AHDB: Rationing of Demand Expected in Corn Market
07 December 2011
GLOBAL - Maize is the season's leader and it's quite evident that global demand for maize continues to grow, Jack Watts, Senior Analyst of Market Intelligence for the Agriculture and Horticulture Development Board, said at the HGCA Grain Market Outlook Conference 2011 in London, writes Gemma Hyland, TheCropSite Junior Editor.
"Currently year-on-year growth is around 3 per cent, and this season it's estimated an extra 25 million tonnes will be demanded by the world market," Mr Watts said. "What we may well start to see as the season progresses if high prices continue, is rationing of that demand."
While production of maize has also increased, it is not increasing at a fast enough rate to meet the growing global demand, he said.
"What we see now is a third consecutive supply and demand deficit within the maize market," he said. "This is now plunging stock to use ratios below 15 per cent and on paper, in theory below a 7 week's supply of maize."
In May initial predictions suggested that maize was going to be in surplus around the world in 2011/2012, but weather-related issues with US crops soon shifted predictions. Despite problems with US crop production, maize production picked up during harvest in Europe and Ukraine, helping to increase global supplies.
Speaking on US maize exports, Mr Watts noted, "At the heart of the global maize market and so at the heart of the global grain market is what's going on in the US maize supply and demand, a dominant force in global maize production and by far the world's biggest exporter.
"The USDA released their September 1st stock figures, putting them at 28.66 million tonnes, esentially the carry over stock figures into the 2011/2012 season. This was an increase of around 5 million tonnes on the previous and since June represents a 10 million tonne increase in that stock estimate. To me this is classic evidence that we're starting to see demand rationing occur in the US maize markets."
Looking forward to 2011, the current production estimate has lost 18 million tonnes since the initial estimates came out in June, he said.
Mr Watts noted that even with higher production estimates and current stock levels, US maize production still looks to be more than 13 million tonnes down on last season. From a US demand perspective, there's an expectation that demand will continue to be rationed particularly in the feed sector and also in the export sector.
Looking at Chicago wheat futures shows that Chicago wheat is now trading at a $10 discount to maize. A year ago Chicago wheat was trading at a $50 premium to maize.
This could be speculated as the market trying to divert demand away from maize in the US and towards wheat, he said. It is expected that we will see increased feeding of wheat into the US livestock market.
Ethanol remains a strong part of the US supply with demand accounting for over a third of the US maize crop. The big change now is that growth has slowed for maize demand for use in ethanol production, Mr. Watts said.
| TheCropSite News Desk |
CME: Corn Futures Closed Higher Friday
21 May 2012Weather Damage to Bulgarian Crops Assessed
21 May 2012
Australian Sugar Industry Continues Recovery
21 May 2012UK Farmers Enjoy Boom as Economy Suffers
21 May 2012US Barley Production Advances in 2012/13
21 May 2012John Deere AutoTrac Controller Widens the Net
21 May 2012Food Hubs Keep Connections Local
21 May 2012CME: Corn Futures Closed Higher Thursday
18 May 2012
Farmers Advised to Get Head-Start on NVZ Appeals
18 May 2012
© 2000 - 2012. 5m Publishing, Benchmark House, 8 Smithy Wood Drive, Sheffield, S35 1QN, England. - A Benchmark Holdings Ltd. Company