilities, increased barley consumption will limit any increase in world carryover stocks at the end of 2012/13. At 28.9m. tons (27.4m.), stocks are forecast to remain slightly below the five-year average and almost one-third less than the recent peak at the end of 2009/10, when stocks in the EU were considerably higher. Because of an improved outlook for production, the forecast of EU stocks is raised by 0.4m. tons from last month, to 9.3m., but this is still marginally lower the year before and half their level at the end of 2009/10. 11

12 GMR May 2012 IGC TRADE World feed and malting barley trade is forecast to decline to 18.2m. tons (19.0m) in 2012/13. Because of increased spring barley production, the EU is unlikely to import much malting barley in the year ahead, with total imports placed 0.3m. tons lower than last year, at 0.4m. A larger domestic harvest is forecast to cut Iran s imports of feed barley to 0.7m. tons (1.0m.). Saudi Arabia is expected to continue to import wheat in place of some barley in 2012/13, but only a small drop in barley purchases is forecast, to 7.4m. tons. Morocco s imports are expected to be higher, at 0.6m. tons (0.4m.), due to a reduced local crop. Increased production is expected to boost Ukraine s exports, to 3.8m. tons (2.3m.). Shipments by Argentina are expected to grow, but tight supplies will cap sales by the EU, the US and Canada. SORGHUM Due mainly to a projected recovery in North America and Africa, world sorghum production is forecast to increase by 12%, to 63.4m. tons in 2012/13. The sharpest rise is projected in the United States, where area is expected to rebound to 2.1m. ha. (1.6m.), just short of the five-year average. Helped by dry weather, planting progressed at a faster pace than last year. With yields expected to be much improved, production is forecast to increase to 8.6m. tons (5.4m.). Australia s crop is forecast to be slightly higher than last season, at about 2.5m. tons (2.3m.). In Africa, bigger crops are expected in Sudan and Nigeria. Owing to an improvement in availabilities, global sorghum consumption in 2012/13 is forecast to recover to 63.1m. tons (58.2m.), including food use at 29.2m. tons (27.0m.) and feed at 25.0m. (22.7m.). Much of the projected rise will likely be due to increases in North and Central America, notably in Canada and the US, and in Africa, by far the largest consuming region. Despite higher use, world carryover stocks are forecast to increase to 2.2m. tons (1.8m.). Nevertheless, underscoring a relatively tight situation, this would still be equivalent to just two-thirds of the prior five-year average. On a July/June basis, world trade in 2012/13 is forecast to recover to 6.1m. tons (4.7m.), including bigger imports by Mexico, the world s largest buyer, from the US. Imports by Japan, Chile and the EU are also forecast to rise. Exports by the US are projected to increase to 2.5m. tons (1.8m.), boosted by a larger crop, while those by Argentina could climb to 2.3m. (1.6m.), on good regional demand. OATS At 22.9m. tons, global oats production in 2012/13 is projected to be slightly lower than last year. Larger crops may be harvested in Canada and the US, but production is forecast to decline in the EU, Russia and Australia. Mainly reflecting a reduction in Spain and the Baltics, EU production is forecast to dip by 0.3m. tons, to 7.6m. After last year s bumper crop of 5.3m. tons, output in Russia is expected to be lower, at 4.5m. tons. In Canada, plantings are expected to increase by about one-quarter due to a rise in the Eastern Prairies. The harvested area is forecast at 1.3m. ha. (1.0m.), with output projected at 3.5m. tons (3.0m.). Due to a 15% increase in plantings and assumed lower abandonment, the US crop is projected to increase by more than 50%, to 1.2m. tons. Global oats consumption in 2012/13 is forecast to be slightly under the previous year, at 23.0m. tons, including feed use at 15.9m. (16.1m.) and food at 3.9m. (3.9m.). With the global supply and demand broadly balanced, world stocks at the end 2012/13 are forecast to be almost unchanged from the year before, at 4.2m. tons. Global trade in 2012/13 (July/June) is projected at 2.3m. tons (2.4m.), including a small fall in shipments to the US, by far the world s biggest buyer, at 1.7m. tons. This reflects a projected larger domestic outturn in the US which will slightly reduce imports from Canada. RYE World rye production is forecast to rebound by 3%, to 14.2m. tons, including an increase in the EU. The global area is expected to rise by 0.4m. ha., to 6.0m., with most of the upswing in Russia. However, production there is placed 0.5m. tons lower than before, at 3.0m., the same as last year, due to dry weather in southern regions. EU output is forecast at 7.5m. tons (6.9m.) due to an expected improvement in average yields. Global consumption in 2012/13 is forecast to be broadly unchanged, at 14.5m. tons, with improved availabilities in the EU offset by drought-affected supplies in Russia. Food use is projected to decline, to 5.5m. tons (5.9m.), but feed consumption is forecast to rise to 6.3m. (6.1m.), including an increase in the EU. The world carryover at the end of 2012/13 is projected to fall marginally, to 0.7m. tons. World trade in 2012/13 (July/June) is forecast at 345,000 tons, similar to the estimate for 2011/12, with imports by Japan placed at 100,000 tons (85,000 tons) and those by the US at 150,000 tons (145,000 tons). Canada is expected to remain the largest exporter, its shipments projected at 150,000 tons, unchanged from 2011/12. RICE: SUPPLY AND DEMAND IN 2011/12 SUMMARY OUTLOOK FOR 2011/12 World rice production in 2011/12 is forecast to expand by some 15m. tons, to an all-time high of 462m., 12

