grain & oilseed market outlook 2012/13 - another season of extremes jack watts senior analyst...
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Grain & Oilseed Market Outlook 2012/13- another season of extremes
Jack WattsSenior AnalystAHDB/ HGCA
Introduction - a season when...
A long term trend will be broken
US maize supply becomes a long term driver
Extreme weather has become the norm
The global wheat market is becoming more assertive
Forecasters have to grapple with ‘demand rationing’
Paper overview
The grains perspectiveMaize – in summary Wheat – becoming more assertiveBarley – more than a follower in the modern grain marketOats – an evolving niche market
The oilseeds perspective Palm oil – the price limiting factor for vegetable oilsSoyabeans – the need to bridge the Oct-Mar supply gapRapeseed – global production fails to impressSunseed – providing less relief
Growth in global meat demand- a key driving force of rising grain usage
Source: USDA
International grain futures (nearby)- relationships are changing
Source: AHDB
Global maize supply and demand - high prices now impacting demand
Source: USDA
Mt 10/11 11/12 Est. 12/13 Proj. 12/13 Proj. 12/13 Proj. Jun Sept Oct
Opening stock 43.4 28.7 21.6 30.0 25.1Production 316.2 313.9 375.7 272.5 271.9Yield (bu/acre) 152.8 147.2 166.0 122.8 122.0
Total available 359.5 342.5 397.3 304.4 299.0 Demand 285.0 279.5 301.6 254.0 254.0
Feed 121.7 111.8 138.4 105.4 105.4Ethanol 127.5 127.0 127.0 114.3 114.3
Exports 46.6 39.2 48.3 31.8 29.2End stock 28.6 25.1 47.8 18.6 15.7Stocks-to-use 8.6% 7.9% 13.7% 6.5% 5.5%
US maize supply and demand- demand rationing now evident
Source: USDA
‘Funds / speculators’ in CBOT Maize- recent sell-off, but remain long
Source: CFTC Commitments of Traders Legacy report (Futures Markets Only)
European maize production (Mt)- down more than 10Mt on 2011
Germany
2011 2012
4.7 5.0
Hungary
2011 2012
8.1 5.2
Italy
2011 2012
9.8 6.8
France
2011 2012
15.8 16.2 Romania
2011 2012
10.5 8.0
Ukraine
2011 2012
22.8 20.0
Spain
2011 2012
3.7 3.3 Bulgaria
2011 2012
2.2 1.5Serbia
2011 2012
6.3 6.0 Source: IGC
South American maize supplies - less impact than soyabeans, but useful supply
Source: USDA
Maize summary
US drought is the big issue – a tight supply situation has gottighter
As a result, demand rationing is essential, hence high prices
European issues also compounding US drought impacts
Increasing reliance on South American crop, but less so thanin the oilseeds market
Funds remain long so can possibly amplify the impact of newS&D information
World wheat supply and demand- stock erosion expected in 2012/13
Source: FAO
International wheat prices - rising as Russian supplies dwindle
Source: AHDB/HGCA
Egyptian (GASC) wheat purchases- the largest importer securing supplies
Purchase Date Quantity Origin Delivery Date
11th Aug 120Kt Russian 1-10 Sep
14th Aug 120Kt Russian, Ukrainian 21-30 Sep
25th Aug 180Kt Russian, Romanian 1-10 Oct
1st Sep 335Kt Russian, Romanian, Ukrainian
11-20 Oct
11th Sep 235Kt Russian, French, Romanian 11-20 Nov
13th Sep 235Kt Russian, French, Romanian 21-30 Nov
26th Sep 300Kt French, Romanian 1-10 Dec
3rd Oct 240Kt French, Argentine 11-20 Dec
TOTAL 1,765Kt
Source: Reuters
World wheat stocks (Mt) - US and India(?) key in avoiding 07/08 scenario
EU-27 Stocks STU
2007/08 12.43 10%
2012/13 9.21 7%
US Stocks STU
2007/08 8.23 13%
2012/13 17.79 26%
