In its latest assessment of the global economy, the International Monetary Fund (IMF) highlighted weak domestic demand, slower growth in several emerging market economies and a protracted recession in the euro area, responsible for subdued global economic growth forecast at slightly above 3% in 2013; possibly made worse should the anticipated wind-down of the US Federal Reserve stimulus programme, lead to sustained capital flow reversals. Signs that the US will begin to taper bond purchases in September, led global share prices to fall to a six-week low; oil led the decline in commodities, while currencies in India, Indonesia and elsewhere, dropped as investors withdrew $8.4Bn from emerging-market exchange-traded funds this year. The sell-off came last month, despite growing evidence, of an improving US labour market and rise in consumer prices; growth in China’s economy stabilizing with better prospects for Japan; while recovery in the UK economy and strong growth in France and Germany pulled the eurozone out of an 18-month recession; but with the US poised to unravel the stimulus package, markets likely to remain nervous until bond yields settle.

GLOBAL GRAIN AND OILSEED OUTPUT TO RISE BY 8% IN 2013/14 In commodity markets, favourable growing conditions especially in Europe and North America, boosted prospects for a sharp recovery in global grain and oilseed supplies, easing inflationary pressures and food security concerns. The UN’s Food and Agricultural Organization (FAO), confirmed, that global food prices fell, for a third consecutive month in July, to reach their lowest level in more than a year. Sharp falls in grain prices, mostly reflected falling corn prices, and by contrast to last year’s weather-damaged crops, harvest reports re-affirmed record- breaking prospects for grain and oilseed crops, with production forecast to rise by 8% to 2.4Bn/t in 2013, the highest output on record, expected to help replenish grain inventories and curb extreme price swings, in 2013/14.


Global wheat and coarse grain output is forecast to rise to 1,951mt (million tonnes) in 2013/14, driven by a huge 10% increase in coarse grains, notably corn, following a return to more typical yields in the US, and a better than expected increase in wheat output. Higher feed use of coarse grains is driving consumption, forecast to reach 1,922mt. With corn prices tumbling, by over 40% to their lowest level since 2010, is expected to reduce input costs and improve the outlook for livestock, feed, food and industrial processors. Global supply of cereals likely to outstrip demand for the first time in four years, with overall cereal stocks forecast to rise to 355mt in 2013/14. The global oilseed crop is also forecast to increase by 4% to a record 493mt-mainly due to rising soyabean output in the US, Brazil, Argentina and India. Feed use of oil-meals to rise to 274mt, mostly reflecting rising demand in China.

SHARP REBOUND IN THE CIS AND EU CROPS BOOSTS WHEAT OUTPUT Wheat output in the CIS producing countries is forecast to rebound sharply, Ukraine and Kazakhstan wheat crops have been revised up to 22mt and 17mt respectively, while Russia’s wheat crop is revised down possibly below 50mt, due to dry weather early-on. In the EU, production is forecast at 141mt, with further upward revisions likely; Canada’s wheat crop is also raised to almost 31mt. The outlook for wheat is positive in most other major wheat producing and consuming countries, with some exceptions — adverse weather conditions, hindered the US wheat crop 58mt, while in China wheat output is forecast lower at 118mt (official data121mt). Reports that the Chinese crop suffered up to 20mt of sprout damage, looks likely, given the flurry of wheat sales to China early in the season, and a hike in import requirements, expected to triple this year. The International Grains Council (IGC) peg the global wheat harvest at 686mt, while both USDA and Lanworth estimate a larger wheat crop at 705mt and 694mt respectively.


