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Grain market 2018/19 expectations

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“World wheat consumption exceed production and harvesting area shorten. As it expecting, next year situation will be the same, ending stocks will fall as well as stock-to-use ratio and prices will rise. Corn market forecast isn’t so clear as a wheat. First of all it’s still incomprehensible would Ukraine able to export record crop or ending stocks will increase. Secondly some U.S. farmers as for rainy weather had have narrow window for working the land for corn. Another black swan cold be oil prices and Trade War between China and the USA.”

Since 2009/10 TY world wheat production increase up to 12%, but consumption rise faster. From 2013/14 TY production was higher than consumption. But not this season. World consumption exceed production and harvesting area shorten. As it expecting, next year situation will be the same, ending stocks will fall as well as stock-to-use ratio and prices will rise. As milling business high developed in Turkey, local producers need to import additional wheat. According to smooth geography position and big supply, main seller for very long period was Russia, Ukraine is the second. It’s explained also throe quality preferetion: for many years Russian wheat had better marks than Ukrainian one. But many water came under the bridge, and for now there are no difference between Ukrainian and Russian quality. But for logistical reason Russian wheat mostly cheaper. Ukraine has big potential to grow as for increasing consumption. As for now Turkey millings converting 15.5 MMT of wheat, but could twice more.

Corn market forecast isn’t so clear as a wheat. First of all it’s still incomprehensible would Ukraine able to export record crop or ending stocks will increase. Secondly some U.S. farmers as for rainy weather had have narrow window for working the land for corn. Another black swan cold be oil prices and Trade War between China and the USA. Both questions center around politics. Strong correlation between corn and oil explained as corn could be used for bioethanol production, which rise as oil go higher. Relationships between to world biggest economies have no direct influence on Turkey market, but it regulates world supply, demand, trade flow and geography of trading. Anyway huge Ukrainian crop demand is exceed supply so for the nearest future we can expect price rally.
Main flavor for the last season is politics. As per axiform reasons trade with some Turkey kith is difficult or even prohibited as per sanctions, it’s regular practice to resell grains to those countries. This create additional demand from Turkey also.

These are what IGC analysts expect for Turkey at new season:

Soybeans: total consumption in 2018/19 TY expect up to 3.1 mmt, almost all is imported. 2017/18 TY imports was 2.8 mmt, which is more than total consumption

Wheat: total consumption in 2018/19 TY expect up to 19.2 mmt little bit more then 2017/18 TY, imports near 5 mmt vs 6.2 previous season

Corn: total consumption 2018/19 is the same as last TY: 9.3 mmt, imports expect also at the same level.

Trading between Ukraine and Turkey developed rapidly. These are figures that show volume of Ukrainian exports to Turkey

Weakening of Ukraine currency make grains cheaper, but political crisis in Turkey weakened lyra as well, and for a short time lots of Turkish buyers lost their licenses. Now situation is stable and trade flow grows.

These are the expectation for global sorghum, oats and rye market for the new season:


Sorghum is corn substitute. According to USDA data world sorghum production decrease by 11% to 58 914 thnd mt since 2014/15 TY. The latest report shows small growing on 137 thnd mt vs November numbers. The biggest reduction by main producers since 2014/15 TY was in the USA: from 10 988 to 9 238 thnd mt, Sudan: from 6 281 to 4 000 thnd mt, Mexico: from 6 270 to 4 600 thnd mt. At the same time, all biggest producers are the main consumers. Mexico decrease consumption from 6 600 to 5 000 thnd mt, Sudan fall from 6 000 to 4250 thnd mt. Only U.S. increase domestic consumption from 2 459 to 6 604 thnd mt according to trade war with China. Anyway, U.S. still stay the main world exporters which will supply market with 3 000 thnd mt for 18/19 TY and China per contra could import 2 000 thnd mt in 18/19 TY that is less than 14/15 TY more than 5 times. The reason of such reduction is replacement demand from sorghum to corn. That have made big influence on the trading geography. For example, EU has never been major importer, because there was a sufficient supply of corn. But this season after unfavorable weather hurt Spain’s crop, competitively priced U.S. sorghum has helped meet Spanish needs. Spain is now the 4th-largest destination for U.S. sorghum with exports soaring to $26.4 million in the first 10 months of 2018. Also extremely high increase in demand is expecting from Mexico which needs 500 thnd mt instead 120 previous TY. As for Black Sea market, the main player is Ukraine. Nevertheless, harvested area fall to 40 thnd ha, yield has been increased from 1.9 to 3.9 mt/ha. Ukraine exports increase from 154 thnd mt in 14/15 to 121 thnd mt in 17/18. Main buyers were Spain, Italy and Israel.

This season trade flow is slow as Ukraine loses EU market. Since the beginning of 18/19 TY, Ukraine export just 8.7 thnd mt of sorghum. Main buyer for today is Turkey which bought 5.2 thnd mt vs 8.6 at 17/18 TY. Also traditional demand is expecting from Israel at February-March.


