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USDA Grains: World Markets and Trade


12 July 2012

USDA Grains: World Markets and Trade - July 2012USDA Grains: World Markets and Trade - July 2012

The United States was poised to regain a significant share of the global corn market based on early forecasts of a record crop. However, the recent dry and hot conditions throughout much of the U.S. corn belt during a key stage in crop development has caused a dramatic cut in expected production and led to a month-to-month drop in projected exports from 48 million tons to 40 million.
USDA Grains: World Markets and Trade Reports

That leaves the United States with the same market share as in 2011/12 and far below its historical position as the supplier of well more than half the world’s corn exports. The tightening supply situation has caused U.S. prices (a proxy for world prices) to jump 35 percent in just 1 month (September futures contract), which is expected to constrain import demand. Foreign exports are currently expected to be up only 2.0 million tons from last month. However, key Southern Hemisphere countries like Brazil and Argentina may expand corn area when planting begins later this year, if prices remain high.

Wheat: World Markets and Trade

Global production in 2012/13 is cut 6.7 million tons, mostly in China, Russia, and Kazakhstan. Global trade is down slightly. The U.S. export forecast is raised this month because of reduced competition from the Black Sea region. Global trade in 2011/12 is raised to a new record reflecting strong demand for wheat used in animal feeds in lieu of high-priced corn. The seasonaverage U.S. farm price is raised 60 cents to $6.20-7.40 per bushel.

Prices

Domestic: Prices of all wheat classes surged, underpinned by rallying corn prices. Soft Red Winter (SRW) soared $65 to $313 per ton, while Hard Red Winter (HRW) jumped $56 to $336/ton. Hard Red Spring (HRS) rose $42 to $382 per ton, and Soft White Winter (SWW) was up $49 to $312 per ton.

Rice: World Markets and Trade

Global production in 2012/13 is expected to remain a record despite a smaller crop in India. Consumption is forecast to outpace production for the first time in several years, causing a dip in still-massive ending stocks. Trade in 2013 is expected to be marginally higher than 2012 but just shy of the 2011 record.

Prices have not returned to their pre-2008 pattern when quotes from Thailand, India, and Vietnam generally moved together, and the gaps between them were narrow. Since the 2008 spike, quotes have converged and diverged, with gaps between suppliers occasionally surpassing $200 per ton. This has been the case since May, when Thai quotes jumped while Viet and Indian quotes fell. The paddy pledging scheme in Thailand is keeping prices artificially high, while in India, massive stocks are pushing prices down. Like most of the price movements since 2008, the current divergence is linked to policy rather than to changes in supply or demand.

Course Grains: World Markets and Trade

Global corn trade for 2012/13 plunged this month because of drastically tighter exportable supplies in the United States outweighing record exportable supplies in South America. U.S. corn exports are slashed and the season-average farm price is projected sharply higher. U.S. exports are also lowered for 2011/12.

Prices

U.S. corn export quotes have risen continually since their recent lows in late May, gaining over $60/ton ($45/ton from June’s USDA report) to finish the first week in July at nearly $310/ton. Brazilian prices are up, now about level with Argentine. A price series for Black Sea corn (Ukraine) is added this month. Black Sea quotes are at a steady discount to U.S. corn.

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