Argentine farmers were expected to increase the area planted to wheat to 4.2m/ha, due to high domestic prices, but both the Rosario Grains Exchange and local US bureau staff in Buenos Aires forecast the area to be lower at 3.8m/ha and 3.9m/ha respectively, with a wheat crop of 12mt; the lower estimate said to reflect mistrust over the government’s tax re-distribution system, a two-year drought in the north-west, plus a scarcity of good-quality seed in the central part of the country. Reports from Brazil indicate frost damage, hit between 20-30% of production in Parana, which typically produces almost half Brazil’s wheat output, also likely to increase import requirements. Elsewhere, problems in western areas of Australia are expected to lower the overall wheat crop. The Commonwealth Bank of Australia (CBA), lifted its forecast for the eastern Australian crop by 1.9mt to 13.4mt and its forecast for the overall harvest by 400,000/t to 25.3mt.Although they expect Western Australia stock tightness to persist, if the forecasts are realized it should allow,“... a sizeable rebuild in east coast grain inventories from December,” according to CBA’s Luke Matthews.


Better crops in several countries are expected to raise the global wheat output to a record 705mt, and as a result of ample supplies, wheat for feed use has been raised by 5mt to 142mt in 2013/14, mainly reflecting increased use in the CIS countries.

CHINAS WHEAT IMPORTS TO TRIPLE AND LIKELY TO MATCH THOSE OF EGYPT Global trade is expected to be boosted by strong import demand in the Middle East, China and increased opportunities in Brazil. Egypt, typically the world’s largest buyer, purchased over 1mt of wheat through a succession of tenders through July/August, with wheat prices c.$251/t excluding shipping, at a cost of $285m, half bought from Romania, with Ukraine and Russia splitting the balance; and is forecast to import up to 9mt against the backdrop of growing domestic turmoil and civil unrest, which has heightened concern about the security of oil supplies from the Middle East and North Africa-violence in Egypt could also affect the Suez Canal, conduit for oil and a vital seaway for bulk carriers.

Chinese wheat futures have been near historic highs for most of this year, due to tight supplies and high demand; China has already booked more than 3mt of wheat shipments in the year to June 2014. Beijing’s CNGOIC Corp, confirmed purchases from Australia and forecast imports at 6.5mt this year.Australian based-Lachstock Consulting’s managing director Mr Stevens, said China has already placed orders for up to 5.5mt out of a total of 8–10mt forecast for 2013/14; and expects wheat imports to be split between the US 3.9mt, Canada1.5mt, EU 500,000/t, Australia 3mt, with 100,000/t from other countries. China is said to be re-building depleted reserves, as a result of the US drought-lack of corn supplies replaced by domestic wheat in feed rations; once wheat reserves are restored imports are expected to be scaled-back. Confirmation that Japan had lifted the ban on imports of US Western White Wheat; sales of 840,000/t of Soft Red Winter wheat to China, plus sales of over 1mt of milling-quality wheat to Brazil, amid growing fears that Argentina will again have little to export, helped underpin US prices pressured by competitive Black Sea exports-HRW rose $18 to $318/t and SRW went up $11 to $276/t CBOT December wheat $6.491/2/bu (Aug 20).



Despite plummeting feed grain prices, two leading banks sounded upbeat on wheat futures, CBA, forecast wheat prices for the October-December quarter at $6.17/bu and a growing premium over corn, flagging “comparatively tight world wheat balances.” ABN forecast wheat prices ending September at $6.20/bu, and highlighted the potential for the higher world wheat production this year to be absorbed by increasing consumption, expected to keep stocks under pressure. “Assuming normal weather conditions, wheat prices will decline slightly over the course of 2013, but will remain at historically high levels.”

RECORD GLOBAL COARSE GRAIN HARVEST BOOSTS FEED DEMAND By contrast to last year, which saw a dearth of supplies and demand rationing in several countries, the prospect of abundant supplies of corn, better crops for barley and sorghum, sent feed grain prices tumbling from record highs in June to record lows in August, the lowest since 2010. USDA’s provisional forecast points to a potential global coarse grain harvest of 1,245mt (corn 957, barley 140mt, sorghum 61mt), the highest ever recorded. Global demand for coarse grains is forecast to expand by 72mt mostly driven by expanding feed demand to a record 1,215mt (feed 713mt, food/industry 502mt). Global fed use is expected to increase by 46mt, especially in North America and East Asia, with almost all regions posting gains.With a larger exportable surplus and much lower prices, trade is expected to rise by 6mt to a record 134mt, moderated by better domestic crops in several countries. Global stocks are expected to rise to 182mt, as are those in the major exporting countries.


