Feed Grain, Where To From Here?
Poultry and Egg Conference
David Hickey
R&H HALL
R&H Hall Ltd.
Topics
Grain Market Overview
Oilseed Market Overview
Freight
Summary
Grain Market Overview
Global Grain Production (Mmt) (Wheat, Rice & Coarse Grain)
900
800
700
600
500
400
300
200
100
0
Wheat
Corn
Barley
Oats
Sorghum
Rice
05/06
619
699
136
24
60
419
06/07
596
713
136
0
58
420
Source: USDA
07/08
611
794
133
26
66
434
08/09
683
798
155
26
65
448
09/10est
682
810
150
24
59
442
10/11 F
641
820
125
21
63
453
Change In Global Wheat Balance (mmt)
2008/09
2009/10
2010/11
May
June
July
August
September
October
Source: USDA
Production
683
680
Ending Stocks
165
196
672
669
661
646
643
641
198
194
187
175
178
175
Global Grain Stocks (MMt) (Wheat, Rice & Coarse Grain)
200
150
100
50
0
05/06
06/07
07/08
08/09
09/10est
10/11 F
Wheat
150
130
124
165
197
175
Corn
125
110
131
148
148
132
Barley
28
21
20
31
37
21
Oats
3
3
3
5
44
3
Sorghum
5
5
6
6
4
4
Rice
76
75
81
91
94
94
Source: USDA
EU-27 Cereal Production (MMt)
160
140
120
100
80
60
40
20
-
2004/05
2005/06
2006/07
2007/08
2008/09
2009/10
2010/11
Wheat
134
124
117
112
140
130
129
Barley
64
55
56
57
65
62
54
Corn
68
61
54
48
63
57
55
Oats
9.10
7.97
7.77
8.63
8.98
8.52
8.32
Source: USDA
EU-27 Ending Stocks (MMt)
25
20
15
10
5
0
Wheat
Corn
Barley
Oats
05/06
06/07
07/08
08/09
09/10est
10/11 F
23
9
9
0.77
14
7
6
0.80
12
4
6
0.63
18
6
11
1.01
14
4
15
1.01
11
4
4
0.83
Source: USDA
Includes Intervention barley
Russian Situation
Russia has experienced the worst drought in over 130 years
Russia have banned wheat exports.
– Ban in place until July-11
How will next year’s crop plantings be affected?
– 8% less winter crops planted, 18mln ha to 15.5mln ha in 2010.
– Of this 13.2mln ha will be winter wheat.
• This leaves the world market bereft of one of the most important
suppliers going into next year.
• Russian government wants farmers to plant 20% more spring wheat
to compensate for reduced winter wheat production.
Russia Wheat Situation mil tn
Some estimate this at 35mil
Russia Wheat
09-10
10-11
11-12 F
Carryin
10.5
12.8
5
Production
61.7
43
53
Imports
Available
0
72.2
0
52.8
0
58
Domestic
41.9
41.9
42
Export
Total
17.5
59.4
5.9
47.8
11
53
Carryout
12.8
5
5
FSU Wheat Situation mil tn
FSU Wheat
Carryin
09-10 USDA 10-11
20.2
23.8
Production
Imports
Available
Domestic
Export
Total
Carryout
114
5.6
139.8
81
35
116
23.8
101
6.2
131
86.4
31.6
118
13
ALT 10-11
23.8
89
6
118.8
89
17.8
106.8
12
Russia/FSU Coarse Grain Situation mil tn
Russia Coarse Grain
08-09
Carryin
Production
FSU Coarse Grains
09-10 USDA 10-11 ALT 10-11
1.6
4.8
2.8
40.7
31.8
26.8
Imports
09-10 USDA 10-11
ALT 10-11
Carryin
20.2
23.8
23.8
15 Production
114
101
89
Imports
5.6
6.2
6
2.8
Available
42.3
36.6
29.6
17.8 Available
139.8
131
118.8
Domestic
32.7
30.8
26.8
26.8 Domestic
81
86.4
89
4.8
3
1.2
35
31.6
17.8
37.5
4.8
33.8
2.8
28
1.6
-10.6 Export
16.2 Total
1.6 Carryout
116
23.8
118
13
106.8
12
Export
Total Use
Carryout
Net Importer
Global Wheat – Production
Prd.648mil tn
1000 MT
700,000
Prod. 680mil tn
650,000
Production (1000 MT)
600,000
Consumption
550,000
500,000
450,000
400,000
350,000
300,000
250,000
Source: AgResource
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
1970
1968
1966
1964
1962
1960
200,000
Global Wheat – Ending Stocks
1000 MT
250,000
200,000
150,000
09/10
10/11
China
56
64
India
16
14
Russia 12
5
USA
26
23
EU27
14
11
193mil tn
178mil tn
100,000
Source: AgResource
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
1970
1968
1966
1964
1962
1960
0
2010…
50,000
EU27 – Wheat Closing Stocks (mln tn)
5.0
France
4.5
2008/09
4.0
3.5
2009/10
2010/11
Germany
3.0
UK
2.5
Spain
2.0
1.5
Denmark
Hungary
1.0
Romania Bulgaria
0.5
Estonia
0.0
Source: Stratégiegrains
Latvia
Global Wheat Production (mln tn)
2009/10
Kazak
17
2%
Ukraine
21
3%
Others
112
16%
India
81
11%
EU
138
19%
Ukraine
17
3%
USA
60
8%
Argentina
11
1%
Pakistan
24
3%
Iran
12
2%
2010/11
Canada
Russia
27
62
4%
9%
Australia
23
3%
Turkey
18
3%
China
115
16%
Others
96
14%
Kazak
12
2%
Source: USDA
India
81
12%
USA
61
9%
Argentina
12
2%
Pakistan
23
3%
Iran
14
2%
EU
136
20%
Russia
43
6%Australia
23
4%
Canada
22
3%
Turkey
17
3%
China
115
17%
Europe/Black Sea mil tn
62mil to 3542mil??