Oat which is used mostly for animal feed and contains many starch, protein, vitamin and minerals is not used for bread making due to its swelling problem. Oat flour is mostly used for foods like porridge and flatbread; it seeds are generally used in grain mixtures having high nutritional value and biscuit production. Increased demand for food containing oats, and a decrease in world ending stocks of oats spur global trade in this crop. After a period of growth in the mid-10x, world oat trade began to decline again. In 2015 World imports and exports of oats were record highs. After the 2014/15 season, trade began to decline from 2 408 thnd MT to 2 140 thnd MT in 2018/19, despite the ever-growing production and consumption of oats for feed purposes in most countries. Canada and the United States account for more than half of world exports and imports of oats. These two countries have the most developed food processing industry of oats and traditionally high consumer demand for food made from this crop. There is a hedging mechanism in the US oat market using futures contracts traded on the Chicago Mercantile Exchange. In 2018/19 TG, Canadian exports will amount to 1 600 thnd MT, the United States Imports the same. Feed manufacturers prefer to use cheaper crops such as maize and barley instead of oats. The demand for foods containing oats will continue to grow, offsetting a further decline in demand for feed oats. Statistics Canada (STC) today pegged the 2018 Canadian oat crop at 3 436 thnd MT, up 4% this month but down 8% compared to last year’s estimate of 3 733 thnd mt and 2% above the average. Feed use and exports will remain the major variable for the balance sheet moving forward. Canadian oat exports are already running 15% ahead of last year YTD (Aug-Oct). Canadian expect this pace will increase some moving forward as US horse demand is also up, offsetting lower US oat imports from Sweden and Finland.

Second biggest exporter is Australia. In 2018/19 exports volume expected at 350 MT but as per bed weather condition it will fall to 150 thnd MT. One of the worst droughts in history has reduced the Australian oat crop to the second lowest level in 36-year low and near the record low. ABARES today pegged 2018 oat production at 888 thnd MT, down 15.3% from last month and 20.7% below last year. The current estimate is 38% below the average.

COCERAL’s released their final 2018 oat production estimates today. Total EU-28 oat production is pegged at 7 883 thnd MT, down 4.4% from their Sept estimate, but is down less than 1% from last year and is on par with the average. The extreme drought conditions this year did, however, have a huge impact on production in the top two EU oat exporters, Finland and Sweden, where production dropped a combined 29.2% from last year said the COCERAL estimates. Oat millers are from reports “making do” with quantities of oats from non-traditional sources, including Spain, where production climbed 57% this year.

China is the largest world consumer. Production for last 5 years increased from 255 thnd MT to 305 thnd MT, but imports fall from 500 thnd MT in 2017/18 to 150 thnd MT according last WASDE report. Australia remains the major oat supplier to China with a 96% market share. Canada, which accounts for 56% of total global oat exports, remains a non-player in the Chinese market due to the fact no import protocol has been put in place by the Chinese Government. The Canadian oat industry is working on obtaining the protocol, but no time frame is known. Breakfast cereals remain a small part of the overall breakfast market in China, but it is on the rise – and is expected to continue to grow.

Since the beginning of 2018/19 TY, Ukraine sold 3.5 thnd MT of oats vs 9.4 thnf MT at previous season but much less than in 2015/16 TY that was 42.8 thnd MT. Main buyers for today are India (almost 2 thnd MT), Switzerland and Poland (both for 0.4 thnd MT). Last season Ukraine main buyer was Pakistan which supply more than half of Ukrainian oats.


Rye, which is a family of wheatgrass, is very similar in appearance to barley. The grains are thinner than the wheat, the husks are narrower, and the awns are rather short. The composition of rye, which is mostly regarded as bread flour and animal feed, contains carbohydrate, protein, potassium and vitamin B. The bread made from rye is also light as wheat bread. The protein mixes (gluten) found in wheat and rye flour makes it soft and elastic by swelling. Therefore, it is recommended that wheat or rye flour should be added while making bread from other cereals.

Annual rye production fall from 14 459 thnd MT in 2014/15 to 12 293 thnd MT in 2017/18, and majority of this provided by EU and Russia. According to the estimates of USDA for 2018/19, EU takes first place with 6 600 thnd MT in global rye production of 10 514 thnd MT. Russia with 1 850 thnd MT, Belarus with 650 thnd, Canada with 235 thnd MT, Ukraine with 400 thnd MT, Turkey with 320 thnd MT, and USA with 214 thnd MT follow EU countries respectively. The decline is expected in any leading rye producer countries except for Russia, Canada and USA.

Majority of rye is consumed where it is produced. Therefore, consumption amount and the ranking of the countries are nearly the same with the production. Therefore, the global rye trade is decrease from 469 thnd MT in 2017/18 TY to 355 thnd MT in 2018/19.

Approximately half of the global rye trade in 2017/18 season (227 thnd MT) was exported by Canada. EU exported 90 thnd MT, and it’s expected that 2018/19 Canada fall to 150 thnd MT and EU rise to 100 thnd MT. Russia was the second largest exporters which supply 110 thnd MT previous season, but as per lover production Russian exports will fall to 30 thnd MT and will be equal to Ukrainian supply.

As it is understood from the difference between production and consumption, the largest share of imports of rye is in the United States. Rye import amount carried out in the USA in 2017/18 season was 325 thnd MT. This is estimated to be around 200 thousand tons in 2018/19 season. In global rye imports in 2018/19 season, EU countries follow USA in import with 50 yhnd MT, Russia need additional 25 thnd MT. Rest of all another main buyer will be almost at the same level.

As for Ukrainian exports, from the beginning of 2018/10 TY rye trade twice more than 2017/18 TY: 64.7 thnd MT vs 38.2 thnd MT. It’s also twice more than WASDE forecast for this season, but we should keep in mind that WASDE treading year begin at October.

Elena Pitek (Neroba) 
Head of Analytics at Marcopolo Commodities SA


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