With an increase in the planted area and a return to more typical yields in the US, the global corn crop is reportedly on track to rise by almost 100mt to 957mt. Record crops in the US 342–350mt, and better crops elsewhere, EU 65mt, China 211mt andUkraine29mt;BrazilandArgentinecrops,areyetto be planted, but output is forecast at 72mt and 27mt respectively, lower than last year; farmers planting decisions possibly affected by significant fall in corn prices. Market participants watch for new insight into the development of the corn crop this year, where excessive spring rains not only cut corn acreage by 3.4m/acres to 94m/acres, but also delayed plantings. According 


to the Pro Farmer tour of the Midwest, the US crop is well behind normal maturity and vulnerable to harsh hot weather as temperatures rise and ramp-up crop stress in dry areas of the Midwest especially in the west — the group forecast production at a record high of 342mt but some 8mt below the USDA estimate. Professor Darrell Good from the University of Illinois, expects both supply and demand estimates, to be revised as the harvest progresses, but confirms that an era of higher soyabean prices, in relation to corn prices, is still the expected outcome. The prospect of greatly increased corn supplies weighing on feed prices is expected encourage corn consumption to expand by 62mt to 930mt mainly driven by feed demand. Food/industrial use is expected to rise by 22mt to 373mt (food 248mt, fuel 125mt).



Corn use for ethanol is expected to rise by 7mt to 125mt, up on last year and likely to increase output of Distillers Dried Grains and Solubles (DDGS) for feed use to 39mt in 2013/14; exports of DDGS similar to last year at 7–7.5mt — top destinations for almost half global trade in DDGS are China and Mexico due to rising feed demand. Following intense debate on the controversial issue of the use of corn for ethanol, sparked by crop shortfalls last year, the US Environmental Protection Agency (EPA) revised the Renewable Fuel Standard (RFS) requirements this year. The EPA retained the RFS requirement (corn from ethanol) at 13.8Bn gallons for this year, and the overall advanced biofuel requirement (includes bio-diesel) to 2.75 Bn gallons, but reduced the cellulosic requirement from the statutory level of 1Bn to 6m/gallons, bringing the total RFS requirement to 16.55Bn gallons in 2013. US refiners are expected to use 13.8Bn gallons of ethanol this year, a 4.5% increase from 2012 levels, which will increase to 14.4Bn gallons next year, unless the RFS is amended.


The decision welcomed by the corn growers and members of the Renewable Fuels Association, but not by the oil industry, who despite the availability of E15 and E85 blends, have pressed for the statutory RFS requirement for corn from ethanol, to be scaled-back, citing falling gasoline consumption in the US, constrains the level of ethanol to 10%, referred to as the ‘ethanol blend-wall’. The pressing issue of how to increase the quantity of ethanol above the so-called ‘ethanol blend wall’ is addressed in a new study from the Center for Agricultural and Rural Development at Iowa State University entitled,“Price It and They Will Buy: How E85 Can Break the Blend Wall.” The study suggests that pricing E85 low enough to generate fuel cost savings has the potential to quickly increase ethanol consumption, perhaps by three billion gallons over the next year or two. According to the study’s authors, Professors Babcock and Pouliot,“Rather than being a physical barrier to increased ethanol consumption, the E10 blend wall is an economic barrier that can be overcome by increasing the incentive for drivers to use E85 to fuel their vehicles,”