China Stocks STU
2007/08 39.08 36%
2012/13 54.97 45%
Argentina Stocks STU
2007/08 2.35 14%
2012/13 0.97 5%
Russia Stocks STU
2007/08 4.27 9%
2012/13 5.44 12%
India Stocks STU
2007/08 5.80 8%
2012/13 22.45 25%
Australia Stocks STU
2007/08 3.85 28%
2012/13 4.84 20%
Ukraine Stocks STU
2007/08 2.08 15%
2012/13 4.46 27%
Canada Stocks STU
2007/08 4.41 19%
2012/13 5.63 22%
Source: USDA
Chicago nearby futures prices - the spread is widening
Source: AHDB / HGCA
Australia - Lower area, dryness, but reasonable stocks
Key features:Plantings down 4% YoY
at 3.686Mha
2011/12 production: • 29.5Mt (ABARES)
2012/13 forecasts:• ABARES: 22.5Mt• USDA: 23.0Mt• IGC: 22.5Mt
Stock draw down in 12/13Source: ABARES, USDA, IGC
Argentina – lower area but good yield potential
Key features:Area declining – historical low
Good yield potential in 12/13
Export policySource: BAGE, USDA
Shifting in Argentine crop areas- Soyabean dominates, but watch barley
Strong soyabean economics
An up and coming barley exporter
Is wheat becoming a niche crop in the Americas?
Source: USDA
European S&D and export licenses- finely balanced, again
M tonnes 2010/11
2011/12est
2012/13 f’cast
Opening stocks
14.6 10.1 10.5
Production 126.6 128.7 125.6
Imports 2.4 5.4 4.4
DemandHuman consAnimal feed
Bioethanol
113.747.150.84.1
119.447.955.24.6
116.647.852.54.6
Exports 20.1 14.3 14.0
Closing stocks
10.1 10.5 9.9
Source: EU Commission
Key European wheat producers - a mixed bag
Production Exports
2011/12est
2012/13f’cast
2011/12est
2012/13f’cast
France 33.97 35.99 15.92 17.53
Germany 22.71 22.39 5.76 5.60
Poland 9.34 8.09 0.56 0.59
Hungary 4.13 4.02 1.30 1.79
Romania 6.69 4.90 2.05 1.99
Bulgaria 4.31 4.02 2.25 2.14
Source: Strategie Grains
European grain - stocks have bailed out unimpressive production recently
Source: EU Commission
UK wheat S & D – low production, high imports, uncertain demand
M tonnes 2010/11 2011/12 2012/13 f’cast
Opening stock 2.027 1.537 1.495
Yield (t/ha) 7.7 7.7 6.68
Production 14.876 15.257 13.310
Imports 1.001 0.908 1.700
Total availability 17.906 17.702 16.505
Domestic demandH&I
Feed
13.7147.2016.144
13.6626.8006.491
14.3057.6886.255
S&D balance 4.192 4.040 2.200
Exports 2.655 2.545
Closing stock 1.537 1.495
Source: Defra, AHDB
GB wheat quality - specific weights the big issue as well as variation
Specific Weight (Kg/hl)
Hagberg F.N(Seconds)
Protein(% dm)
Average SD* Average SD* Average SD*
2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012
Nabim group 1
79.8 71.0 2.28 4.09 308 250 50.75 69.25 13.0 13.2 0.93 0.93
Nabim group 2
79.4 71.9 2.43 4.06 304 286 52.29 67.24 12.6 13.0 1.02 1.01
Nabim group 3
78.4 68.8 2.22 4.11 246 223 46.59 57.55 11.5 12.3 0.90 0.98
*Standard Deviation2011 final results –67,933 samples 2012 provisional results – 54,060 samples
Source: AHDB / HGCA
GB quality: High quality bread wheat- Group 1, 76Kg/hl, 250s, 13%
2011 final% samples meeting spec
2012 provisional (10 Oct)% samples meeting spec
Source: AHDB / HGCA
GB quality: Medium quality bread wheat- Group 1/2, 74Kg/hl, 180s, 12.5%
2011 final% samples meeting spec
2012 provisional (10 Oct)% samples meeting spec
Source: AHDB / HGCA
GB quality: Soft wheat- Group 3,74Kg/hl, 180s, 10.7%
2011 final% samples meeting spec
2012 provisional (10 Oct)% samples meeting spec
Source: AHDB
UK milling wheat pricing – rapid move to import parity: harvest delay and quality
