Cereals market situation Committee for the Common Organisation of Agricultural Markets 30 th August 2018
Exchange Rates 2
Euro US Dollar exchange rate 3
Euro Argentine Peso and Brazilian Real exchange rate 4
Euro and US Dollar Russian Rouble exchange rate 5
Euro and US Dollar - Ukraine Hryvnia exchange rate 6
Crude oil price ($/barrel) 7
Baltic Dry Index 8
World Cereals Forecasts International Grains Council 9
World cereals: IGC 10
World wheat: IGC 11
IGC: Wheat production forecast 12
Summary of the IGC Grain Market Report (GMR 491 of 23/8/2018) Outlook for 2018/19 Wheat production in selected countries (all wheat; million tonnes) 15/16 16/17 (estimate) 17/18 (forecast) 18/19 (projection) m/m change (m t) y/y change EU-28 159.6 144.2 151.2 135.8-4.1-10.1 % USA 56.1 62.8 47.4 51.1 - +7.8 % Canada 27.6 32.1 30.0 31.0-0.8 +3.4% Russia 61.0 72.5 84.9 67.0 +1.0-21.1 % Ukraine 27.3 26.8 27.0 25.5 - -5.5 % Australia 22.3 31.8 21.2 20.5-2.0-3.5% China 130.2 128.9 129.8 122.5 - -5.6 % India 86.5 86.0 98.5 95.5 - -3.1 % World 737.3 752.4 758.0 716.4-4.6-5.5 % 13
World durum wheat: IGC 14
Summary of the IGC Grain Market Report (GMR 491 of 23/8/2018) Outlook for 2018/19 Total grains: projected total grains production was raised by 4m m/m to 2,063m t (-29m or -1.4% y/y) with increased estimate for maize only partly offset by further cuts to wheat and barley. World total usage is seen reaching a new record at 2,129m t (+1m m/m; +22m or +1.0% y/y), incl. 712m t for food (+1.3% y/y), 933m t for feed (+0.5%) and 368m t for industrial use (+2.5%). Ending stocks are forecast at 538m t (-66m or -11.0% y/y) of which 282m t in China (-20m or -6.5% y/y). Wheat: reflecting negative affects of hot and dry weather on yield prospects world production estimate was reduced further, down by 4.6m to 716.4m t (-41.6m or - 5.5% y/y). Decreases for AUS, CAN, the EU and Turkey (-0.5m to 19.2m t, -2.3m y/y) outweighed small increases for RUS, KZH (+0.5m to 14.2m t), ARG (+0.6m to 19.6m t) and Serbia (+0.2m to 3.2m t, +0.9m y/y). Harvest progressed rapidly in RUS and prospects improved somewhat for the spring wheat crop. In ARG abundant soil moisture and robust prices made wheat an attractive crop with planted area exceeding 6m ha with output estimated at a new record. 15
Summary of the IGC Grain Market Report (GMR 491 of 23/8/2018) Outlook for 2018/19 Wheat: following a 5m t m/m reduction world consumption is now placed at 734m t (-0.2% y/y), broadly in line with past two years, with food use estimated at 519m t (+1.3%) and feed use at 132m t (-4.8%). EU feed use seen at 51.5m t (-1.5m y/y). Despite an 18m t decrease y/y wheat ending stocks are estimated at 2 nd largest on record reaching 248m t (-18m or -6.8% y/y), incl. 116m in China (+6m y/y; 46.8% of world total). However, stocks reduction concerns mainly the 8 major exporters with a total decrease of 19.4m t. Wheat trade is forecast lower m/m at 174.2m t as feed wheat is expected to be less attractive due to relatively higher prices compared to alternatives. With an estimated 30.5m t (-10.6m y/y) RUS would remain the largest exporter, closely followed by the US (28.6m t; +5.8m y/y). EU exports were cut by 2m to 22m t ( y/y) and CAN by 0.6m to 23.9m t (+2.2m y/y). Durum wheat: world production forecast lowered by 0.5m to 37.6m t (+1.8% y/y), with the estimates for the EU seen at 8.7m (-6%) and for CAN at 6.0m (+20%). Demand to match output at 37.7m t (+1%), incl. 32.9m for food use. 16