LOWER INPUT COSTS IMPROVES MARGINS FOR FEED PROCESSORS With the cost of corn, almost halved since June, significantly improved the outlook for more profitable meat production, especially for the pig and poultry sectors, that are the most dependent on concentrated feed. Corn for feed use is forecast to rise by 40mt to 557mt, with the US and China accounting for over 70% of the increase. Upbeat assessments from Pilgrim’s Pride and the Tyson Group, who forecast a $500m drop in chicken feed costs from late September, citing the increase in 2013/14 grain supplies would lower input costs (livestock and feed processors have struggled against elevated feed prices for the last three years) as well as decrease costs for cattle and hog producers. “Solid demand and chicken’s relative low pricing compared to the other proteins should make next year, a very, very, good year for chicken.”


Global meat production is anticipated to grow by a modest 1.4% in 2013, to a little over 308mt an increase of 4.3mt — small increase for beef 68mt and larger increases for both pork 114mt and poultry 107mt. Resurgence in beef output is led by the developing countries, with trade in beef rising by 4% to 8.6mt, prompted by domestic shortfalls in the US, Canada and other countries including China — imports to rise by over 20%, as health issues prompt consumers to switch away from poultry to other proteins. Pork output, like beef, is also led by developing countries, principally in Asia — strong demand and government backing, support rising output in China 53.8mt, almost half global output; an increase in the Republic of Korea, and modest growth in Vietnam, the Philippines, Japan, Thailand and Indonesia, curbed by competition from other types of meat. In Brazil, better prices stimulate production while Mexico’s expansion is underpinned by improved genetics and productivity. Russia’s 4% growth is due to reduced feed prices and government support for large-scale farms. Global pig-meat trade expected to fall to 7mt, due to declining Asian demand.


Unlike the beef and pig meat sectors, global poultry production is anticipated to increase in developed and developing countries due to competitive pricing relative to other meats. China’s aim to replace the US, as the main poultry producing country, over the next few years, ran into serious difficulties, following an outbreak of H7N9 influenza strain in March, in eastern China. Consumers shifted to other sources of animal protein and fish, with recovery expected to be gradual over the next six to twelve months. Analysts estimate the cost to the Chinese poultry industry to be in the order of RMB 15Bn (€1.8bn). So far there have been 135 confirmed cases and 45 deaths, while reports indicate the virus may be spread through human faeces. An outbreak of the H7N3 strain in Mexico in April is also causing concern. Elsewhere, production growth is anticipated for the US, EU, Brazil and Russia, and rapid expansion (possibly 8%) forecast for India. While poultry trade growth has stalled since 2010, trade is forecast to increase by 1.5% to 13.3mt in 


2013/14. Brazil, the US and the EU, account for almost three- quarters of global trade, but sales have been static, with most growth evident from second-tier exporters, including China, Thailand,Argentina,Turkey, Chile, the Ukraine and Belarus, expected to continue, with the exception of China.


CHEAPER UKRAINE CORN SUPPLIES PROVE IRRESISTIBLE TO ASIAN BUYERS Cheaper availability of corn from the Ukraine, which has an export surplus of 18–20mt, has prompted many buyers in Malaysia, Japan, South Korea and Taiwan to shift away from US and South America origins, to the Ukraine. Malaysian animal feed millers bought a cargo of up to 45,000 tonnes of Ukrainian corn for shipment in October for around $239/t C&F; South Korean millers bought optional origin corn, likely to be sourced from Ukraine around $233/t C&F, for shipment in January. Ukraine's corn on a delivered basis is around $25/t cheaper than US corn for shipment in October and $10/t cheaper for shipment in January. Brazil’s corn exports are also expected to be very competitive, but concerns with corn leaf blight fungal disease and delays in shipments, due to congestion at ports, further boosted Ukraine sales. China recently approved its first 60,000/t purchase of genetically modified (GM) corn from Argentina, and is expected to more than double its corn imports to 7mt in 2013/14. China has been seeking to diversify its suppliers and has recently added both Argentina and Ukraine to the approved list. CBOT Corn December contract after initially rallying to $4.85/bu (Aug 20) above its multi-year low of $4.45 3⁄4/bu

(Aug 14), on worries about US unplanted acreage, lower yields and stronger-than-expected exports, fell to $4.70/bu (Aug 23). Global corn exports are expected to rise by 5mt to a record 105mt in 2013/14; while stocks are forecast to rise from 123mt to 150mt-tight US stocks expected to more-than-double, from an historic low of 18mt to 46mt by the end of 2013/14.


