Grain: World Markets and Trade Nov. 10, 2012
Record Rice Trade despite Shake-up in Suppliers
Global rice trade is expected to surpass 38 million tons in 2012 after an unprecedented 36 million last year. Previously, trade had averaged around 30 million tons. Behind the record volumes, though, is a story of policy changes and production issues that are driving major fluctuations in suppliers. The most dramatic shift is between India and Thailand. A 4-year ban on non-basmati rice exports left India with massive stocks that are now pouring out in quantities expected to make that country the number one exporter for the first time, topping its 2002 record by 50 percent.
While India releases stocks, the Thai government is accumulating them by purchasing domestic supplies at above market prices, making exports uncompetitive. After 30 years as the world’s largest rice exporter, Thailand is expected to fall to number three, shipping the smallest amount in 14 years. Meanwhile, Vietnam is exporting at levels not previously thought possible because of record crops and a porous border with Cambodia. Together, these three countries supply 60 percent of the world’s rice trade.
Other exporters can also be erratic. For example, policies in Brazil and Egypt and weather in Burma and Australia have caused major fluctuations in the past several years. These shifts in suppliers are likely to continue as policies and weather are major drivers of the rice market.
WHEAT: WORLD MARKETS AND TRADE
Global wheat production for 2012/13 is reduced due to a lower projected crop in Australia. Global trade is boosted primarily on higher demand from the EU and Egypt as a result of greater available exportable supplies in the Black Sea. U.S. exports are reduced on account of greater competition from the Black Sea and India. The season-average U.S. farm price is unchanged.
Domestic: Wheat prices were generally flat with the exception of Hard Red Winter (HRW), which rose $11 to $378/ton. Dry conditions in HRW producing areas are supporting prices. The spread between HRW and Hard Red Spring (HRS) has narrowed significantly and is currently only $6/ton, the tightest since 2007/08. Soft Red Winter (SRW) and HRS went up slightly by $4 to $345/ton and $2 to $384/ton, respectively. Soft White Winter (SWW) was down $1 to $339/ton.
TRADE CHANGES IN 2012/13
• Australia is cut 1.5 million tons to 19.0 million because of reduced crop expectations.
• EU is raised 1.0 million tons to 17.5 million due to growing competitiveness in North Africa and the Middle East.
• India is up 1.0 million tons to a record 7.0 million, as a result of the strong pace of shipments-to-date, which are expected to continue into Southeast Asia, the Middle East, and East Africa.
• Russia is raised 1.0 million tons to 10.0 million supported by a strong pace of shipments.
• Ukraine is boosted 2.0 million tons to 6.0 million based on reported sales and shipments.
• United States is reduced 1.0 million tons to 30.5 million owing to slack sales and shipments to date.
• China is boosted 1.0 million tons to 2.5 million attributable to a stronger-than-expected pace and recent additional purchases.
• Egypt is raised 500,000 tons to 9.5 million resulting from greater availability of lower priced supplies in Russia and Ukraine.
• EU is up 500,000 tons to 6.0 million on stronger demand for both milling and feed-quality wheat.
RICE: WORLD MARKETS AND TRADE
Global rice production in 2012/13 is forecast to be nearly on par with the previous year, while consumption rises slightly and stocks remain the second highest in a decade. Trade is forecast down from the previous year’s record but at comparable levels to 2 years before. U.S. production is up, and exports are also up marginally.
The gap between U.S. and Indian export quotes widened $10 in the past month to $175, a major increase since February when the spread was only $60. Top exporter India continues to sell its massive stocks while the United States faces a relatively small rice crop and near-record prices for other grains. Quotes from Thailand and South America join the United States to form the higher-priced tier, while Vietnamese and Pakistani quotes are closer to India.
SELECTED TRADE CHANGES FOR 2012
• India is boosted 250,000 tons to a record 10.0 million on strong shipments to West Africa.
• United States is down 200,000 tons to 3.3 million on the pace of shipments.