13 IGC GMR May 2012 underpinned by bigger outturns in Asia s main producers, especially India. Owing to larger availabilities, global use is also seen increasing to a record, of 458m. tons (447m.), while the world 2011/12 carryover will increase for the seventh consecutive year, to a nine-year peak of 99.6m. Inventories in the major exporters will account for much of rise; at 33.9m. tons, these will be up 5m. on the previous year. World trade in 2012 is expected to decline by 6%, to 33.1m. tons, on smaller deliveries to Far East Asian markets. RICE: SUPPLY AND DEMAND m.tons (milled basis) 08/09 09/10 10/11 11/12 (est.) (f'cast) Opening stocks Production Total supply Total use Closing stocks Trade a) a) January/December RICE: SUPPLY AND DEMAND m. tons m. tons < World consumption < World production Stocks: major exporters* > 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 * India, Pakistan, Thailand, United States, Vietnam PRODUCTION IN 2011/12 The estimate of world rice production in 2011/12 is broadly unchanged from last month: at 462m. tons, output is some 3%, or almost 15m., higher than in the previous year. The increase is centred on larger outturns in Far East Asia, notably in China and India. In the latter, the smaller (winter-sown) rabi crop was somewhat disappointing, but last year s exceptional main outturn underpinned record total production of 103.4m. tons (96.0m.) PROSPECTS FOR PRODUCTION IN 2012/13 Rice supply and demand projections for 2012/13, including trade forecasts for 2013, will be formally presented in the July edition of the Grain Market Report. However, concerning tentative production prospects for 2012/13, the world outturn is projected to increase further, to a fresh record of nearly 467m. tons the rate of expansion of 1% representing a marked slowing on the previous year. Planted area is seen rising only marginally, to 160.7m. ha., while a modest improvement in yields is expected. In China, based on a preliminary official forecast, output is expected to rise by around 2%, to 143.5m. tons, underpinned by a larger planted area, while production prospects in India, the world s second largest producer will, as always, be heavily shaped by the Southwest monsoon. Assuming precipitation is favourable for the country s main (summer-sown) kharif crop, total output in 2012/13 could rise marginally, to 104.1m. tons. Elsewhere in the region, production is likely to increase in Bangladesh, Indonesia, the Philippines and Thailand. Output in the Americas is also likely to recover, to a large extent underscoring our expectations of a much improved outturn in Brazil. However, production in the US is officially forecast to edge lower, to 5.8m. tons (5.9m.), as a smaller harvested area outweighs a projected increase in yields. CONSUMPTION Global rice consumption in 2011/12 is forecast to rise to a record of 458m. tons, as larger outturns in Asia s largest producers, notably China and India, lead to increase use. Last year s exceptional kharif crop boosted India s domestic supplies and, in addition to enabling the government to remove a near four-year old ban on common rice exports, it also supported higher consumption, forecast to rise by 4%, to 95.4m. tons. In the medium-to-longer term, the domestic market in China is likely to shrink as rising incomes further boost protein consumption at the expense of traditional staples. However, underpinned by a bigger crop, domestic use in 2011/12 is expected to rise to 138.7m. tons (134.8m.). Together with increases elsewhere in the region, total rice consumption in Asia is projected to expand by 3%, to an all-time high of 403.4m. tons. In other regions, rice use in sub-saharan Africa is forecast little changed, at 22.4m. tons, but consumption in the Americas will fall sharply on account of poor outturns in Brazil and the US. STOCKS World rice ending stocks in 2011/12 (respective marketing years) are forecast to rise for the seventh consecutive year, by about 4m. tons, to a nine-year high of 99.6m. Outside of China, a country which is estimated to account for more than 40% of the world s rice inventories, carryovers in the five major exporters, of 13

14 GMR May 2012 IGC most relevance for the world market, are forecast to expand by 5m. tons, or 17%, to an all-time peak of 33.9m. tons, equivalent to one-third of the world total. Within this constituency, the overall increase is chiefly explained by larger inventories in Thailand and India, forecast at 8.6m. tons (5.5m.) and 21.4m. (20.1m.), respectively. Modest increases are also seen for Pakistan and Vietnam, but US stocks are expected to decline. TRADE The IGC forecast of global rice trade in calendar 2012 is lifted slightly from previously but, at 33.1m. tons, still represents a fall of 2m., or 6%, from the previous year s record. However, the projected total is still well above the prior five-year average. The anticipated year-on-year fall is near entirely due to an expected heavy contraction in deliveries to key markets in Far East Asia; at 9.0m. tons, the sub-region s imports will be 17% below the estimate for 2011, as a steep decline in shipments to Bangladesh and Indonesia outweighs increases elsewhere, including in the Philippines and China. China is expected buy considerably more than in recent years, its imports in 2012 tentatively seen at 1.0m. tons (0.5m.). After last year s steep rise, shipments to sub- Saharan Africa are expected to be near unchanged, at 10.2m. tons, including imports by Nigeria at 2.4m. (2.5m.), but a particular feature of the region s trade will be the increased presence of South Asian exporters at the expense of their counterparts in Thailand. While their pace slowed because of logistical difficulties at ports, India s exports in 2012 are still expected to increase by 55%, to 6.5m. tons; the forecast also assumes bigger sales of higher-value basmati rice. Along with larger exports by Pakistan, forecast at 3.8m. tons (3.4m.), the aggregate share of both South Asian suppliers in world trade is expected to rise markedly, to about 31% nine points higher than the five-year average. Thailand s exports have, as expected, progressed at a very slow pace due to active second crop intervention buying by the Thai government. With competition from South Asia and, to an extent, Vietnam, also expected to remain a feature, the country s shipments in 2012 are projected to fall by 40%, to 6.7m. tons. The forecast of Vietnam s international sales in calendar year 2012 is marked down, by 0.3m. tons, to 6.4m., a fall of 9% from the previous year s record. SUMMARY OILSEEDS OUTLOOK FOR 2011/12 SOYABEANS World soyabean production in 2011/12 is estimated at 236.9m. tons, a decline of 11% from last year, reflecting sharply reduced outturns in all key producers. Despite further growth in shipments to China, global trade is expected to fall for the second consecutive year, to 88.9m. tons (91.2m.). Strong demand from Asia and the EU is expected to boost world soyameal trade, to 57.4m. tons (56.9m.) SOYABEANS: PRODUCTION AND TRADE m. tons m. tons World production > < World trade 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 The result of sharply reduced outturns in all major producers, world soyabean output in 2011/12 is estimated to fall by 30.0m. tons year-on-year, to just 236.9m., marginally below the five-year average. With harvesting in South America largely complete, a more informed