70
Russia
60
07/08
08/09
50
09/10
France
40
30
10/11
Germany
Ukraine
UK
20
Kazak
Denmark
10
Spain
Poland
Sweden
0
Source: Stratégiegrains
Romania
Hungary Czeck
Bulgaria
Global Corn - Production
1000 MT
MMT
China
USA
900,000
800,000
2009
155
333
2010
166, some say it will be 153
321
Production (1000 MT)
700,000
Consumption
600,000
500,000
400,000
300,000
200,000
Source: AgResource
ARC 10
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
1970
1968
1966
1964
1962
1960
100,000
Global Corn – Ending Stocks
1000 MT
250,000
mln tn
Brazil
USA
China
EU27
200,000
150,000
09/10
12.8
43
53
3.7
10/11
9.5
23
60
3.6
100,000
50,000
Source: AgResource
ARC 10
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
1970
1968
1966
1964
1962
1960
0
Major Corn Producers (mln tn)
2009/10
India
17
2%
Other
129
16%
Argentina
23
3%
2010/11
Brazil
56
7%
China
155
19%
EU27
57
7%
Ukraine
11
1%
USA
333
41%
Canada
9.561
1%
Mexico
21
3%
Source: USDA
Other
India 134
16%
20
3%
Argentin
a
25
3%
Ukraine
12
2%
USA
322
39%
Canada
11
1%
Brazil
51
6%
China
166
20%
EU27
55
7%
Mexico
25
3%
20
Global Barley – Production
1000 MT
190,000
134mil tn -14mil
Production (1000 MT)
170,000
Consumption
150,000
130,000
110,000
90,000
Source: AgResource
ARC 10
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
1970
1968
1966
1964
1962
1960
70,000
Global Barley – Ending Stocks
MMT
EU27
Russia
Canada
1000 MT
40000
09/10
15
2
2.5
10/11
4
0.9
1.4
35000
30000
25000
20000
15000
10000
5000
Source: AgResource
ARC 10
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
1970
1968
1966
1964
1962
1960
0
EU27 – Barley Closing Stocks (mln tn)
3.5
France
3.0
2008/09
2009/10
2010/11
Spain
2.5
2.0
UK
1.5
Denmark
Germany
1.0
Finland
Poland
0.5
Hungary
0.0
Source: Stratégiegrains
Estonia
Latvia Romania
Bulgaria
Major Barley Producers (mln tn)
2009/10
Ukraine
12
8%
Other
21
14%
2010/11
U.S.A
5
3%
China
3
2%
Canada
10
6%
Turkey
7
4%
Australia
8
6%
Russia
18
12%
Kazakhstan
3
2%
Iran
3
2%
EU-27
62
41%
Ukraine
9
7%
Canada
8
7%
Turkey
6
5%Australia
8
6%
Source: USDA
U.S.A
4
3%
Other
20
16%
China
3
3% Russia
9
7%
Kazakhstan
2
1%
Iran
3
2%
EU-27
54
43%
24
Native Harvest Production (‘000tn)
2400
2100
1800
1500
1200
900
600
300
0
2002
2003
2004
2005
2006
2007
2008
2009
2010 F
Wheat
868
794
1,020
840
806
684
950
627
595
Barley
963
1198
1,330
1,060
1,137
1,130
1,250
1,104
1050
Oats
133
155
150
113
145
157
177
127
122
Total
1,964
2,147
2,500
2,013
2,088
1,971
2,377
1,858
1767
Minimal carry over from 2009 to 2010.
2011 crop may see increase of 35% in winter barley and winter wheat may increase 25%.
Drivers of Irish Market
Net importers.
European market – Price Influence.
Supply of Irish Grain – Native Production.
Global Supply & Stocks.
Coarse Grain price.
– Price Relationship between Corn, Barley and Wheat
Weather.
– Russia, Germany harvest this year
Funds / Global Economy / Currency.
Volatility
Biggest monthly grain price increase since 1959
July and August to date have gained 73%
– Cbot 4.25 to 7.13 cents/bu
– Matif 148.50 to 236 €/tonne. Contract high at that time
– Liffe 103 to 169 £/tonne. Contract high at that time
Daily movement can swing 10%
Largest ever volume in Cbot wheat on Friday 06/08/10 at 354,000
contracts (48mil tn), previous high 02/08/10 at 294,000contracts
(40mil tn).
