Global ending stocks projected to recover to six-year high, use and trade to rebound.

by Teresa Acklin
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Global ending stocks projected to recover to six-year high, use and trade to rebound.

   World coarse grains stocks at the end of the 1998-99 season are estimated at nearly 140 million tonnes, the highest level since the end of 1992-93. Coarse grains trade and consumption for the 1998-99 season are expected to rebound slightly from the previous year.

   World trade in coarse grains for 1998-99 should reach 90 million tonnes, up 4% from the 86.6 million tonnes estimated in 1997-98, according to the U.S. Department of Agriculture. Total world consumption is projected at a little more than 875 million tonnes, slightly higher than the 872.8 million in the previous season.

   Maize trade for 1998-99 is projected at about 64 million tonnes. That estimate is up only slightly from 63.4 million tonnes in 1997-98 and is far short of the 1994-95 high of 71.6 million tonnes.

   Maize imports by the traditional top two importers, Japan and South Korea, are projected to slide by about 400,000 and 500,000 tonnes, respectively, as economic difficulties persist. Other key maize importers, including Taiwan and Egypt, should see import levels increase by 100,000 tonnes or less, while Mexico's imports should increase by nearly 400,000 tonnes. Among exporters, South Africa, Argentina and China are expected to ship less maize in 1998-99 than in the previous marketing year for varying reasons. Conversely, the United States is projected to enjoy an increase in exports, capturing a 72% share of world trade compared with 59% in 1997-98.

   South Africa's production estimate of 7 million tonnes is down from earlier expectations, as drought in February took a heavy toll on previously favorable harvest prospects. Consequently, that country's maize export projections have been slashed to 750,000 tonnes, down 1 million from earlier estimates.

   In Argentina, maize output is projected at 14.5 million tonnes, down nearly 5 million from 1997-98 production, based on a drop in harvested area and yield. The resulting smaller export availability indicates Argentina's 1998-99 maize exports should total 9 million tonnes versus nearly 13 million in 1997-98.

   In China, maize availability is more than adequate as China's 124-million tonne maize output in 1998-99 is estimated to be up by a hefty 20 million tonnes from the previous year. But China is expected to be a less aggressive exporter, with shipments projected at 4 million tonnes compared with about 6.2 million in 1997-98. Declining world prices have widened the gap with China's domestic price levels, and the International Grains Council reported indications that fiscal restraints would keep a lid on the amount of export subsidies China would be willing to approve for maize sales.

   Maize prices through the season have been under pressure from the same bearish psychology ruling other grains and oilseeds markets recently. This psychology has been fueled by expanding stocks and continued demand sluggishness from formerly growing markets in Asia.

   The eight-month season average price for maize as of mid-February was U.S.$96 a tonne, f.o.b. U.S. gulf ports, the lowest marketing-year average since 1987-88, when the average price for the season was U.S.$87. Even so, maize prices have tended to remain relatively stable when compared with recent plunges in wheat and soybean prices, and in recent weeks maize price levels have posted a slight recovery from earlier lows.

   The relative stability in the maize market comes in the midst of considerations of price relationships with other commodities. Maize prices have needed to walk a fine line between remaining low enough to compete with wheat for feed while at the same time remaining high enough to compete with soybeans for planted area, especially in the United States.

   Conventional wisdom recently has maintained that U.S. producers would tend to abandon maize in favor of soybeans at planting time, based on depressed market prices as well as U.S. farm support price relationships. Those ideas have helped form a base of support for maize prices.