Grain Market Review: Grains

by Teresa Acklin
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Despite tightening supplies, coarse grains trade expected to hold relatively steady.

   Coarse grains supplies in 1995-96 are projected to be the tightest in decades, a fact reflected in prices climbing to their highest levels since 1983-84. Even so, world coarse grains trade in 1995-96 is projected to hold virtually steady from the previous year.

   According to both the International Grains Council and the U.S. Department of Agriculture, coarse grains trade this marketing season will be little changed from 1994-95. Trade should remain relatively stable despite a 6% drop in production and prices that could be more than 30% higher than the previous season.

   The reason for these projections of steady trade is that importers are expected to have little choice. With global wheat supplies every bit as tight as those for coarse grains, importers will be unable to substitute feed wheat. And feed requirements in many countries are not expected to abate signficantly, despite higher prices for feed ingredients such as coarse grains.

   In the first five months of calendar 1995, importers offered little indication they planned to back off on coarse grains purchases, even though prices have advanced sharply from the previous year. Rather, coarse grains export reports indicate that buyers accelerated purchases as prices climbed, probably in anticipation of even higher prices in the future.

   According to I.G.C. data, coarse grains shipments by the United States and Argentina from January through May 1995 totaled 30.4 million tonnes, 74% higher than the 17.5 million shipped in the same period in 1994. At the same time, maize prices between January and May 1995 advanced to U.S.$113 from $U.S.109; conversely, in 1994 prices declined to U.S.$111 from U.S.$128 during the January-May period.

   Among the world's regions, Far East Asia should lead the way in coarse grains imports, with trade to that region estimated to increase by some 4% from 1994-95. Imports by Japan and Taiwan may slip slightly, but coarse grains imports by South Korea, a large purchaser of feed wheat in recent years, are projected to increase by 9%.

   China should remain a net importer of coarse grains through 1995-96 at least. Its maize imports alone could jump by 46% in 1995-96 to 3.5 million tonnes, while its maize exports are expected to slide to 1 million tonnes from 3.7 million in 1994-95. The projection is grounded in soaring demand; unofficial estimates indicate that meat consumption in China now is increasing by 4 million tonnes a year, with feed intensive pork accounting for much of the advance, according to the I.G.C.

   In total, maize trade should account for about 65 million tonnes of the total 1995-96 coarse grains trade. With U.S. exports on a July-June basis put at 54 million tonnes, Argentine exports at 6 million and China exports at 1 million, some 4 million tonnes of maize traded will need to come from other sources. In addition to small amounts available from Canada and Thailand, the I.G.C. indicated that supplies could originate from South Africa in May 1996 or that Romania could step in to absorb some demand.

   World trade in barley should increase in 1995-96, based on rising demand in China for malting barley. Australia could pick up market share in this barley trade at the expense of the European Union and Canada.

   Oats trade in 1995-96 should rise by about 4% from the previous year, mostly because of stronger demand from the United States. Canada will be the primary origin for world supplies, although Australia will have larger availabilities.