Global Trade Review

by World Grain Staff
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by Chris Lyddon and Emily Buckley

Crop estimates for wheat and coarse grains have kept on rising. By the end of October the International Grains Council (IGC) put the world wheat crop at 617 million tonnes. The IGC’s estimate has risen steadily. A month earlier they had it at 615 million tonnes and a month earlier than that 614 million tonnes. At the end of July it was 606 million tonnes, up from 602 at the end of June and 599 at the end of May. The first estimate, issued at the end of April, for the World’s 2004/2005 grain crop was 602.1 million tonnes. It marks a change after several years in which estimates were revised down sharply as the harvest approached.

"There’s a huge crop that keeps on getting bigger," John Tjaardstra, assistant executive director of the IGC told World Grain. But what the IGC is not predicting is a big rise in stocks. A record crop, will add just 12 million tonnes to the world’s store, bringing it to 138 million tonnes. "Although we’ll see some recovery in stocks they’re by no means back to the levels they were some time ago," said Tjaardstra. Even as recently as 2001/2002 the year ended with 197 million tonnes of grain in store but consistent underproduction has eroded stocks. An increasing amount of that stock is in the exporting countries. The IGC puts it at 50 million tonnes by the end of 2003/2004. That is back to the 2001/2002 level and 10 million tonnes more than they held a year ago. "There’s a problem with the measurement of stocks," said Tjaardstra. "We look mainly at exporter stocks, which are more reliable but the world figure is influenced by a number of countries for which data are not always reliable." The big rise in wheat stocks is in Europe. Stocks of wheat in the enlarged E.U. of 25 are set to rise to 21 million tonnes in 2004/2005, having fallen to 11.7 million tonnes in 2003/2004, according to the IGC.

"The figures are important in the sense that they do give us an idea of the direction," said Tjaardstra. A tight market, in theory at least, has not pushed prices up. "We’ve seen cases in many countries where low stocks haven’t prevented prices from staying low."


The record wheat crop comes straight up against a record corn crop that is being driven by a massive crop in the United States. The IGC’s most recent estimate for 2004/2005 U.S. corn production is 295 million tonnes, up from 256.9 a year ago. Julian Bell, senior economist at the London-based Home Grown Cereals Authority, points out that this makes it the single biggest crop of any grain anywhere, by far, dwarfing China’s 122 million tonne crop. U.S. farmers planted the corn because the price was high; pointing up the difference between prices at planting and prices after the crop has been harvested. Bell thought it was an advertisement for risk management tools like futures and options. "You really want to take some of that price when you plant it," he said.


"Freight rates have come down, but they’re still historically high," said the IGC’s Tjaardstra. At the end of October it cost $55 a tonne to ship heavy grains from the U.S. Gulf to China. A year ago it was U.S.$45.

The HGCA’s Bell described freight rates as "interesting." "They’ve given China a boost, by making it easier for them to export corn," he told World Grain. "Freight rates are so high that anyone who’s near to their market benefits."

Putting U.S. corn at U.S.$95 fob compared with Chinese corn at U.S$128, he said the Chinese still had the advantage going into South East Asia. "Because of the freight rates they are still finding demand into Korea," he said. "The Americans have lost market share."

It also means that exporting corn is costing China less. "The Chinese do seem to be trying to reduce subsidized exports and the freight market is helping them out," he said.

Another country affected by freight costs is Argentina. "Argentina is very cheap, but they seem very hungry for business," said Bell. "They’re taking it from the Canadians and the French. Argentina’s exporters are U.S.$25 cheaper than Canada or France. "They have to absorb the freight rates," he said.


This year’s sharp rise in wheat production ends six years of decline that had the crop down at 554 million tonnes, the lowest since 1995 and 12 million tonnes less than 2002. Last year’s winter frost and summer drought hit a large part of Europe, Russia and Ukraine but Ukraine played a big role; this year it has been slow to come onto the market.

"Ukraine is a bit of an enigma," said Bell. "They’ve not been as aggressive as they might have been." Ukraine is exporting, but it is getting more into the low grade milling market. This has helped push the price of Ukrainian wheat in the right direction. Bell put it at U.S.$120 a tonne now compared with U.S.$80 a tonne at harvest. "We knew that Ukraine’s volumes weren’t going to be as big as two years ago, but they are already slacking off," he said.

