World Grain - December 2010 - 20

GRAINMARKETREVIEW
Maize global ending stocks
(% of use)

Coarse grains

Smaller-than-expected U.S.
maize crop sends prices higher

by Chris Lyddon
5

2010-11**

2009-10*

2008-09

2007-08

2006-07

*Projected
** Forecasted
Source: International Grains Council

Maize prices
(Average prices received by U.S. farmers: dollars per bushel)

5
4
3
2
1

Oct

Sep

Aug

Jul

Jun

May

Apr

Mar

Feb

Jan. 10

Dec.

Nov.

Oct.

Sep. 09

2005-06

The world's coarse grains market has remained volatile in recent
weeks with a focus on maize (corn) and, in particular, the apparently
shrinking U.S. crop.
"The steep upturn in maize prices was almost entirely in response
to declining yield forecasts for the U.S. crop, with a sharply reduced
official projection of stocks, placed at a 14-year low, triggering a
mid-month surge in futures," the International Grains Council (IGC)
said in its most recent Grain Market Report.
The last two months have been dominated by concern over tight
supplies, but most recently there's been a reminder that there are other
factors to watch. Expectations that China, concerned over food price
inflation, would raise interest rates and tighten monetary policy to slow
demand, triggered a sharp sell-off on the fear that it could mean an
economic slowdown and, therefore, reduced demand for commodities.
In its October report, the IGC cut its estimate for world maize
production in 2010-11 to 814 million tonnes from the estimate of
824 million it produced a month earlier. Global maize production in
2009-10 was 811 million tonnes. At the same time, the IGC's been
revising world maize consumption higher, up to 840 million tonnes
for 2010-11 from 837 million last month. Last year, world maize
consumption was 813 million tonnes.
The IGC says the cut in its estimate is down due to "rapidly worsening production prospects in the U.S. and China."
There are indications on the bearish side. "Ideal planting conditions could result in a bumper crop in Argentina," it says and points
out that the production figure of 814 million tonnes is still a record.
The IGC's explanation for the increase in consumption is that
"despite the recent spike in prices, maize remains competitive for
livestock use." Feed demand is forecast to rise by 20 million tonnes
to 490 million.
Because of that consumption, 2010-11 ending stocks are projected
to fall to a four-year low of 125 million tonnes. The IGC noted, in
particular, a sharp drop in the U.S. carryover forecast to the lowest
level since 2003-04, at 24.1 million tonnes, down from its earlier
estimate of 28.1 million and well below the previous year's level of
43.4 million tonnes.
The U.S. Department of Agriculture (USDA) cut its estimate for
U.S. maize production in 2010-11 to 318.52 million tonnes from the
previous figure of 321.68 million. This was the main factor behind a
cut in world maize output to 818.52 million tonnes from 819.65 million. In 2009-10, the world maize crop was, according to the USDA,
813.4 million tonnes, of which 333.01 million came from the U.S.
The USDA now has U.S. maize ending stocks at 21.01 million
tonnes, the lowest level since 1995-96.
The changes for maize help bring total coarse grains production to
1.085 billion tonnes, down from 1.088 billion estimated a month ago
and well off the previous year's 1.108 billion.
As well as reduced U.S. maize production, the lower figure also

Source: U.S. Department of Agriculture

represents reduced barley production in China, and reduced oats and
rye production in Russia, the USDA said. Global 2010-11 barley
production is lowered 800,000 tonnes mostly on a 700,000-tonne
reduction for China based on lower area and yields. Other barley
changes include small reductions for Belarus and the E.U.-27, and a
300,000-tonne increase for Australia "as abundant rainfall in eastern
growing areas support higher yields," it said.
There is a 1.3-million-tonne reduction in oat production, mainly
because of a 1-million-tonne decrease for Russia. There is also a
400,000-tonne reduction in Russian rye production.
In its commentary in the WASDE report, Rabobank highlighted the impending battle for acreage. "With soybeans, cotton and
wheat also at extremely lofty levels, it also doesn't provide maize
with any certainty of buying the required acreage needed next
season," it said.
Chris Lyddon is World Grain's European editor.
He may be contacted at: chris.lyddon@ntlworld.com.
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