assessment of the impact of drought conditions on yields can be gleaned. Argentina s crop is expected to decline by 16% compared to last year, to 41.0m. tons, while production in Brazil is forecast at just 65.6m., some 10.0m. lower than in the previous year. In Paraguay too, output is estimated to fall sharply, to just 4.2m. tons (8.4m.). As at 20 May, planting of the 2012/13 US crop was estimated to be around three-quarters complete markedly ahead of the five-year average following a period of generally favourable weather which has allowed fieldwork to progress quickly. Despite recent market declines, soyabean futures and cash prices have posted sizeable net gains during 2012, and especially relatively to maize and wheat. Nevertheless, based on an earlier assessment 1, soyabean plantings are expected to fall this year, with the area harvested forecast to decline by 1%, to 29.5m. ha. However, smaller sowings will be more than offset by an expected improvement in average yields to broadly match the levels seen in 2009 and 2010 as production rises modestly, to 87.2m. tons (83.2m.). Global soyabean trade in 2011/12 (October/September) is forecast at 88.9m. tons, a fall of 2.3m. from the previous year owing to tighter global supplies and higher prices. Despite the marked fall in world availabilities, total shipments to China, the world s largest market, are expected to rise to a record of 55.5m. tons (52.4m.), as 1 Prospective Plantings report, 30 March

15 IGC GMR May 2012 demand continues to expand in its feed and vegetable oil sectors. However, increased deliveries to that country are outweighed by an expected decline in import demand in other key consuming areas, including, most notably, the EU; at 11.0m. tons, shipments to that market in 2011/12 are forecast 11% lower than in the previous year. Exportable supplies of new crop soyabeans in South America are expected to be relatively tight after adverse weather resulted in disappointing outturns. In Argentina, exports are expected to fall by around 11%, to 8.2m. tons, while in Paraguay the decline could be even more pronounced, declining by more than 40%, to just 3.2m. In Brazil, the smaller outturn will also restrict export volumes in the near-term, but, because of record shipments of old crop soyabeans early in this marketing year, 2011/12 (October/September) exports are still forecast at 35.7m. tons, representing a rise of 19% yearon-year. In contrast, the early season export pace of the US was disappointing; however, more recently, sales have picked up significantly as buyers have switched some of their needs to US supplies. Accordingly, the official projection of US exports in 2011/12 is lifted by 0.4m. tons, to 35.8m. (40.3m.). SOYAMEAL World soyameal trade in 2011/12 is forecast to rise to a record 57.4m. tons (56.9m.), boosted by import demand from Asia. Expanding oilseed meal requirements in South East Asia will prompt bigger purchases from the world market in 2011/12, with shipments to the region expected to increase to 16.3m. tons (15.6m.). The forecast of imports by the EU is cut slightly following a slower than expected pace of shipments thus far. However, at 22.4m. tons (22.4m.), the total remains relatively high and in line with the five-year average, as smaller soyabean imports and tight supplies of alternative oilseeds underpins demand. Despite reduced crop expectations, exports of soyameal by Argentina are expected to remain high and, at 27.5m. tons (25.8m.) would still equate to a record. In Brazil, too, exports sales are expected to be maintained at last year s level of 14.0m. tons. Following an improved pace of sales by the US, the official forecast for that country is lifted by 0.3m tons, to 8.3m. (8.3m.). winterkill and some disease-related crop losses, which have negatively impacted yield potential, EU production is forecast to decline for the third consecutive year, by 6%, to a five-year low of 17.8m. tons. Unfavourable conditions and reduced plantings, partly linked to a shift to spring-planted crops, including soyabeans, is expected to result in a decline of one-third in Ukraine s output, to 0.9m. tons; along with Russia and Belarus, CIS production is forecast to decline by around one-fifth, to 2.3m. Partly offsetting reduced output in Europe, Canada s crop is projected at a record 15.4m. tons, up 9% year-on-year, boosted by a significant expansion in sowings and increased average yields. Elsewhere in the northern hemisphere, US production is forecast higher, too, at 1.0m. tons (0.7m.), while outturns in both China and India could rise, to 12.8m. (12.4m.) and 7.0m. (+8%), respectively. Following a year in which output increased significantly, Australia s crop is tentatively forecast to rise markedly again, by 8%, to 3.0m. tons., as higher prices encourage farmers to plant more m.tons RAPESEED/CANOLA: PRODUCTION 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 Other Australia Ukraine Canada Global trade in rapeseed/canola in 2011/12 (October/September) is forecast to increase by 12%, to an all-time high of 11.6m. tons some 0.4m. higher than the previous record of 2008/ m. tons RAPESEED/CANOLA: CHINA S IMPORTS FROM CANADA October-March (cumulative basis) EU RAPESEED/CANOLA At 59.3m. tons, the rapeseed/canola production estimate for 2011/12 is unchanged from the April Grain Market Report. The fall of 1% from the previous year reflects the fact that larger outturns in Australia, Canada and the CIS (Russia) only partly compensated for smaller crops in the EU and Asia. With respect to 2012/13 prospects, production is projected to rise by 1%, to 60.2m. tons, the second largest outturn on record and only marginally below the all-time peak of 2009/10. Owing to above-average / / / /12 Oct Nov Dec Jan Feb Mar 15