Markets very uncertain
Market Drivers Going Forward
Where Will Final Global Cereal Production Be.
– South America, Australia.
Demand
– Will high prices reduce demand, corn/wheat ratio out of sink.
Switch in exports
– Egypt
– Russia 18mmt to 3mmt
– USA 24mmt to 34mmt
Planting forecast for 2011/2012 harvest
– Weather market has started for 2011 crop, (dryness in USA, crop rating of 48%
Vs 62% last year)
Global Economy
Soya Market Overview
Major World Soybean Producers
4
3 main
producers
account for 83%
of global
production
market is
always fearful of
a crop problem
in any one of
these
>50MMT
93
14
9
67
7
50
>4MMT
China and
India are
sizeable
growers but
largely
consume
production
domestically
Major World Soybean Exporters/Importers
EU imports
may increase
due to smaller
oilseeds
crops
13
41
55
31
Exporters
12
Importers
China’s
demand for
the world’s
soybeans is
influential
on the
market
Major World Soymeal Producers
Some meal is
produced
domestically but
consumed locally
10
36
45
26
30
China’s
meal is a by
product of
the huge
crushing
industry
Major World Soymeal Consumers
32
27
44
13
Of the main soymeal producers only Argentina has a very small domestic demand. In the US the
hog/poultry industry consume the majority of soymeal produced. Growing livestock populations in China
is driving the crush there while a rapidly growing Brazilian hog/poultry population is eating into their
Major World Soymeal Exporters/Importers
23
8
12
Exporters
30
Importers
The Argies export 50% of
the world’s soymeal so
any crop problem there
has major ramifications for
the global protein-meal
market
China Meat/Poultry Production – Feed Use - Corn
Source: USDA, Prudential Bache
Growth in China’s Livestock Herd
Source: AgResource Co.
Importance of China’s Poultry Sector
Source: AgResource Co.
China Soybean Imports as % of World Production
25%
60,000
50,000
20%
40,000
15%
'
30,000 0
0
0
M
20,000 T
10%
5%
10,000
0%
0
98/99
99/00
00/01
01/02
02/03
03/04
Imports
04/05
05/06
06/07
07/08
% of world production
08/09
09/10
10/11
China’s Reliance on Imports
80,000
70,000
60,000
'000MT
50,000
40,000
30,000
20,000
10,000
0
1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11
(e)
(f)
Production Imports
China Soybean Import Pace…..
Weekly US Soybean Export Inspections
Source: Prudential Report 12/10/10
CBOT Soymeal & MATIF Rapeseed
Soybean Meal market factors…..
Hand to mouth buying of consumers which
supports prices on any setbacks
Record large combined US, Brazilian &
Argentinean supplies
Need to replace depleted protein supplies
due to lower rapeseed and sunseed
production and crush products
A return to normal/above normal soybean
yields from last year’s low level indicating
more meal produced per bu crushed
More competitve than normal price
relationship of soybean meal to fishmeal
Competition in some regions from increased
corn by product availability
Increased US and world broiler numbers
Lower US soybean meal export bookings
Concern that record large US soybean
exports may end up causing shortage of
supplies to crush
Larger % increase in world meal production
than world oil production which could
pressure meal prices relative to oil prices
Uncertainty over weather in parts of South
America
Market will closely monitor developments in
the South American soybean crop
Does a rising tide raise all vessels…..the impact of the Russian drought on the soy complex
Wheat rally has increased speculative buying which has
pushed soybeans higher in sympathy
Higher wheat prices obviously harms its
competitiveness causing perhaps additional corn and
meal consumption
Wheat production losses could ultimately translate into
an increase in poultry or meat imports which could have
an impact on US domestic meal consumption
Decreased FSU rapeseed and sunflower production
may lead to higher EU soybean imports
What impact will the rally in wheat prices have on new
crop soybean acreage and how will the market react to
this
?
?
Bulls
Bears
?
?
?
?
?
?
Trade trying to balance potential record supplies with demand levels way above
that initially expected
Freight
Baltic Dry Index
This index gauges the cost of shipping resources including iron ore, grain, coal
and fertiliser.
Summary
Fundamentally, markets look over valued.
Still too many unknowns regarding production for clear direction
According to UN if population grows to 9 billion, Demand for cereals will grow:
– Cereal demand will rise by almost 1 billion tonnes from 2.1 billion tonnes today.
– Meat demand will grow by 200milion tonnes to almost 470milion tonnes.
Demand
– Population may double by 2050 (2009 6.8billion )
– Dietary change – higher meat and dairy consumption
– Rising per capita food intake
Challenge
– Food Security, Self Sufficiency and Sustainability
Summary
Grain markets appear to be well supported at current levels.
Volatility will remain.
Next year prices are well supported as the market debates planting
intentions and the switch of exports from FSU to USA, EU, etc.
Lack of forward cover (Jan/Jun), will under-pin the market.
Market will react violently to any food shortage, whether it be
perceived or real.