World maize: IGC 17
IGC: maize production forecast 18
Summary of the IGC Grain Market Report (GMR 491 of 23/8/2018) Outlook for 2018/19 Maize production in selected countries (million tonnes) 15/16 16/17 (estimate) 17/18 (forecast) 18/19 (projection) m/m change (m t) y/y change EU-28 59.0 62.6 65.2 60.4-1.7-7.4 % USA 345.5 384.8 371.0 370.5 +11.5-0.1 % Ukraine 23.3 28.0 24.1 28.8 +1.0 +19.4 % Russia 13.2 15.3 13.2 12.0-0.5-9.3% Brazil 67.0 97.8 82.2 93.8 - +14.1 % (-0.7 m/m) Argentina 39.8 49.5 43.6 (+1.2) 49.5 +1.2 +13.5 % China 224.6 219.6 215.9 219.9 - +1.9 % World 983.5 1,087.3 1,044.9 (+0.5m) 1,064.4 +12.2 +1.9 % 19
Summary of the IGC Grain Market Report (GMR 491 of 23/8/2018) Outlook for 2018/19 Maize: estimated world production was raised considerably, up by 12m m/m to 1,064m t, as improved prospects for the US, ARG, UKR and Serbia were only partly offset by cuts for the EU and RUS. Lower EU and RUS forecasts are due to the dry growing conditions. The US crop was increased on projected record yields (11.2 t/ha), while beneficial rains improved outlook in UKR. The Serbian harvest is now estimated 0.6m higher m/m at 6.5m t (+2.5m y/y). Maize consumption forecast was increased by 7m to a record 1,105m t (+27m or +2.6% y/y), incl. 641m t for feed (+2.7%) and 304m t for industrial use (+2.8%). Feed use to reach 59m t in the EU reflecting both tighter feed wheat supply and worsening pasture productivity. World maize trade is to reach a new record at 156m t with the EU remaining the largest importer with 18.2m t ( y/y). With production increasing more than demand ending stocks were placed 7m higher at 256.4m t (-13% y/y or -22% from the record of 2016/17). 20
World barley: IGC 21
Summary of the IGC Grain Market Report (GMR 491 of 23/8/2018) Outlook for 2018/19 Barley production in selected countries (million tonnes) 15/16 16/17 (estimate) 17/18 (forecast) 18/19 (projection) m/m change (m t) y/y change EU-28 61.4 59.5 59.0 55.8-2.6-5.3 % Russia 17.1 17.5 20.2 17.0 - -15.7 % Ukraine 8.7 9.9 8.7 7.8 +0.8-10.3 % Australia 9.0 13.5 8.9 8.5-0.8-4.8% Canada 8.3 8.8 7.9 8.4-0.2 +6.4 % World 149.8 148.6 145.5 140.0-2.3-3.8 % 22
World oats: IGC 23
Summary of the IGC Grain Market Report (GMR 491 of 23/8/2018) Outlook for 2018/19 Barley: production to decline for the third year in a row reaching 140m t only, the lowest level in 6 years. The decrease is entirely due to lower yield prospects as harvested area is seen 3% higher y/y. Due to dry growing conditions estimates for AUS, CAN and the EU were reduced m/m, while raised for UKR reflecting better yields than expected during harvest. Mostly due to lower feed use in the EU (-1m to 36.1m t) world demand was reduced by 0.9m to 144.8m t (-2.5% y/y), incl. 