16 GMR May 2012 IGC This month s projection is lifted by 0.2m. tons, to reflect a strong pace of imports by China, forecast to increase by about four-fifths from the previous year, to 2.0m. in 2011/12. Larger shipments to that country will underpin a year-on-year rise of one-quarter in total deliveries to the sub-region of Far East Asia. Elsewhere, imports by Japan and Pakistan are forecast to be steady, at 2.3m. tons (2.3m.) and 0.8m. (0.8m.), respectively. Owing to tight supplies, which reflect the disappointing outturns of recent years, imports are forecast to rise by 17%, to 3.2m. tons. On the exporter side, forecast (October/September) shipments by Canada are lifted by 0.2m. tons from before, to a record 8.3m., up by 13% on last year. RECENT MARKET DEVELOPMENTS * WHEAT A mostly favourable outlook for 2012 production weighed on world wheat export prices in the first half of May. There was additional pressure from global economic concerns, including escalating fears about the future of the eurozone, which prompted some reduction in speculative risk exposure. However, wheat markets subsequently soared higher, sparked by increasing worries about crop prospects in some areas, before receding again later in the month as gains were considered overdone. Since the last Grain Market Report, the IGC GOI wheat sub-index rose by 1%, to 240 points. US wheat futures had a weak tone in the first part of May, pressured by generally favourable winter wheat crop conditions. In the first week of the month, the annual Wheat Quality Council tour of Kansas found the potential for record yields, seen possibly lifting the state s Hard Red Winter (HRW) output to its highest since Rapid planting of an anticipated expanded area weighed on Minneapolis-based spring wheat values, narrowing their premium to Chicago and Kansas City. Bearish sentiment was partly linked to worries about the global economy and wheat values also responded to weakness in rowcrops at times. Nevertheless, spells of short-covering, from a continued heavily net-short position held by speculative funds, provided some underpinning. Short-covering became more pronounced in the second half of the month, as market sentiment became much more bullish amid increasing reports of unfavourable crop conditions, both domestically and in other countries. While resulting in relatively little market response initially, USDA s first set of supply and demand forecasts for 2012/13, published on 10 May, contributed to the firmer market, portraying a tighter global outlook than traders had anticipated. Amid ideas that price gains were overdone, some of the steep * For main market events since 26 April see: advance was reversed later in the month. As at 23 May, export quotations for Soft Red Winter (SRW) were $11 higher compared with the last GMR, at $263 fob (Gulf), while Hard Red Winter (HRW) rallied by $20, to $293 fob (Gulf). An increase in Minneapolis futures was outweighed by lower export premiums and Dark Northern Spring (DNS 14%) export prices fell by $9, to $345 fob (PNW). Activity was occasionally light in the EU, slowed by public holidays in some countries, and this helped to accentuate volatile trading conditions caused by crop and economic uncertainties, especially during the second half of the month. Although worries persisted about the impact of the severe winter and recent dry weather, favourable rains relieved concerns about dryness in some areas, pressuring Paris milling wheat futures during early May. In part, the declines also mirrored the weak tone in US futures at that time. However, doubts about the world production outlook and steep gains in US values sparked a subsequent strong rally. Having traded lower for much of the month, delivered prices in France climbed in the second part of May; as at 23 May, they were up by 2, at 210 (Grade 1, Rouen). However, the increase in local values was more than offset by a weaker euro and dollardenominated export quotations dropped by $9, to $281 fob (Rouen). Feed wheat prices in Germany continued to be underpinned by strong demand, although slackening use saw values ease later in the month. While German milling wheat prices were buoyed by the more bullish tone in global markets, the weaker euro saw export quotations drop by $11 compared with the end of April, to $291 fob (Hamburg). Amid little old crop activity and an unclear outlook for 2012 production, export values in the Black Sea region were generally considered nominal. Since the last report, milling wheat export quotations strengthened by $5, to $270 fob, while feed wheat values were slightly lower than before, at $250 fob. New crop milling wheat in Russia was offered around $10 below EU (France) and US SRW values, but the discount was reported to be narrowing. Although fresh sales were slowing, prices in Argentina were supported by tightening old crop availabilities and expectations for reduced area for the next harvest. Up River export quotations increased by $10, to $255 fob. Strong demand and tight logistics continued to underpin prices in Australia and, although gains in local values were partly offset by a weaker currency, US dollar export quotations for Australian Premium White (APW) milling wheat increased by $8, to $278 fob (Port Adelaide). Australia featured regularly in reported purchases in the past month, including for feed and milling wheat. The Philippines secured around 317,000 tons of feed wheat from Australia since the last report, at $271-$295 c&f, June-October. Optional origin feed wheat purchases of 222,000 tons by South Korea, at $270-$274 c&f, September-October, likely included Australia. Iran was reported to have bought 60,000 tons of Australian Standard White (ASW) milling wheat in early May. 16

17 IGC GMR May 2012 Saudi Arabia took a total of 450,000 tons of milling wheat from Australia, Argentina, Canada, the EU and US, at $317 c&f, July-September. A sale of 100,000 tons of US HRW was confirmed to Iraq, likely part of a reported 400,000 tons purchase that also included Australia, the EU, Kazakhstan and Russia. Black Sea milling wheats were expected to fill Lebanon s purchases totalling 100,000 tons, at $282-$294 c&f, June-July. Jordan bought 100,000 tons of milling wheat from optional origins, at up to $289 c&f, August- September, and Tunisia purchased 75,000 tons, at $277-$280 c&f, June. In order to reduce burdensome stocks, India was reported to be considering a large volume of wheat exports US$ / ton US DNS 14% US HRW (ord) EU (France) US SRW 25-May Jun Jul-11 WHEAT: EXPORT PRICES* May 2011 May Aug Sep Oct Nov-11 *US HRW/SRW (fob Gulf), US DNS (fob PNW), France (fob Rouen). 07-Dec-11 DURUM Despite falling production expectations in parts of the EU and Morocco, a likely increase in harvests in the US and Canada weighed on durum export quotations during May. Old crop exports by Canada were strong in the past month, with the cumulative marketing year (August/July) total increasing to 3.0m. tons (up to 13 May), up by 15% compared with the same time last year. Recent export sales by the US included 20,000 tons to the EU (Italy) and 8,400 tons to Algeria, boosting total commitments (June/May) to 499,000 tons (up to 10 May), down by 49% compared with the same time in 2011/12. US Lakes export quotations dropped by around $10, to $355 fob. In the EU, dollar-denominated export prices in France fell by $14, to $360 (La Pallice). Up to 15 May, EU export licences totalled 1.1m. tons, hardly changed since the April GMR and down by 34% year-on-year. However, the volume of import licences was up sharply, to 1.4m. tons, albeit still down by about one-fifth from last season. 