Elena Faige Neroba
Business Development Manager
“Limited supply in the south of the Black Sea holds wheat prices, but global stocks look better so market went down. The initial outlook for 2020/21 international wheat is for larger supplies, increased trade, greater consumption, and higher ending stocks. The corn market is ‘dead’. Cheaper and cheaper… We starting the new season like bears, but bulls is over the corner.”
The market is getting ready for the start of the new season. Early grain harvesting started in the USA and Ukraine and Russia. Barley yields are poor as usual at the beginning of harvesting but markets already feeling harvest pressure.
The corn market is "dead". According to Informa, in 2020, corn in the US will amount to 94.1 million ac., which is 2.9 million ac. less than the WASDE forecast and slightly lower than their previous estimate. Crop ratings fell by four points to 71% GD / EX, but remained above 59% last year and 69% on average over 5 years. Chinese Sinograin will sell 663kMT of corn harvest 2016 from state stocks on June 19. Ethanol production in the US still far from pre-COVID levels and corn stocks much higher than usual. S/U Ratio increased from 27.9% 2019/20 to 29%. Corn looks overproduced.
The US corn crop is projected at a record 16.0 billion bushels, up from last year on the increased area and a return to trend yield – weather conditions is favorable and planting progress is normal Corn used for ethanol is projected to increase from the 2019/20 COVID-19 reduced levels, based on expectations of a rebound in US gasoline consumption which fell on quarantine period. US 2020/21 corn exports are forecast to rise 375 million bushels to 2,150 million, driven by growth in the world corn trade. With total US corn supply rising more than use, 2020/21 US ending stocks are up 1.2 billion bushels from last year and if realized would be the highest since 1987/88. S/U at 22.4% would be the highest since 1992/93. The global coarse grain outlook for 2020/21 is for record production and use and larger ending stocks. World corn production is forecast record-high, with the largest increases for all main producers. Ukraine increased areas to 5,4 mln ha. If yields be the same as LY – 7.2 MT/ha- production could be 38.9MMT, but average yield is higher so Ukraine expects new corn record. Excluding China and the United States, ending stocks are up 4% YoY. For China, total coarse grain imports are forecast at 18.3 MMT, up 1.3 million from 2019/20 but below the 2014/15 record of 25.7 million tons. Expectations are for robust demand from China in 2020/21, with 7.0 MMT of corn, 6.0MMT of barley, and 5.0 MMT of sorghum imports from all sources. Quite interesting how Australia-China relationships will go. Saudi Arabia's SAGO said Monday that it had purchased 1.08MMT of barley at an average price of $ 198.81 C&F for delivery in August-September. The main shipper is Glencore, and the price does not exceed the previous tender. The possibility of deliveries of Australian “refused” grain is not ruled out. For today demand is lower than supply.
The wheat market is more interesting. Limited supply in the south of the Black Sea holds prices, but global stocks look better so the market went down. The initial outlook for 2020/21 international wheat is for larger supplies, increased trade, greater consumption, and higher ending stocks. But most of them is China, India, Australia and Argentina, which could be lower at the end. S / U exporters in 2020 will amount to 13.7% against the 40-year low of 13.5% set in 2007/08.
Australia is projected with the largest increase from last year to 24MMT by USDA and 26,7 by ABARES. Anyway, it’s much higher YoY as it recovers from a multi-year drought. Conversely, the EU is projected to decline nearly 12 million tons to 143 0 million on lower harvested area and yields. Ukraine production is also projected lower LY, and officially could be at 23/3MMT, but local analysts expected 25-26, even 26,7MMT. Imports are projected to rise, primarily on increased demand by China, Algeria, Morocco, the EU, Iraq, and Uzbekistan. Russia is projected as the 2020/21 leading world wheat exporter at 36MMT with Argentina, Australia, and Canada also projected higher while the EU, Ukraine, and the United States are lower. Projected 2020/21 world consumption is increased by 4.9 million tons to a record-large. Projected 2020/21 world ending stocks increased 5 percent to a record-large 310.1 million tons with China accounting for 52 percent of the total.
The state of winter wheat in the United States continues to deteriorate. GD / EX was estimated at 50% of the crop versus 64% last year and 51% 5YA. Spring wheat ratings also fell 1pp to 81% compared to 77% a year earlier, but it is still better than 69% 5YA.
MARS lowers estimate of soft wheat yields in the EU in 2020 from 5.72 to 5.60 MT/ha. The Ministry of Agriculture of the Russian Federation does not plan restrictions on grain exports from the Russian Federation in the first half of the 2020/21 season, which will begin on July 1, the press service of the ministry said.
“It is assumed that the first half of the season has no restrictions on the export of grain, and in the second half of the agricultural year a quantitative restriction is established due to the need to ensure the domestic market. The Ministry plans to improve and apply this measure in the future,” the Ministry said in a response to a Reuters request.
In turn, in Ukraine, the signing of the export Memorandum is scheduled for July 1. The ministry plans to take as a basis the production forecast from the Ukrhydromettsentr, which so far barely exceeds 23MMT, and estimates the export potential at 14.9MMT, which is much lower than the estimates of Ukrainian associations and analysts. Updating the indicators is planned before the date of signing of the Memorandum, but the numbers indicated in it are more indicative than a direct guide to action. To date, Ukraine has already exceeded the previously announced wheat export limit of 20.2MMT: as of June 12, according to customs, 20.28MMT of wheat was exported, and including lineups, this figure is already 20.71MMT.
WASDE estimates the Russian crop at 77MMT despite looking at higher market expectations while overestimating exports by 1MMT to 36MMT. Ukraine’s production was reduced by 1.5 MMT to 26.5 MMT (including Crimea), which meets the expectations of local analysts; export valued at 17.5MMT.
Argentina has already sowed 43% of the 7 million hectares of planted wheat area, which is a record pace of sowing. Fear of drought accelerated sowing, but production is no longer expected at 22MMT.
So, for assuming
Wheat - week there is a lull among importers. Having bought a little, they hid, activity is still low. Harvest pressure against warring of quantity and quality. Barley - activation in two directions. Both exporters and the farmer calls and offers barley. But there are no particular factors for growth. SAGO set the level. But China… There are risks in this country (as usual). Corn – nothing to add. Cheaper and cheaper. We starting the new season like bears, but bulls is over the corner.