97.3m t (-2.9%) feed use. Stocks to fall to a 23-year low level at 21.3m t (-18.3%). Driven by strong demand from China (+0.3m to 8.8m t) and Saudi Arabia (+0.2m to 7.8m t) world trade is seen at an all-time high of 30.2m t. Oats: world production is seen decreasing by 2.8% y/y to 23.3m t reflecting smaller crops in the EU (7.7m; -0.3m m/m, -6.2% y/y), RUS (5.1m; -6.5%) and CAN (3.5m; -6.6%). Consumption is estimated 0.2m lower m/m at 23.4m t (-3%), incl. 16m feed use (-3.7%) while stocks put at 2.8m t (-3.8%). 24
Cereals Market News and Prices 25
Market News 1. (30-8-2018) Russia - RUS: (SovEcon) 2018 July grain exports reached a record level for that month with 4.7m t grains (incl. 3.8m wheat and 0.6m barley), while Aug shipments estimated at 4.5m t, incl. 3.8m wheat. - RUS: as of 22/8 grains exports reached 7.8m t (+42%) in MY 2018/19, incl. 6.4m t of wheat (+73%). - RUS: (SovEcon) 2018/19 grain production forecast lowered again, down by 4.3m to 109.6m t (135m last year). - RUS: (IKAR): 2018/19 grain production forecast was reduced by 2.8m to 110m t (135m last year), incl. wheat down by 1.2m to 69.6m t (84.9m), and maize slightly lower to 11.7m t (13.2m). 2018/19 grain exports estimated at 39.8m t (48.9m) incl. wheat at 32.5m. - RUS: (USDA) due to improved conditions for spring wheat total wheat crop is now forecast 1m higher m/m at 68m t (-17m y/y), incl. 48.5m winter and 19.5m spring wheat. Yield is estimated at 2.67 t/ha (-14% from last year's record) with harvested area put at 25.5m ha. 26
Market News 2. (30-8-2018) Ukraine/KZH - UKR: (UkrAgroConsult) share of milling wheat may decrease to 45% from 55% last year due to too much rain during harvest. Wheat crop estimated at 24m t (26.1m in 2017). Maize crop forecast raised to 28.5m t (+3.8m y/y) due to favourable weather improving yield prospects. Exports up 1.5m to 22.5m t (18m). - UKR: (AgMin) Memorandum of Understanding signed between AgMin and the grain trade. Accordingly 16m t of wheat could be exported in MY 2018/19, incl. 8m of milling quality. - UKR: (Ag Min) 2018/19 wheat harvest complete with 25m t (26.6m) with ave yield at 3.8 t/ha (4.2 t/ha). - UKR: (USDA) maize crop is estimated at a record 31m t (+1m m/m; +6.9m y/y) with yield forecast at a record 6.89 t/ha and harvested area at 4.5m ha. - KZH: (USDA) wheat production estimated at 14.5m t (+0.5m m/m; -0.3m y/y) as conditions remained favourable for the spring crop, which represents about 95% of total production. Yield is seen at 1.26 t/ha (+1% y/y and +9% above 5-Y AVE). 27
Market News 3. (30-8-2018) U.S. Grain export inspections w/e 23/08/2018 Commodity MY 2017/18 MY 2016/17 Change Maize 56 378 641 56 119 547 + 0.5 % Sorghum 5 062 112 5 933 909-14.7 % Soybeans 55 503 869 57 136 551-2.9 % Wheat (2018/19 vs 2017/18) 4 842 725 7 458 784-35.1 % Marketing Year = June/May for wheat and September/August for maize, sorghum and soybeans; www.ams.usda.gov/mnreports/wa_gr101.txt - -US maize exports remained highly competitive with weekly exports exceeding 1.0m t and cumulative total for 2017/18 now higher y/y. - - So far 2018/19 wheat exports rather disappointing and slow 28