04-Jan Feb Feb Mar Apr May COARSE GRAINS MAIZE (CORN) World maize export prices exhibited mixed trends during May, with US spot values showing a small net gain while South American markets weakened. The IGC GOI maize sub-index was fractionally lower than in late April, at 269 points. After a period of two-sided activity, nearby (July) US futures were little changed from the end of April, but new crop December fell by 4%. After trading in a narrow range initially, values were pressured in mid-may by USDA s larger than expected 2011/12 closing stocks forecast and projections for an above-trend increase in 2012/13 yields. While losses were subsequently reversed by tight cash markets and spillover from steep gains in wheat, non-commercial long liquidation resulted in a renewed sharp drop in late May. Selling was mostly associated with a stronger dollar and confirmation of favourable early crop conditions, including beneficial rains after a period of overly dry and warm weather. Gulf fob premiums were lifted by slow producer selling, with some exporters reported to be struggling to source supplies to load vessels for nearby shipment. With July futures also slightly firmer, old crop export quotations at the Gulf were up by $2, at around $271 fob. With the main (summer) harvest recently completed, local prices in Brazil were weighed by increased nearby availabilities as well as prospects for a bumper second (winter) crop. However, losses were limited by strengthening export demand, with prices at the main ports showing some resilience. Paranagua quotations were competitive compared to other leading exporters, at around $242 fob (July). Export demand in Argentina remained steady but, with signs of increased competition from Brazil, Up River premiums weakened and export quotations decreased by $3, to $243 fob. Domestic prices in China remained firm. Strong underlying demand and slow country movement were supportive, with recent large purchases from the US having little impact. Old crop export prices in Ukraine were steady, at $265 fob, but trading activity was slower because of reduced demand and dwindling high quality supplies. Reflecting expectations for a large harvest later in the year, new crop export quotations were priced at around $230 fob. China was a large buyer of US maize during the past month. US sales of around 1.5m. tons were confirmed, including 0.3m. for 2011/12 and 1.2m. for 2012/13 (September/August) delivery. USDA reported the sale of a number of cargoes to unknown destinations, also seen as likely to be to China (see Table 16). South Korea bought 532,000 tons, at $260-$296 c&f, October- December, including 295,000 tons from optional origins and 172,000 tons from the US. Japan covered some July-September feed requirements, securing 300,000 tons from Brazil and 200,000 tons from Argentina. Iran 17

18 GMR May 2012 IGC purchased 70,000 tons from Brazil, for May-June delivery. 200,000 tons. Tender activity was therefore limited to routine buying by Japan. MAIZE: EXPORT PRICES May 2011 May 2012 FEED BARLEY: EXPORT PRICES May 2011 May US$ / ton US 3YC, fob Gulf Argentina, fob Up River US$ / ton EU (France) Australia - (South Australia) May Jun Jul Aug Sep Oct Nov Dec Jan Feb Feb Mar Apr May May Jun Jul Aug Sep Oct Nov Dec Jan Feb Feb Mar Apr May-12 BARLEY EU feed barley markets were mixed during May. After the previous month s gains, prices in Germany eased slightly on signs of reduced feed demand. At around 203 (delivered Rouen, May), old crop prices in France were slightly firmer compared to a month ago. Some support stemmed from tight stocks and gains in wheat, but physical trading was light. Reflecting the weaker domestic currency, dollar-denominated export prices fell by $10, to $272 fob. New crop values were nominally priced at a discount to nearby quotations, but trade was said to be quiet, with most participants awaiting clearer indications about the spring crop. Old crop Black Sea prices were little changed, at around $265 fob. Reports of Far East Asian demand underpinned, as did a rise in the local feed wheat market. New crop values of around $245 fob were also steady, but trade was limited because of differing price expectations between buyers and sellers. Ukraine s Farm Minister reported that Saudi Arabia is expected to sign a forward contract to buy 4.0m. tons in 2012/13, but some traders were sceptical about such a large volume. Local feed barley prices in South Australia increased slightly on the rise in wheat prices and ideas that domestic demand might strengthen in areas where wheat stocks are tightening. However, US dollar export prices of around $248 fob (Adelaide) were lower due to currency movements. Old crop prices in Argentina of around $240 fob were considered nominal due to limited remaining supplies for export. Planting of the next crop was underway and there were reports of some forward trade, with prices (December-February) at around $230 fob. Syria tendered for 150,000 tons from optional origins, but no purchases were confirmed. There was also no reported outcome from Iran s plans to secure Conditions were mostly favourable for spring barley crops in the EU. With buying interest very light, French old crop spring (2 row) malting barley prices fell sharply during early May, but were steadier thereafter. Delivered prices were down by as much as 23, at around 215 (Rouen, May), with dollar export prices at $291 fob. The thin malting premium resulted in increased amounts being traded as feed. Schooner malting barley export prices in Australia (Port Adelaide) were slightly lower, at around US$254 fob, as currency movements offset a rise in the domestic market. Demand from China underpinned, but the malting/feed spread remained small. Planting made good progress across Canada s Prairies. Malting prices for the next crop were quoted at around US$310 fob (Vancouver, October). New crop malting values in Argentina were reportedly priced at a $30 premium to feed, at around $260 fob (January). OTHER COARSE GRAINS Despite small gains in maize and in spite of tight nearby supplies, US sorghum export quotations dropped by $9, to $263 fob, weighed by the rapid planting of an expected larger crop. Because of tight old crop availabilities, 2011/12 export commitments totalled only 762,000 tons by the middle of the month, compared to last year s 3.1m. tons. In Argentina, prices were weighed by seasonal harvest pressure, even though progress was slowed by farmers concentrating on gathering soyabeans. Up River prices eased by $8, to $179 fob. In Australia, export values were pressured by rising new crop supplies and, as at 24 May, US dollardenominated export quotations were $6 lower, at $216 fob (Brisbane). 18

