It is early days yet, but the world is gearing up for record areas of maize plantings in the US. Indeed, the USDA published its predictions in February with exactly that. It might be expected that this would cause prices to collapse but, of course, the global populations keep rising and so with more mouths to feed, consumption needs to be a record every year, just to keep up. The market recognised this and quickly calculated the plantings estimated by the USDA might not be sufficient. Indeed, maize stocks are thought likely to reach a 7-year low at the end of the season. Prices rose. This is all rather forward looking as the Midwest (where most US maize is planted) does not get its drills out for another month or two. Southern States like Alabama start in March but more northerly areas such as Illinois (where more is planted) is late April.
Yet, grain and oilseed prices are at 7-year highs, or even higher in the UK and other national markets. Production is clearly only half of the story. In fact, the country with most mouths to feed is not only buying ever-increasing amounts of soybean (having imported vast amounts in recent years and hitting a gigantic 100 million tonnes in 2020/21), but is also now buying maize and wheat. China’s food policy for millennia was to be self sufficient in grains. This has changed. The chart demonstrates that when China decides to buy something, it does so in volume. Its wheat imports have doubled to 10 million tonnes this year and maize imports tripled, adding another 16 million tonnes of new demand to the crop. The world will certainly feel it.
According to USDA estimates, Chinese wheat stocks at 155 million tonnes are half the world’s wheat reserves, and 10 million tonnes more than China consumes in a year. China will also carry over enough maize to keep it going for 8 months. One has to wonder what it is up to, either something big or it will release it all onto the market again at some point, something the Chinese did at the turn of the millennium, an action that contributed to 5 years of low grain prices.
Unusual weather around the world is, ironically, usual at this time of year with plantings and crops emerging from winter in the more southerly countries. It often affects markets more than it affects crops suggesting it has limited long term impacts. In the UK, whilst snow melt and subsequent rains have topped up the soil moisture levels to ‘saturated’ in many regions, the warmer weather and winds have also been starting to prepare soils for spring cropping. A lot still depends on the rainfall in coming weeks though. Barley remains cheap compared with wheat, and whilst new crop wheat has been steadily rising in price (November futures at £170 per tonne), the discount from old to new crop is about £35 per tonne. There will be nothing carried over this year.
Oilseed prices have been strong, pushed about by currency shifts, and the Chinese business (above), plus poor weather in south America. Demand in the EU is tight, partly as people throughout the EU have still been driving a lot in the more recent wave of lockdowns and therefore buying biodiesel. There will not be much OSR in the EU by harvest time.
The pulse market is still busy but possibly falling a bit as the Australian harvest is now in full swing and some of which has already reached the Egyptian shores, depressing demand from the UK.
