World grain and feed market review
As we enter into a new year, the statistics for 2018 are analysed and we discover that last year was one of uncertainty and turbulence.
Wheat production overall, in 2018, declined by an average of 28 million metric tonnes (mmt), and wheat feeding was reduced by 4mmt. 2018 was the fifth year in a row, wherein consumption of wheat rapidly outpaced production, an ongoing problem that is only continuing to expand as the global population increases so drastically.
Production of wheat in 2018 came to 731mmt, compared to 2017, which saw 759mmt produced. 746mmt of wheat was used in 2018, compared with 2017, where 741mmt of wheat was used throughout the world.
Wheat production, from country to country, varies significantly. Whilst globally, we saw a decline of 28mmt of wheat production, some countries had an increase in production, including the US (+4mmt) and North Africa (+2mmt). Other countries in the green include Kazakhstan, Mongolia, Brazil, Argentina, Peru, Bolivia, Algeria, Mali, Sudan, Kenya and South Africa. Countries that saw a decline in wheat production include Russia (-15mmt), the EU (-14mmt), Australia (-3mmt), China, Japan, Turkey and Sweden.
Exports in 2018 also were subject to some remarkable changes, and these were not just limited to the US and China. Despite the trade-war between the two countries, North America still ended 2018 with +2mmt of exports and South America with +3mmt of exports. Other countries subject to increases in exports include Canada (+2mmt), China, India, Algeria and South Africa.
Russia also saw a decline in exports by -6mmt, Australia by -2mmt and Ukraine by -1mmt. Others who suffered declined exports in 2018 include Mexico, Colombia, the UK and Tanzania. Some countries maintained relative balance with their exports, including Kazakhstan, Pakistan, Nigeria and Namibia. Global stocks-to-use for major exports, excluding the US, also come to a record-low level of 15 percent. This low statistic is somewhat worrying, especially when comparing it to 2009, when these numbers were as high and prosperous as 26 percent.
Droughts cause declines
2018 proved to be a year of adverse weather conditions, some countries suffering from prolonged rainfall, whilst others suffered overwhelming heatwaves, killing off thousands of crops. Many countries suffered from a drought, including Australia, Canada and the EU.
Australia suffered from a reduced wheat area of 10 percent and the exceptionally dry weather did not help matters for them. With their driest September on record, Australian yields dropped significantly. The rainfall, from October 1-18th, helped assist their crops in the West, but Eastern crops were not saved in time. As a result, Australian wheat production decreased by 53 percent.
Australia suffered many declines, with wheat production down 13 percent (18.5mmt), compared to 2017 (21.3mmt), and exports fell by 10 percent (13mmt), compared to 2017 (14.5mmt).
Persistent dryness in Canada resulted in a 2018 yield of -6mmt of spring wheat and a -4mmt percent decrease in durum wheat yield. Crops were either forced to be harvested before being of a desirable quality or were left in the field and suffered from a decline in worth. This was then followed by five weeks of incredibly snowy and cold weather in Canada, throughout September and October.
Despite this, Canada ended the year with a +5 percent increase in production of wheat (31.5mmt, 24mmt of which was exported), compared to their beginning stocks of 6.2mmt.
In the EU, wheat area reduced by an average of -3mmt, due to the abnormally dry and warm weather. The only place to receive above-average rain was Spain, and the EU was reported to have a remarkably low vegetation health index.
Yields were lower than average for the majority of EU countries, including Germany (6mmt), Sweden (5mmt), Poland (4mmt) and Finland (3mmt). Countries with yields similar to their average yields include France (7mmt), Italy (3mmt) and Greece (3mmt). Positive yields were displayed in Croatia (5mmt), Spain (4mmt) and Portugal (2mmt).
EU wheat production reduced by nine percent to 138mmt, and exports fell by one percent (23mmt).
Russia also suffered from droughts from June through to August, with their average wheat area reduced by five percent, and their average yield down by 14 percent. Their most successful areas for production and yield were North Caucasus, and Southern Russia, alongside Southern Siberia.
Despite their production decreasing by a shocking 18 percent, their production of 70mmt still remains their third highest output to date. Similar can also be said for their exports, which reduced by 15 percent, but remain their second-highest numbers, with 35mmt.
Recovery for the US
China"s trade-war with the US has caused major changes for both countries. The 25 percent soybean tariff has not affected US wheat production negatively, with their total wheat planted being a four percent increase, up to 19.3 million hectares (Mha). Their total harvested wheat came to 16Mha (+6%).
This year, the US produced 12.1 million acres (ma) of hard red spring wheat (+1.8ma), 2ma of durum (-0.3ma), 4.1ma of soft white (-0.1ma), 5ma of soft red winter (+0.3ma) and 23.2ma of hard red winter (-0.6ma).
US wheat production increased by eight percent in 2018, to 51.3mmt, compared to 2017"s 47.4mmt. Exports also increased by 14 percent, to 27.9mmt, compared to 24.5mmt in 2017.
Despite exports to China reducing significantly and causing problems for the US with the storage and exportation of soybeans, exports have largely been relocated to Brazil and other countries, to combat this issue, although this is not expected to remain a sustainable solution. Exports of other products have continued to retain healthy numbers, with US still at the top of the charts as the country with the most exportable supplies, followed closely by Russia, Canada, the EU, Ukraine, Australia and Argentina.
Soybean acres in the US, in 2019, are expected to be gradually shifted to wheat, to combat the reduced demand, especially so in US Northern Plains. The US are aiming to reduce planted soybean area by seven percent.
Wheat: GOI sub-index
Wheat slightly declines this month, with an annual change of thirteen percent, reflecting the turbulent year. This looks set to stabilise, as we go ahead into 2019. Utilisation is set to increase, with the feed use of wheat steadily increasing. Stocks have upgraded at a rather drastic rate, due to projected build-ups in China.
Soybean: GOI sub-index
2019 looks set to be a better year for soybeans, as both the US and China stabilise their plans for substitute imports and exports. US exports are picking up, as they begin to establish enhanced exporting relationships with other countries, namely Brazil. India is also producing particularly favourable soybeans.
Maize: GOI sub-index
Maize also suffered slightly, seeing a sudden drop at the end of October and early November. This soon picked up, and the crop continued to sell favourably. Trade of maize is set to reach a peak in 2019, due to large export availabilities.
Barley GOI sub-index
Barley is continuing to decline throughout November and December, largely due to the droughts in many parts of Europe, Russia and Australia. Supplies continue to dip, but the new year might bring some stability.
Despite the trade war, the US have a promising 2019 ahead, and new US wheat plantings are expected to rise, from six percent to eight percent, due to slightly higher wheat prices. Their plans to minimise the damage caused by the soybean tariffs seem promising and could lead to only further profits with other produce, such as corn and wheat, which will soon be produced in much more bountiful quantities.
The US Wheat Associates predict that their hard red winter wheat area will increase by five percent, and their hard red spring to increase by up to 15 percent. Durum wheat, in contrast, they predict will be reduced by between 10 and 15 percent, making durum just four percent of total wheat area in the US. Planted area of durum in the US may decrease and undergo a similar change to soybeans, if markets do not turn favourable.
Canadian durum wheat is also suffering decreases, durum area possibly decreasing by as much as 25 percent.
Argentina also looks hopeful, as their statistics in 2018 were so close to record-setting, that, if good weather follows, they could have a very prosperous 2019.
EU soft wheat plantings are expected to expand in 2019/20 by six percent. This will be enacted by a switch from rapeseed to soft white, due to lower returns on rapeseed, and the 2018 drought severely affecting rapeseed harvests.