19 IGC GMR May May-11 US$ / ton US maize, fob Gulf US sorghum, fob Gulf 22-Jun Jul-11 SORGHUM: EXPORT PRICES May 2011 May Aug Sep Oct Nov-11 US oats futures declined by around 4% in a month of largely technical activity. The earlier than normal completion of planting and good condition of the developing crop weighed on values. Market direction was also influenced by developments in other grains, particularly maize. Weather-related planting delays in parts of Canada provided support, although conditions were reported to have improved recently. Domestic rye prices in the EU (Germany) continued to be underpinned by strong demand, slow farmer selling and concerns about the outlook for the 2012 harvest. In Russia, sales of milling rye from intervention stocks totalled 33,185 tons, mostly from the 2008 crop, lifting cumulative sales to 73,145 tons. Prices were quoted at an average of RUB4,337 ($139) for the 2008 crop. 07-Dec Jan-12 OILSEEDS Under pressure from weaker outside markets, world soyabean prices declined sharply since the last Market Report, the IGC GOI soyabeans sub-index falling by 8%, to 265 points. At the end of April, generally supportive fundamentals boosted US futures to above $15/bu for the first time in four years. However, values subsequently moved sharply lower and the nearby contract posted an overall net loss of around 8%. Declines in other markets, including crude oil and equities, partly due to an uncertain world economic outlook, sparked bouts of heavy fund long liquidation. A tighter than expected official 2012/13 supply and demand forecast, released on 10 May, provided temporary support. However, with US soyabean planting progressing at a rapid pace and with forecasts for favourable near-term weather, prices resumed their downwards trend in the second half of the month. Because of earlier than normal wheat harvesting, there were ideas that plantings of double-crop soyabeans might increase, contributing to bearish sentiment. Export demand from China, which had been robust for much of May, showed signs of slowing more recently 01-Feb Feb Mar Apr May and this, coupled with the sharply firmer dollar, added to the negative tone. Owing to the steep drop in futures and weaker export premiums, export quotations fell by $42, to $526 fob (Gulf) May-11 US$ / ton USA No.2, fob Gulf Brazil, fob Paranagua Argentina, fob Up River 22-Jun Jul-11 SOYABEANS: EXPORT PRICES May 2011 May Aug Sep Oct Nov-11 In Canada, ICE (Winnipeg) canola futures moved lower, the nearby July contract dropping by 5%, mainly weighed by weakness in soyabeans. Values were also pressured by favourable weather and expectations for record plantings, but tight old crop supplies and steady export demand limited overall losses. 07-Dec-11 RICE Global rice markets were somewhat mixed over the past month. Largely reflecting gains in Thailand, the IGC GOI rice sub-index, a broad measure of white rice market conditions, advanced by 5%, to 227 points. Quotations in Thailand were underpinned by ongoing state intervention buying, together with fresh export interest, but offers in Vietnam were little changed as support from increased domestic activity was outweighed by seasonal harvest pressure. Elsewhere, fresh demand from the Americas boosted US milled export prices, with prospects for another small crop this year providing underlying support. Export prices for white and parboiled rice in Thailand posted significant net gains during May, benchmark 100% B up by $45, or 8%, to a near five-month high of $617 fob. The market was mainly boosted by fresh export sales, including to Iraq, together with ongoing intervention buying by the Thai government. According to official figures, more than 13m. tons of 2011/12 main and second crop paddy had been procured from farmers by mid-may. While export sales have progressed at a very disappointing pace thus far, the Ministry of Commerce still expects its 2012 export target of 9m. tons to be achieved due to the likelihood of big sales through diplomatic channels in the second half of the 04-Jan Feb Feb Mar Apr May

20 GMR May 2012 IGC year. Negotiations were reportedly ongoing with a number of countries, likely including Bangladesh, Indonesia and the Philippines. In contrast, broken rice markets in Vietnam were little changed over the month. Values were mildly supported by increased domestic activity as exporters procured supplies for shipment to China and the Philippines following earlier heavy sales, while ideas later confirmed that the latter country could return to the world market provided further underpinning. However, this was mostly outweighed by seasonal (main crop) harvest pressure. In South Asia, white rice export values in India weakened, mainly on currency movements, but prices in Pakistan, while also softening, were mildly supported by continued trade with Afghanistan. Milled rice export values at the US Gulf rallied during May on fresh demand from the Americas, the No.2, 4% broken grade recording a net gain of 7%, to $550 fob. Prospects for another disappointing outturn in 2012, confirmed by USDA in its May supply and demand update, provided underlying support. Harvesting advanced to 91% complete by 20 May, slightly ahead of average progress. A build-up of Panamax tonnage in the Pacific and Indian Oceans pressured rates, with owners reported to be moving vessels to South America and the US Gulf. This resulted in a sharp fall in quotations for transatlantic roundtrips, dropping by one-quarter, to around $11,500 daily. New business included a cargo from Argentina to the Egyptian Mediterranean at $14,650 daily, plus a $475,000 ballast bonus. North Pacific roundtrips were quoted below $8,000 daily. Atlantic Handysize/Supramax rates edged higher for nearby positions, lifted by solid demand for cargoes from South America. Sustained grains shipments from the Black Sea region also provided support, with a cargo from Russia to Yemen reported at $30.00/ton. In the short period sector, a Handysize contract for three-tofive months was settled at a strong $10,000 daily. Rates in the Pacific were mostly steady; new business included a trip from the Philippines to India s