Goldman Sachs, cut their price forecasts for corn to $4.25/bu on the basis of a record corn output. And, since July, speculators turned bearish on the outlook for corn, for the first time since 2010, as bets on corn’s decline rose. But, despite lower returns to growers, the North American manufacturer and distributor of agricultural fertilizers, CF industries, “projects that 92m/acres of corn will be planted in 2014 — down from 2013 but still historically high” and above the 90m/acres USDA has forecast in their long-term projections.


Larger harvests are expected in all the major barley producing areas EU 57mt, CIS countries 30mt and Middle East 13mt, mainly due to better yields, lifting global barley output to 140mt, 11mt more than last year. Feed use is forecast to rise to 93mt, almost 4mt up on last year, with global trade slightly up to 19mt; Middle East and North African countries responsible for the bulk of imports especially Saudi Arabia forecast to import 7.5mt this year. Like other feed grains, barley values have fallen dramatically- Quotes for French barley FOB (free on board) Rouen $239 (Aug 22); UK Feed Barley Merchant Nov £145–152/t ($226-$237)- (Aug 23).


Increase in the planted area for sorghum, and better crops in the US 10mt, India 5.8mt, Nigeria 6.5mt, Argentina 5.4mt and Australia 2.1mt, to boost global output to 61mt. Rising feed 


demand, notably in Mexico and also in India, Argentina, Nigeria and China to drive consumption to over 60mt, with global trade expected to increase to 8mt largely driven by Mexico’s imports of 3.5mt and other countries including China — where imports are set to double those of last year to 400,000 tonnes — the majority to be shipped (Aug–Nov) to southern China, due to a smaller domestic crop; sorghum is cheaper than corn and, and as well as feed, is also used to produce a liquor ‘baiju’. Chinese purchases from Australia have been strong, with prices well- above those of the US and Argentina; US sorghum-September delivery FOB Nola $244 (Aug 23).



While industry officials and farmers expected, the USDA to raise the US soyabean estimate to above 90mt, the prospects for hot dry temperatures and disappointing crop findings by the Pro Farmer tour of the Midwest, led to a potential downward revision to the US crop to 86mt. Reports from the tour confirmed lower-than-expected pod count rates in many states, and due to delays in spring-sowings-the crop is well behind its normal maturity pace, not helped by cool temperatures for most of the summer, raising concerns that the crop could be vulnerable to hotter temperatures or an ‘early’ or ‘timely’ frost. Preliminaryestimatesfor BrazilandArgentina,stilltobe planted, peg the crops at 85mt and 54mt respectively, which suggests a record output for soyabeans as well as better crops for rapeseed 66mt (EU 20mt, Canada 15mt and China 14mt) and for sunflower seed 40mt (EU 8mt Ukraine 10mt Russia 9mt), palm kernel 15mt and copra 6mt, expected to offset smaller crops of cottonseed 44mt, and groundnut 39mt, and to lift global oilseed output, forecast at a record 493mt in 2013/14.

Global oilseed crush is also expected to rise by 14mt to 410mt, mainly driven by soyabeans and sunflower seeds, with crush expected to rise in China, Indonesia, Argentina, Brazil, Russia, Ukraine, and in other some other countries; while oilseed trade is expected to rise by 11mt to a record 125mt, mostly due to increased imports of soyabeans into China. Global consumption of protein meals to rise 9mt to 273mt, due to increased demand in Europe, US, Asia and Brazil. The increase in the global supply of oilseeds in 2013/14 is anticipated to ease international prices for oilseed and oilseed products, while replenishing stock levels in major exporting countries especially the US. Last year the US was forced, due to a drought-hit soyabean crop, to import up to 1mt of soyabeans, which left soya stocks at critically low levels, of 3.5mt.


