Coarse grains

by World Grain Staff
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World coarse grains consumption pushed above 1 billion tonnes for the first time in history in the 2006-07 marketing year, and global use is forecast to surge even higher for the 2007-08 season. According to a recent report from the U.S. Department of Agriculture, total world consumption for the current marketing year should reach 1.053 billion tonnes, up 4% from 1.009 billion in 2006-07.

Analysts attribute the gains to economic growth in many countries, which has boosted incomes, supported expanded meat consumption and prompted more feed use of coarse grains. An explosion in coarse grains-based ethanol production also has contributed.

On the production side, world harvest projections have been cut in recent months, based on less than favorable weather developments in many regions. Specifically, the coarse grains harvest outlook has declined in Australia, Brazil, China, the European Union (E.U.) and Russia.

Australia’s drought has battered barley and oats crops, while a localized drought has cut China’s maize production in parts of the northeast. Brazil’s maize output will be hurt by delays in the rainy season that will shorten the window for second crop planting and by high soybean prices that may draw area away from maize.

These developments leave global production projected at 1.053 billion bushels, marginally higher than use. Consequently, 2007-08 global coarse grains ending stocks are projected to increase only slightly, to 135.33 million tonnes versus 134.71 million at the end of 2006-07.

The crop troubles in other areas are expected to prompt an increase in coarse grains trade, put at a record 117 million tonnes this marketing season. The largest jump in imports is expected in the E.U.-27, which is forecast to take 13.32 million tonnes in 2007-08.

That total is 65% higher than the 8.07 million tonnes the E.U. imported in 2006-07 and nearly 400% higher than the 2.78 million imported in 2005-06. Extremely tight E.U. wheat supplies — ending wheat stocks are forecast at only 11 million tonnes — will boost the need for coarse grains for feed.

In global markets, maize exports will make up the bulk of coarse grains trade, and the U.S. will be well positioned to meet the increased import demand. The bin-busting record U.S. harvest of 338.3 million tonnes is 13% higher than the previous record of 299.9 million three seasons ago.

The huge 2007-08 maize output began with the largest U.S. planted maize area since 1944, and favorable growing conditions resulted in the largest harvested area since 1933. Exceptionally high maize prices and expected strong demand for ethanol production sparked the jump.

But ethanol markets have encountered somewhat of a downturn. Although maize prices eased from earlier highs, relative price strength and declines in ethanol prices cut profit margins for ethanol producers, who then cut capacity utilization. As a result, forecast U.S. maize use for ethanol in 2007-08 has been reduced to 81.3 million tonnes from earlier expectations of more than 86 million tonnes.

Maize exports should help offset some of the decreased U.S. domestic use, with the U.S. forecast to export 59.7 million tonnes. That figure would be the highest U.S. export level in 18 years and its fourth highest behind the record 61 million in 1979-80.

Argentina also is expected to see a slight increase in maize exports, with 2007-08 shipments forecast at a record 16 million tonnes versus the previous record of 15.8 million last season.

China, however, probably will not be a player in global maize trade in 2007-08. Imports should be minimal, and exports are forecast at only 1.5 million tonnes, the lowest since 1995-96 and negligible compared with 2002-03 shipments of 15.4 million.

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