east coast at $11,000 daily. Capesize rates were buoyed by increased mineral business, with the average of four major timecharter rates gaining 13%. AVERAGE OF BALTIC DRY BULK INDICES*, EXCLUDING CAPESIZE May 2011 May 2012 RICE: EXPORT PRICES May 2011 May ,000 Average Indices May-11 US$ / ton Thai 100% Grade B Thai 5% Broken 617 Viet 5% Broken 607 Pakistan IRRI 25% 22-Jun Jul Aug Sep Oct Nov-11 Source: Jackson Son & Co. (London) Ltd; other trader quotations; various industry sources 07-Dec Jan Feb Feb Mar Apr May ,750 1,500 1,250 1, May Jun Jul Aug Sep Oct-11 *Grain carrying sectors (Panamax, Supramax, Handysize) 04-Nov-11 NATIONAL POLICY AND OTHER DEVELOPMENTS 01-Dec Jan Feb Feb Mar Apr May May-12 OCEAN FREIGHT RATES In the grain-carrying freight market, the Panamax sector was pressured by surplus tonnage, with Atlantic rates weighed by ballasters from the Pacific. However, quotations for smaller vessels were underpinned by a reasonable volume of trade. Overall, the average of the three grains-carrying sectors fell by 13%, but the Baltic Dry Index (BDI) slipped by just 3%, reflecting improved sentiment in the Atlantic Capesize market. LATEST NATIONAL TRADE - RELATED MEASURES BURUNDI: On 1 May 2012, the President announced the removal of import taxes on basic foods, including maize flour, wheat flour, rice and palm oil, to ease domestic prices which have risen on account of reduced production. CHINA: In early May 2012, it was reported that, with effect from 20 April, the General Administration of Quality Supervision and Quarantine would permit maize imports from Argentina. The grain must only be used for processing and at selected processors. 20

21 IGC GMR May 2012 However, on 2 May 2012, Maizar, an Argentine industry association, stated that maize exports to China would not be feasible until various genetically-modified varieties were approved by Chinese authorities. INDONESIA: On 16 May 2012, industry and trade sources indicated that, following a two-month hiatus, the government had started reissuing feed maize import permits owing to inadequate domestic supplies. Up to 200,000 tons was expected to be shipped from India in the coming weeks. KAZAKHSTAN: On 23 May 2012, the Minister of Agriculture announced that, in an effort to achieve grain exports of 13.0m. tons in 2011/12 (July/June), the government would provide a subsidy of $27/ton for the remainder of the marketing year for all deliveries to Black Sea and Baltic ports. In addition to investing in infrastructure to support trade with other countries in Near East and Central Asia, it would also encourage farmers to cultivate more feed grains, including maize, and oilseeds to avoid over-production of wheat. MOROCCO: The National Cereal Traders Association announced on 16 May 2012 that the duty applied to milling wheat imports would remain suspended until the end of May, before being lifted to 17.5% on 1 June, effective until the end of However, tariffs on durum and barley imports were to remain suspended until the end of the calendar year. NIGERIA: On 4 May 2012, it was reported that the government had increased the 2012 rice import benchmark price by $60/ton, to $699, with the minimum import tariff set at 50% of the benchmark price ($349.50), in an attempt to reduce imports and boost domestic production. OTHER NATIONAL POLICY DEVELOPMENTS CHINA: On 4 May 2012, it was reported that the government had requested that from 1 June, importers of distillers dried grains report information about shipments, including volume, estimated delivery times and port details. The move is part of an expansion of the monitoring of agricultural commodity imports. CUBA: On 11 May 2012, the Ministry of Agriculture announced that up to $450m. would be spent in an effort to lift rice production, aimed at reducing dependence on imports. The investment, which in the current year will amount to $108m., is to focus on installing improved technology to boost farm machinery, drying sheds and crops. EGYPT: The Vice-Chairman of the General Authority for Supply Commodities (GASC) stated on 7 May 2012 that the 2012/13 (July/June) food purchasing bill would exceed the previous year s $24bn. to cope with increased milling costs, as well as higher domestic and international wheat prices. The bill was currently awaiting approval by parliament. OTHER DEVELOPMENTS INDIA: The National Commodity and Derivatives Exchange (NCDEX) reduced the expiry period of rapeseed futures contracts to six months (from nine months) and of soyabeans to four months (from eight months), in a move aimed at curbing volatility. USA: On 1 May 2012, the CME Group Inc. announced that trading hours for grains and oilseeds futures and options on the electronic CME Globex platform would be expanded to 22 hours daily, effective from 14 May Specific products to be included in the expanded hours were corn, mini-sized corn, soyabeans, mini-sized soyabeans, wheat, mini-sized wheat, soyabean meal, soyabean oil, rough rice, oats, and ethanol futures and options, together with all related calendar spread options and inter-commodity spread options. For further information, please view the following link: &pagetemplate=article In a further development, on 16 May 2012 the CME Group submitted a revised request to the Commodity Futures Trading Commission (CFTC), to expand trading hours to 21 hours per day (compared to the original plan for 22 hours), effective from 20 May. On 18 May 2012, the CFTC approved the revised (16 May) proposal by the CME Group to expand electronic trading of grains and oilseeds futures contracts by 4 hours, to 21 hours per day. Further details are available at the following link: Furthermore, on 23 May 2012 trade reports indicated that the CME Group was planning to file a notice with the CFTC (on 24 May) for permission to extend open-outcry trading of grains and oilseeds futures and options. MARKET FOCUS INDUSTRIAL USE OF GRAINS - UPDATE World industrial use of grains is forecast to increase to a record 311.6m. tons in 2012/13. However, at 2.4%, the rate of growth is expected to remain much slower than in recent years, mainly due to a deceleration in the US fuel ethanol sector. Having grown by an annual average of 23% in the past decade, global use of grains for biofuels is forecast to increase by 1.8% in 2012/13, to 149.9m. tons. The US maize-based ethanol sector led the recent advance, but output there has now exceeded federally mandated levels and, with output of 10% ethanol blends (E10) adequate to meet current demand, further expansion is being limited by sluggish growth in use of E15 and E85 21

