Dramatic events in the global grain market have unfolded over
the past few months. As the full extent of this summer’s likely
harvest shortfalls among Black Sea exporters became clearer,
international prices for wheat and other grains soared. It
became more obvious also that another periodic upheaval in
seaborne trade patterns was beginning.
Prospects for the total volume of wheat and coarse grains
traded worldwide during the current 2010/11 crop year, ending
mid-2011, have not changed greatly. There are still only limited
signs of positive factors which could boost import demand, and a
number of negative influences remain prominent. This
combination may result in a flat or marginally reduced overall
world trade volume. But exporters’ market shares will change
very noticeably.
 
BLACK SEA EXPORTS PLUMMET
In the past two crop years, grain exports from the main Black
Sea suppliers — Russia, Ukraine and Kazakhstan — comprised
over one-fifth (about 22%) of global trade. Good harvests amid
favourable weather enabled these countries to compete strongly
in foreign markets, especially among North African and Middle
East buyers, gaining market share from other exporters.
During 2010/11, the large Black Sea share of world grain trade
is expected to diminish very sharply to about 10%, under one
half of the previous percentage. Poor summer 2010 harvests
across the region, caused by severe drought, have greatly reduced
available exports. Russia’s ban on further shipments, beginning in
mid-August and set to continue until next year’s harvest,
emphasises the massive downturn evolving.
Russia, Ukraine and Kazakhstan together exported over 50mt
(million tonnes) of grain annually in the past two years. In
2009/10 ending June 2010 the volume was 51.3mt, a 5% decrease
from the previous year. The latest International Grains Council
forecast for 2010/11 suggests that the total will fall steeply to just
under 23mt, a 28mt (55%) decline. An especially drastic
reduction in Russia’s exports, from 21.9mt, to 3.5mt, reflects the
ban introduced recently.
Following the worst drought in more than one hundred years
in central and southern parts of western Russia, average crop
yields are well down and the country’s 2010 grain production is
estimated at 64mt, a 33% fall. Parts of Ukraine and Kazakhstan
were also adversely affected by excessively dry and hot weather,
resulting in output falling by 14% to 39mt in Ukraine, and by 31%
to 14mt in Kazakhstan.
 
OTHER EXPORTERS BENEFIT
Which competing exporters will benefit? As shown by the table
below, about half of the Black Sea shortfall is likely to be offset by
higher US sales. Increased shipments in the year ending June
2011 from Australia, Argentina, and several smaller suppliers
including Brazil, India and China could also contribute. Some of
these projected rises are dependent on forthcoming harvests.
This year’s United States grain harvest, now approaching
completion, is another good one and stocks are plentiful.
Consequently ample supplies are available. The IGC’s calculations
point to exports increasing by 18%, reaching 92mt in 2010/11.
US wheat exports in particular will gain advantages from the
Black Sea downturn, rising by over 10mt (47%) to a forecast
33.7mt, while the corn volume advances less rapidly by 7% to
54mt.
Potential for higher shipments from Argentina and Australia
depends heavily on crops not yet harvested. But prospects for
these southern hemisphere countries, where wheat production
begins in November or December, are promising. Assuming
‘normal’ weather over the remainder of the growing season,
output will be well above the volumes seen twelve months
earlier.
The extensive rearrangement of grain trading patterns
foreseeable probably will have a net positive impact on bulk
carrier employment. Black Sea exports include a large
proportion of short-sea trades. Replacement volumes, for most
importers, will be mainly obtained from distant suppliers,
resulting in more long-haul shipments which increase bulk carrier
tonne-miles.
 
IMPORT DEMAND SUBDUED
Although indications of strengthening import demand in some
countries are emerging, pointers to lower volumes in other areas
are still a key feature. As a result, after a 4% reduction in the
total over the twelve months period ending June 2010, the IGC’s
latest figures suggest that 2010/11 wheat and coarse grains world
trade will see a further marginal (1%) decrease, to 236.6mt.
The biggest negative factor probably will be Middle East
imports. Domestic grain production across the region has risen
for the second consecutive year, greatly improving supplies. Iran
and a number of other countries seem set to buy lower volumes
from foreign sources. Consequently regional imports could fall
by 11% to 37.8mt.
Several Asian buyers also are likely to purchase reduced
volumes. The Asian region (excluding Japan) could see a 6%
decrease in imports during 2010/11, to 46.9mt. China’s imports
of wheat, barley and other grains are expected to remain
unchanged at 3.6mt. By contrast, related Chinese soya imports,
which have now reached the 50mt annual level, probably will
continue growing.
Among signs of upturns, wheat and coarse grains imports into
the European Union may be about 25% higher, at 9.6mt. EU corn
purchases, in particular, are forecast to rise sharply as a result of
tight domestic supplies. And another consequence of Black Sea
suppliers’ crop shortfalls is foreseen. Imports into the FSU
(former Soviet Union) countries group in 2010/11 could rise by
around 4mt (62%), reaching 9.4mt. Richard Scott