Roger Dean: Feed Materials Commentary

Feed materials Commentary

By Roger Dean

The latest edition of the Grain Market Report was published by the International Grains Council on 29 April 2021.

An increase in global total grains supply - wheat and coarse grains - in 2020-21 of 36 million tonnes is expected to be exceeded by a 44 million tonne rise in consumption leaving stocks 8 million tonnes down and at a five-year low of 609 million tonnes. The International Grains Council attributes the drop in inventories mainly to another drawdown for maize, to the smallest level in eight years; this contrasts with a build-up for wheat to a record.

Turning to grain supply in 2021-22 and increases in wheat production (up by 16 million tonnes) and maize (up by 52 million tonnes) were only partly offset by decreases for barley, oats and rye. World total grains production in 2021-22 is projected to climb by 61 million tonnes to a world record 2,287million tonnes. With the 52 million tonnes increase in supply matched by the rise in use, world grain inventories are expected to stay at 609 million tonnes at the end of 2021-22, although maize inventories are expected to decline again to a nine-year low, while further stock building is seen for wheat.

Driven by bigger soybean crops in both the US and Brazil, global soyabean output in 2020-21 is forecast at 7 per cent higher year-onyear. Nevertheless, with consumption expected to record a solid increase, world soybean inventories are seen as falling for a second consecutive season, including a contraction in US inventories by 80 per cent. With high soybean prices expected to generate a supply response, 2021-22 world soybean production is ‘tentatively placed’ at a record of 383 million tonnes, up by 5.8 per cent. While world soybean consumption is expected to increase further, a ‘modest’ inventory increase seems likely.

The United States Department of Agriculture’s Foreign Agricultural Service (FAS) provides monthly updates on the production, consumption and ending stocks of a wide variety of agricultural products and the latest update was published on 9 April 2021.

World wheat production during the 2020-2021 marketing year was projected at 776.5 million tonnes, 286,000 tonnes or marginally lower than the previous estimate published in March 2021. It should be borne in mind that the end of the 2020-21 cereal marketing year is approaching and thus estimates for individual countries are becoming cumulatively more accurate as more statistical information is gathered.

The overall figure includes a 516,000 tonne or 0.9 per cent reduction in production for a wide variety of countries not individually identified. Otherwise, projected production of wheat in the EU, at 135.6 million tonnes, is reduced by 200,000 tonnes or 0.15 per cent. The only other significant change is in Argentine wheat production which, at 17.63 million tonnes, has been increased by 430,000 tonnes or 2.5 per cent from the projection made in March.

In terms of the outcome where consumption is concerned, total usage identified by FAS currently amounts to 747.18 million tonnes, 5.13 million tonnes more than in the previous, March estimate. Significantly, 5 million tonnes of the total increase is estimated to have arisen in China. Equally, of a 5.7 million tonne fall in world wheat inventories between March and April is identified as taking place in China. Conversely, there is no change in Chinese wheat production identified between the two latest estimates.

As regards maize, the USDA has increased its projection of maize production in 2020-21 by 740,000 tonnes or 0.1 per cent to 1,137.0 million tonnes.

A substantial contribution to the increase – 1.14 million tonnes – is made up of non-specified and presumable minor producers. However, maize production in the EU is also projected to increase from 63.7 million tonnes to 64 million tonnes as the data is further refined. France is the largest maize grower in the EU and, together with Romania (15.3 per cent), Italy (12 per cent) and Hungary (11.3 per cent), these four Member States covered 61.8 per cent of the total EU-28 grain maize production in 2015.

USDA’s projection of world soybean production in 2020-21, at 363.19 million tonnes, is 1.36 million tonnes ahead of the projection made in March.

The major contributor to the increase is Brazilian soybean production which, at 136 million tonnes, is 2 million tonnes or 1.5 per cent ahead of USDA’s March projection. The estimates for the other major producers, including the US and Argentina are unchanged; in the case of the US, this contradicts much of recent trade comment.

Brazil soybean production for the 2020-21 marketing year is forecast at a record 136 million tonnes, and up 7.5 million tonnes or 6 per cent) from last season’s revised record crop of 128.5 million tonnes. The harvested area is forecast at a record 38.6 million hectares, up 1.7 million hectares or 5 per cent from last season’s record. Brazilian soybean yield is projected at a record 3.52 tonnes per hectare, 1 per cent above last season and close to the 10-year trend. Although Brazil had weather-related delays in both sowing and harvesting, record soybean output is expected for a second consecutive year. Currently, about 80 per cent of the Brazilian soybean crop has been harvested, with dry weather allowing rapid harvest gains during recent weeks.

Paraguayan soybean production in 2020-2021 is lowered to 9.9 million tonnes as a delayed harvest prevented farmers from planting second-crop soybeans. However, a return to normal climatic conditions in 2021-22 would mean that soybean production is projected at 10.5 million tonnes as this would allow for increased second-crop soybean planting, a critical element in the South American soybean sector.

The overall picture as regards prices concerning the major feed ingredients is for a significant decline in world wheat stocks, down 5.7 million tonnes and by a 3.8 million downturn in maize inventories, the latter countered by a 3.1 million increase in soybean inventories. In conclusion, there are few grounds for suggesting any fundamental weakness in feed material prices in the immediate future.