• Uruguay is raised 200,000 tons to a record 1.1 million on strong year-to-date regional shipments and to Iraq.
• Vietnam is up 200,000 tons to a record 7.2 million on higher demand from China and Indonesia.
• China is boosted 700,000 tons to a record 2.6 million in 2012 and 500,000 tons to 2.0 million in 2013 as cheaper Vietnamese rice continues to enter the country.
• Cote d’Ivoire is up 300,000 tons to a record 1.3 million as traders purchase rice before the duty increases.
• EU-27 is down 100,000 tons to 1.2 million on the pace of imports.
• Indonesia is bumped up 200,000 tons to 1.7 million as BULOG seeks to boost stocks.
• Nigeria is up 200,000 tons to a record 3.2 million as traders continue to accumulate stocks in anticipation of higher levies.
• Senegal is raised 250,000 tons to a record 1.2 million on a smaller crop and rising domestic prices.
• South Korea is slashed 360,000 tons to 240,000 on the timing of shipments in 2012 but is raised for the same reason in 2013 (up 240,000 tons to 640,000, the highest in 3 decades).
• Thailand is tripled to a record 600,000 tons in 2012 and boosted one-third to 400,000 tons in 2013 as the Paddy Pledging Scheme attracts border trade.
• Vietnam is down 300,000 tons to 100,000 as some of the rice typically sent to Vietnam for milling is being returned to Cambodia because of favourable prices there.
COARSE GRAINS: WORLD MARKETS AND TRADE
Global trade in coarse grains is raised 3.2 million tons because of higher corn and barley demand. Global corn trade is boosted nearly 2.5 million tons for the second consecutive month on higher imports by the EU, the United States, South Korea, and Mexico. U.S. corn production is up slightly while exports are unchanged. Despite slow sales and shipments, there are indications of improving U.S. competitiveness with South America and Ukraine. The season average farm price is projected lower from last month on weak early-season prices although it remains a record.
The gap between U.S. corn export quotes and those of other exporters has narrowed as South American prices have risen nearly $20 per ton to $285 since the release of USDA’s October WASDE report. In the Black Sea Region, prices have edged closer to their peaks in late July. The rise in competitor quotes is likely due to stronger feed demand worldwide and the rapid commitment of supplies and from South America and Ukraine
TRADE CHANGES IN 2012/13
• Brazilian corn is raised sharply by 2.0 million tons to a record 21.0 million as the strong shipment pace is expected to continue until early 2013.
• Russian corn is up 300,000 tons to 1.8 million on greater exportable supplies and strong early-season shipments.
• Argentine barley is cut 200,000 tons to 4.0 million because of reduced crop prospects.
• EU barley is boosted 300,000 tons to 3.0 million on the pace of export licenses.
• Russian barley is raised 500,000 tons to 2.0 million based on the pace of shipments. (Iranian imports are also raised 500,000 tons).
• Argentine sorghum is up 200,000 tons to 2.4 million on expectations of a larger crop due to higher seedings.
• U.S. corn jumped 600,000 tons to a new record 2.5 million based on reports of purchases from Brazil and relatively high domestic prices.
• EU corn is boosted sharply by 1.5 million tons to 6.5 million as higher wheat exports tighten feed grain supplies and a smaller corn crop more than offsets a larger carry in.
• Mexican corn is raised 500,000 tons to 9.0 million as a smaller crop more than offsets a higher carry in. (Sorghum is up 200,000 tons to 2.2 million for similar reasons.)
• South Korean corn is up 500,000 tons to 8.0 million as corn substitutes for feed-quality wheat.
• Turkish corn is halved to 500,000 tons on a larger crop and lingering policy issues (biotechnology) that discourage imports.
TRADE CHANGES IN 2011/12
• Indian corn is up 300,000 tons to 4.7 million.
• Chinese corn is down 269,000 tons to 5.2 million.
• Vietnamese corn is raised 300,000 tons to 1.5 million.
• Iranian barley is up 200,000 tons to 1.4 million.