Source: AHDB / HGCA
Physical and futures prices detaching - limited availability of 72.5Kg feed wheat
Source: AHDB / HGCA
Wheat summary
Lower global output in 2012/13 is making wheat lessabundant – globally
Declining exporter stock levels - US is critical
India could become a useful exporter
Wheat needs to build premium over the feed grain market toregulate global animal feed demand
The market is not in a 2007/08 scenario, but weather issuesin 2013/14 could further sensitise stock levels
Barley is globally tight- 2008 and 2009 surpluses now eroded
Source: USDA
Key players in barley production- fragile export availabilities
M tonnes 2011/12 2012/13 Change
EU-27 51.8 53.4 1.6
Russia 16.9 14.0 -2.9
Ukraine 9.1 6.8 -2.3
Canada 7.8 9.5 1.7
Australia 8.6 7.0 -1.6
Argentina 4.1 5.6 1.5
Source: IGC
World barley exports- Argentina emerging as a real player
Source: IGC
EU barley supply and demand- rebound in French production
Million tonnes2008/09 2009/10 2010/11 2011/12
2012/13 Oct f’cast
Opening stock 8.4 14.1 18.4 9.7 7.5
Production 64.9 61.8 52.7 51.4 54.4
Imports 0.3 0.1 0.2 0.4 0.3
Demand 59.5 57.3 61.6 54.1 55.4
Feed 41.5 41.9 42.0 36.1 38.0
H&I 9.1 9.3 9.5 9.6 9.8
Exports 6.0 3.5 7.6 5.7 5.0
Ending stocks 14.1 18.4 9.7 7.5 6.7
Source: EU Commission
Malting barley export prices – good EU quality, squeezing premiums
Source: RM Analytics
UK barley S & D- recovery in feed demand
M tonnes 2010/11 2011/12 2012/13 forecast
Opening stock 1.599 0.870 0.940
ProductionEngland & Wales
Scotland
5.2523.4471.665
5.4943.5581.798
5.527
Imports 0.125 0.156 130
Total availability 6.976 6.520 6.597
Domestic demandH&I
Feed
5.3341.7443.419
4.7761.8202.784
4.9961.8222.996
S&D balance 1.642 1.744 1.601
Exports 0.772 0.804
Closing stock 0.870 0.940
Source: Defra, AHDB
GB barley quality - lower N levels compared to the 2011 drought hit crop
Nitrogen (%)
Screenings(% through 2.25mm)
Average SD* Average SD*
2011 2012 2011 2012 2011 2012 2011 2012
Winter Barley
1.89 1.68 0.18 0.15 1.2 3.5 0.72 2.10
Spring Barley
1.66 1.56 0.22 0.15 1.5 3.7 0.92 2.07
*Standard Deviation2011 final results – 29,829 samples2012 provisional results – 27,662 samples
Source: AHDB / HGCA
EU oat supply and demand - tight stocks a key feature
M tonnes 2010/11 2011/12* 2012/13** % change
Opening Stocks 1.50 1.10 0.84 -24%
Production 7.37 7.81 7.76 -0.6%
Finland 0.81 1.04 1.16 12%
Germany 0.60 0.63 0.72 15%
Sweden 0.56 0.70 0.83 19%
UK 0.69 0.61 0.66 8%
Demand 7.66 7.90 7.74 -2.0%
Exports 0.11 0.17 0.11 -34%
End-Season Stocks 1.10 0.84 0.76 -9.5%
*estimated, ** forecast
Source: IGC, Defra
UK Oat Production – a niche crop that needs to compete for area
Source: Defra
Barley and oats summary
Global barley is finely balanced and is becoming increasinglyreliant on the Southern Hemisphere - Argentina
A rebound in French barley production and reasonable qualityis keeping EU premiums low
However, absolute prices are supported by the strong feedgrain market – risking quality barley entering the feed market
To maintain sufficient supplies, oats need to compete for landagainst the mainstream crops – pre-planting price signal is key
Global vegetable oil prices- widening spreads
Source: Oil World www.oilworld.biz
Malaysian palm oil supply and demand- seasonal production peak looks strong
Source: Malaysian Palm Oil Board
Global soyabean supply and demand-production recovery in 2012/13?