22 GMR May 2012 IGC blends. In 2012/13, use of grains for biofuels production in the US is forecast to be little changed from the year before, at 128.5m. tons, including 127.0m. of maize, the same as in the previous year. WORLD INDUSTRIAL USE OF GRAINS m. tons 09/10 10/11 11/12 12/13 (est) (f'cast) (f'cast) Ethanol (of which biofuels) ( 134.6) ( 147.3) ( 147.3) ( 149.9) Starch Brewing Total* *including unspecified Expansion of grain-based ethanol production in the EU remained sluggish during 2011/12, hindered by a difficult economic environment and strong competition from lower-priced imports. However, recent changes to import regulations may stimulate expansion, including the resumption of production at some idled plants. Use of grains for biofuels in the EU is forecast to rise by 24%, to 10.5m. tons, including 5.2m. (4.2m.) of wheat and 4.5m. (3.6m.) of maize. GRAINS USE FOR BIOFUELS m. tons 09/10 10/11 11/12 12/13 (est) (f'cast) (f'cast) USA of which: maize sorghum barley EU of which: maize wheat barley Canada of which: maize wheat China of which: maize wheat sorghum Others TOTAL GRAINS of which: maize wheat sorghum barley other/unsp Use of grains for fuel ethanol in China is forecast to remain stable in 2012/13, at 5.4m. tons, including 4.1m. of maize, but increased use for starch sugars and for alcoholic beverages will see total industrial demand reach a record 61.9m., up by 5% year-on-year. The government wants future growth in biofuels production to utilise non-grain feedstocks, such as cassava. Although the five existing ethanol plants, which use mainly maize and wheat, continue to receive government subsidies, these are being progressively reduced. In Canada, the expected completion of a wheat-based ethanol plant in Alberta during 2012 will lift total production capacity to close to 2.0bn. litres, broadly sufficient to meet the federally mandated 5% bioethanol content in gasoline. Use of grains for fuel ethanol is forecast to show a small increase in 2012/13, to 3.1m. tons (3.0m.), including 2.4m. (2.4m.) of maize and 0.7m. (0.6m.) of wheat. Grains-based biofuels production in Argentina is set to increase once construction of five new plants is finished, likely by the end of 2012, expected to be sufficient to satisfy the 5% blending requirement in fuel. Use of maize is forecast to reach 0.7m. tons once the plants start production. MAIZE (CORN): CHINA DOMESTIC PRICES Maize prices in China have firmed during 2012, in some areas equalling last year s record highs, when values soared in the run up to the 2011 harvest. A bumper crop contributed to weaker markets between October and December, but prices have subsequently been lifted by underlying strong demand, especially from industrial processors, slow producer selling and quality concerns. With the majority of domestic maize grown in northern China but consumed in southern regions, transportation costs results in significant differences in domestic prices. Over the past year, prices in Guanghzhou, a major market for inter-provincial trade, have averaged around CNY2,485/ton ($393), some 13% above values in Jilin, where prices averaged CNY2,200 ($348). 2,700 2,600 2,500 2,400 2,300 2,200 2,100 2,000 MAIZE (CORN): CHINA DOMESTIC PRICES CNY/ton 03-May May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May-12 Nanning Guanghzou Shanghai Dalian Jilin Jiamusi 22

23 IGC GMR May 2012 Production in the northeastern provinces, including Jilin and Heilongjiang, typically accounts for more than one third of national maize output, but demand is comparatively light and most is transported to the south of the country, usually through the port of Dalian. The northern provinces of Shandong, Henan and Hebei are also major producers, mostly filling regional demand, including Shanghai, by rail or truck. Due to firm demand, higher domestic prices and rising internal transportation costs, US imports to southern China have been increasingly competitive since late 2011, even taking into account ocean freight rates, 13% VAT, 1% import duties and other associated costs. A number of cargoes of new crop US maize have reportedly been purchased by Sinograin for government reserves, and are therefore not subject to VAT. CHINA Dalian Jiamusi Jilin VOLATILITY IN GRAINS AND OILSEEDS FUTURES MARKETS RECENT TRENDS Historic volatility in grains and oilseeds futures markets is statistically measured as the standard deviation, expressed in percentage terms, of daily price movements over a specified time period 2. The latest in the Secretariat s regular (quarterly) updates, this note briefly reviews volatility trends in key grains and oilseeds futures markets in the past three months. Day-to-day volatility in grains and oilseeds futures markets, as measured by HV20, is higher when compared to three months earlier. However, the trend of more pronounced day-to-day price swings since end- February is not unexpected as this coincides with a critical time for fundamental supply prospects, especially in the northern hemisphere. In the period since late February, CME soyabean futures recorded solid net gains centred on worries about global availabilities following disappointing crop outcomes in South America and concerns about this year s US crop. Until early March, volatility eased, likely reflecting the fact that, as combining in South America s key producers advanced, a more informed assessment of the impact of adverse weather on yields could be determined. Shanghai CME CORN AND SOYABEANS: VOLATILITY IN NEARBY FUTURES (HV20) 22 February May 2012 Nanning Guanghzou 45 Volatility, HV 20 (%) CME Corn CME Soyabeans Source: USDA, IGC 35 MAIZE (CORN): CHINA DOMESTIC PRICES VS. ESTIMATED IMPORT PRICES 25 US$/ton May May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May-12 China maize dlvd. Guanghzou US maize (Gulf) fob + freight + 1% import duty + 13% VAT US maize (Gulf) fob + freight + 1% import duty 5 22-Feb 29-Feb 07-Mar 14-Mar 21-Mar 28-Mar 04-Apr The release of USDA s Prospective Plantings and Grain Stocks reports on 30 March had a significant impact in grains and oilseeds markets. After easing slightly in the days leading up to the release of these documents, a lower than expected projection of 2012 US soyabean plantings underpinned strong gains in CME futures on the day of the report consequently resulting in a steep rise in volatility. Day-to-day price swings became less pronounced in early May, before deepening worries 11-Apr 18-Apr 25-Apr 02-May 09-May 16-May 23-May 2 In this case, taken to be 20 days and also referred to as HV20. 23