The E.U.-25 wheat crop was 106.1 million tonnes last year, compared with 134.8 million this year. France’s crop fell from 39.0 million tonnes in 2002 to 30.5 million in 2003. This year it is back up to 39.3 million tonnes due in large part to increased rain. For most it was good news. For Britain the timing was wrong. Across much of the country the 2004 grain crop was late and of poor quality affected by a wet harvesting period. The U.K. has a bigger 2004 crop, at 15.8 million tonnes compared with 14.3 million tonnes last year but quality in some areas has been dismal. British traders are eyeing that big U.S. corn crop nervously. They fear having to compete with it on the world feed grain market.


The big 2004 crop has put prices under pressure. According to the IGC, the export price of U.S. hard red winter wheat rose from U.S.$128 a tonne at the start of July 2003 to U.S.$164 by mid-August of that year. The high for 2003/2004, reached in April 2004, was U.S.$180 a tonne. By the end of June it was back to U.S.$154. Prices have not exactly been rock steady since then, but the IGC quoted a f.o.b. price for U.S. hard red winter wheat of U.S.$154 a tonne for the week ending October 22. Currency fluctuations mean that this does amount to movement, said Bell. "American prices haven’t really moved in dollars, but they’ve come down in euros or pounds," he said. "The Americans seem to have managed to keep their maize and wheat prices pretty steady."

U.S. corn export prices also reached a peak in April 2004, hitting U.S.$138 fob U.S. Gulf, compared with U.S.$100 a tonne in July 2003. But then the market realized that the weather was near perfect for the 2004 U.S. crop, while Europe was heading for bigger production and China was selling more than expected. The U.S. corn price ended the season at U.S.$99. By the week ending October 22, it was U.S.$94. Top left: Average price quotations for U.S. No. 3 yellow maize, f.o.b. U.S. gulf in U.S. dollars per tonne. Source: IGC

Bottom left: Average price quotations for U.S. No. 2 yellow soybeans,c.i.f Rotterdam in U.S. dollars per tonne. Source: IGC

Below:Average price quotations for U.S. No. 2 hard red wheat, f.o.b. U.S. gulf in U.S. dollars per tonne. Source: IGC QUALITY PROBLEMS

From a millers point of view this will not necessarily be the year of plenty. Although there is plenty of wheat, too much is low-protein feed grain. There are also problems in some countries with low Hagbergs (baking quality standard). "Around the world the very high quality wheat has problems. The U.S. and Canada have a problem with wheat," Peter Jones, chairman of the National Association of British and Irish Millers wheat committee told World Grain. For U.K. millers looking round for sources of protein it makes life difficult. Normally they import North American grain. Uncertainty about the upcoming Australian crop also clouds the picture. This year there will be more German wheat in particular to make up the protein gap. Around the world this means big premiums for quality wheat.


Even though the crop is bigger, the IGC’s estimate for world wheat trade is little change, at 101 million tonnes in 2004/2005, compared with 102 million in 2003/2004. The U.S. is expected to export less: 26 million tonnes, compared with 31.9 million tonnes in 2003/ 2004. The E.U. will make up most of the difference, its exports rising by 5 million tonnes to 15 million tonnes.

Trade in corn is actually expected to fall slightly to 77.2 million tonnes, from 80.2 million tonnes in 2003/2004. Much of that fall is due to the E.U., which is expected to import 2.4 million tonnes, compared with 5.5 million in 2003/ 2004. It is anticipated that exports from China will fall from 11.4 million tonnes in 2003/2004 to 4 million, while U.S. exports are due to jump to 50.5 million tonnes from 45.6 million.


Bell advised caution looking ahead. "Winter plantings are getting pretty well advanced," he said. "The new U.S. crops are in excellent condition, which is pretty bearish." Ukraine has had a mild autumn and a lack of snow is predicted for the winter. "In Europe there are no real problems," he said. "It’s off to quite a good start."

The IGC’s Tjaardstra warned, however, that this year is not yet over. "It’s been an interesting year, not just on quantity but also on quality," he said. "We don’t yet have the full picture." WG Chris Lyddon is World Grain’s European editor. He may be contacted at: Emily Buckley is a freelance writer. She may be contacted at: We want to hear from you — Send comments and inquiries about this article to