Source: USDA
Seasonal soyabean supply - holding out for potentially large South American crop
Source: USDA
Chicago soyabean crush margin -strong despite high raw material costs
Source: AHDB / HGCA
Chicago soy complex - meal is driving the crush margin
Soya oil has remained relatively flat with the threat of demand switching to palm oil
Soya meal is the dominant protein meal. Switching opportunities to other protein meals is limited, enabling values to rise – supporting crush margins
Source: AHDB / HGCA
Soya meal production - heavily dependent on good South American crops
Source: USDA *Forecast
US soyabean exports (as at late Sep)- buyers hedging the South American risk
Hedging South American crop risk?
*Forecast Source: USDA
South American soyabean prospects - the market expects a record crop
Brazil• Record plantings of 27.14Mha - 8%
year-on-year increase (CELERES).
• Early dryness in central regions delayed planting, but rains have since arrived.
Argentina • Record plantings of 19.7Mha - up
4.5% on last season (BAGE).
• Wet weather in the lead up to planting has helped soil moisture. Drier conditions recently for planting
Brazil soyabean growing area
Argentina soyabean growing area
El Nino--------------------Neutral--------------------La Nina
Source: CELERES, BAGE
European rapeseed - production continues to disappoint at sub-20Mt
EU Rapeseed Supply and Demand (Mt)
Mt 10/11 11/12 12/13*
Opening stocks
1.41 1.26 1.29
Production 20.61 19.22 18.89
Imports 2.70 3.65 3.00
Exports 0.19 0.11 0.09
Crushings 22.39 21.75 21.16
Other use 0.87 0.98 0.90
Closing stocks
1.26 1.29 1.03
2.5Mt-8.0%
5.4Mt+1.1%
4.9Mt+26.6%
1.73Mt-7.5%
Source: Oil World www.oilworld.biz
Canadian & Australian Canola – no record crop expectations this season
*estimate, **forecast Source: COPA, Statistics Canada, ABARES
Sunflower seed production - down almost 3Mt (7%) on last season
Mt ’09/10 ‘10/11 ‘11/12 ‘12/13 f’cast
World 33.27 33.57 39.33 36.67
Russia 6.60 5.82 9.50 7.80
Ukraine 7.30 8.00 9.30 8.40
Argentina 2.65 3.67 3.72 4.10
EU 7.00 6.97 8.20 7.10
Stocks 2.09 2.36 2.19 1.93
Crushing 30.74 29.76 36.00 33.40
Source: Oil World www.oilworld.biz
Oilseeds summary
Seasonal peak in palm oil output is making the commodity competitive for demand, limiting wider vegetable price rises
However, rising soya meal prices are supporting crushmargins, despite high soyabean prices
The world has never been so reliant on the approachingSouth American soyabean crop. Any weather threat will resultin volatility and impact Chinese import levels
Rapeseed expected again to be in tight supply. Weatherissues in EU and Canada focuses attention toward Australia
Conclusions
Expect volatility to remain for the foreseeable future
Demand rationing is required in 2012/13 to balance S&D
Production depending, the long term increasing demandtrend should be expected to continue
Political and macroeconomic influences may increase:US, China, EU
The global grain industry is now five years into the newvolatile era, businesses need to evolve
Final comment - fixed price selling/buying can only do so much in volatile markets
Source: AHDB / HGCA