Market News 4. (30-8-2018) USA - USDA Crop Progress report w/e 26 August: Maize conditions: 68% good/excellent (62% a year ago, 67% 5-Y ave) Soybeans conditions: 66% good/excellent (61% a year ago, 65% 5-Y ave) Harvesting: Spring wheat harvesting: 77% complete (73% a year ago, 61% 5-Y ave) Pro Farmer Midwest tour: findings of the field visits confirmed the USDA's forecasts for outstanding yield prospects. 2018/19 Maize harvest is seen at 368.3m t with average yield at 11.9 t/ha while soybean production is forecast at 127.4m t with an average yield of 3.6 t/ha. 29
Market News 5. (30-8-2018) Canada: Outlook for Principle Field Crops in 2018/19 (source: AAFC; crop year = Aug/July) 17-8-2018 2016/17 2017/18 f' 2018/19 f' y/y Durum prod' (m t) 7.76 4.96 5.8 (-0.3 m/m) +16.9% exports (m t) 4.53 4.50 4.80 +6.7% All wheat prod'(m t) 32.14 29.98 30.30 (-0.3) +1.1% exports (m t) 20.16 22.10 22.30 +0.9% Barley prod' (m t) 8.84 7.89 8.50 +7.7% exports (m t) 2.32 2.85 2.40-15.8% Oats prod' (m t) 3.23 3.72 3.45-7.4% exports (m t) 2.30 2.40 2.43 (+0.03) +1.0% Canola prod' (m t) 19.60 21.31 20.34-4.6% Exports (m t) 11.02 10.80 11.50 +6.5% 30
Market News 6. (30-8-2018) Brazil CONAB Aug report concerning 2017/18 S&D (2018/19 for wheat): - Maize: total crop reduced again, mostly due to lower safrinha (2 nd crop) area (11.56m ha) and reduced yield prospects (4.8 t/ha). Exports were cut by 3m m/m to 27m t (-10%) due to lower supply and expected higher transport costs. - Soybeans: exports raised by 2m to 74m t (+9%) on strong CHN demand. 9-8-2018 Forecast +/- previous f'cast Previous year +/- y/y Wheat prod (m t) 5.1 +0.2 4.3 +21% Wheat area (m ha) 2.0-1.9 +6% Soybeans prod (m t) 119.0 +0.1 114.1 +4% Soy area (m ha) 35.2-33.9 +4% Maize prod (m t) 82.2-0.7 97.8-16% Maize 1st crop 26.8-0.1 30.5-12% Maize 2 nd crop 55.4-0.6 67.4-18% 31
Market News 7. (30-8-2018) - ARG (BAGE 22 08 2018): Maize harvest 97% done of the 5.17m ha harvestable area (area sown: 5.4m ha). Final production estimate unchanged at 31m t from before (-8m y/y) with ave yield seen at 6.02 t/ha. Wheat planting completed on 100% of the 6.1m ha (+7% y/y) projected area for the 2018/19 harvest and barley on 100% of the 0.95m ha (+12%). - ARG (BAGE): 2018/19 maize planted area is forecast at 5.8m ha (5.4m in 2017/18), potentially a new record. Production is tentatively seen at 45-46m t (31). - ARG (AgMin) : estimated 2018/19 wheat area was raised by 0.1m to 6.3m ha (5.9m), while 2018/19 maize sowings placed also higher y/y at 9.4m ha (9.1m). 32
Market News 8. (30-8-2018) - India: official estimate for 2018 wheat crop increased by 1.1m to a record 99.7m t (+1.2m y/y). - Egypt: wheat imports with a maximum moisture content of 13.5% will be allowed for the next 9 months according to gov' sources. - Saudi Arabia: Saudi Grains Organization (SAGO) issued a moratorium on wheat and barley imports from Canada following a diplomatic dispute between the two countries. - Turkey: Turkish Grain Board was allowed to import 2.25m t dutyfree grain incl. 0.75m wheat, 0.7m barley and 0.7m maize. - South Africa (Crop Estimates Committee): maize production foreacast at 13.2m t (-21% y/y) incl. 6.9m white maize (-31%) and 6.3m yellow maize (-8%). 33
World cereal prices ($/t) 300 280 $ / tonne 260 240 220 200 Barley-FR Dlvd Rouen feed $ 242 Wheat - FR Cl. 1 Rouen $ 237 Wheat - Black Sea Milling $ 225 Wheat - US SRW Gulf $ 216 Maize - FR Bordeaux $ 210 180 160 Maize - US 3YC Gulf $ 161 140 34
390 World common wheat prices ($/t) 340 $ / tonne 290 240 190 Wheat - Argentina - $ 241 Wheat - FR Cl. 1 Rouen $ 237 Wheat - Black Sea Milling $ 225 Wheat - US SRW Gulf $ 216 140 35
CME wheat: open interest and net position of traders 0.8 Open Interest Last value from: 2018-08-21 Managed money - Net position 100 Millions of contracts (136 metric tonnes) 0.7 0.6 0.5 0.4 0.3 0.2 0.1 WHEAT - CHICAGO BOARD OF TRADE 50 0-50 - 100-150 Thousands of contracts (of 136 metric tonnes) 0.0-200 36
US CME SRW wheat futures 37
US KCBT HRW wheat futures 38
EU Milling Wheat Futures 39
CME maize: open interest and positions of traders 3.0 Open Interest Last value: 2018-08-21 Managed money - Net position 500 Millions of contracts (127 metric tonnes) 2.5 2.0 1.5 1.0 0.5 0.0 CORN - CHICAGO BOARD OF TRADE 400 300 200 100 0-100 - 200-300 Thousands of contracts (of 127 metric tonnes) 40
CME maize futures 41
EU maize futures 42
Trade 43
Selected cereals trade for the past 5 weeks Country Crop Quantity (in t) Price ($/t) Origins Delivery Algeria wheat 360 000 269-272 c&f Optional Oct Egypt Wheat 240 000 238.5-238.2 fob Freight: 15.0-16.5 Egypt Wheat 420 000 231-233.8 fob Freight: 15.0-16.6 Egypt Wheat 350 000 221.5-225.5 fob Freight: 15.2-18.3 RUS: 180 000 EU (ROM): 60 000 RUS: 360 000 EU (ROM): 60 000 RUS: 290 000 UKR: 60 000 Sep Sep/Oct Oct Tunisia Wheat 50 000 238.3-238.6 c&f Optional Oct Feed barley 50 000 251.5-252.4 c&f Optional Oct Jordan Feed barley 60 000 263 c&f Optional Oct 44
EU cereals trade 2018/19 (update of Situation at 20/08/2018) Imports: 2.1m t (2.8m t last year; 1.9m t two years ago) 0.32m t soft wheat -14% y/y 0.02m t durum wheat -84% y/y 1.7m t maize -20% y/y 0.04m t barley -80% y/y Exports: 3.2m t (4.1m t last year; 6.4m t two years ago) 1.8m t soft wheat -40% y/y 0.9m t barley +80% y/y 0.05m t durum wheat -15% y/y 0.03m t maize -46% y/y So far, the EU is a net cereal exporter of 1.1m t, against 1.3m t last year and 4.5m t two years ago. 45
Conclusions - Wheat prices fluctuated on weather news and rumours that RUS/UKR might limit wheat exports by administrative measures - Wheat exports from RUS very strong during July-Aug - Maize prices remained under heavy pressure from improved crop prospects in US/UKR & nearly completed ARG/BRA harvests - Barley supply outlook tight pushing prices upwards - USDA forecasts record maize yield in US -On fob basis US SRW and Russian wheat most competitive -On fob basis US & ARG remain cheapest origins for maize 46
Thank you for your attention! Market data the for cereals, oilseeds and protein crops are available at the EU Crops Market Observatory. https://ec.europa.eu/agriculture/marketobservatory/crops