Following a late surge in US soyabean sales, USDA raised the forecast for 2012/13 by 3mt, to 62mt. US soyabean sales were helped by logistical problems in Brazil, the main source of China's soyabean purchases. The uptick in Chinese imports coincided with a sharp fall in global soyabean prices, and on the expectations of a strong US soyabean harvest, with shipments forecast to hit 10.5mt during August/September. For 2013/14, USDA forecast China’s imports of soyabean and domestic crush at 69mt and 68mt respectively; given excessive Chinese domestic crush capacity, other analysts suggest a more conservative range for imports of 63–67.5mt.


Singapore-based Wilmar, the largest crusher in China, confirmed in its annual report that pre-tax profit at the oilseeds and grains division of the company, dropped 97% in 2012, amid overcapacity and “dumping of soyabean products by speculative players,” with as much as 51% of China’s 120mt annual soyabean crushing capacity idled because of too much expansion in the industry. Processing soyabeans into meal and oil was unprofitable for six of the past 12 months in China, according to data from Shanghai JC. Margins averaged a negative 169 yuan and swung between losses of 783 yuan and gains of 404 yuan. With declining utilization rates further cutting crush margins, and the set-back to demand for meat from food scares including the H7N9 avian flu outbreak and the discovery of thousands of dead pigs in the Yangtze River and Huangpu River, has left some industry experts forecasting a 3–5% decline in China's feed production in 2013 from the previous year. Soyabean futures jumped to their highest in two months, supporting corn and wheat prices too, as prospects for a US heat-wave, and disappointing crop tour findings, dented expectations for this year’s crop. CBOT Soyabean futures for November, the best-traded lot, rose to $13.68/bu before closing at $13.28/bu (Aug 23), the highest level since June 7. US export bids, soyabeans US-No.2 FOB Gulf $522/t (Aug 22).

India set for record production of oilseeds, thanks to good monsoon season 

This being a good monsoon year for India, the country’s production of oilseeds is likely to be a record, writes Kunal Bose. According to Vijay Data, president of Solvent Extractors Association of India (SEAI),“it may be a little early to talk about the crop size, but going by the progress of the monsoon and sowing in major oilseeds growing states, a crop in 2012/13 outshining all past harvests is very much on cards.” A caveat is, however, there. Rains need to continue at regular intervals for the next couple of weeks for an outstanding harvest. The meteorological office says weather will not disappoint oilseeds growers. Oilseeds in India are grown in two instalments — once in summer and monsoon period and then during the winter taking advantage of the retained moisture in the soil and scattered rains. The ongoing good monsoon, a major break from last season’s drought in many parts of the country, has led to an at least 8% rise in the area under oilseeds. Moreover, early start of rains, in fact about a month ahead of the normal, has enabled farmers to “advance sowing by 10 to 15 days in most centres.” 

Data says “early sowing will result in our starting the harvest by September end instead of the routine mid-October.” The Agriculture Ministry’s estimate that farmers have planted 18.3m hectares under oilseeds crop this summer season is much ahead of the industry’s assessment. Summer-monsoon and winter seasons combined, the country grows oilseeds in 26m to 27m hectares, making it the world’s fourth largest producer after the US, China and Brazil. Differences in estimates of areas under major crops and their production send out wrong signals to the market doing no good to the farm sector.

India’s heavy dependence on imports of edible oils to bridge the gap between demand and domestic supply, a major factor in the country’s worryingly high current account deficit problem, has led the government to incentivize farmers by steadily raising minimum support prices (MSPs) of oilseeds along with other food crops. The government will do well to advance the announcement of MSPs by about a month for farmers to work out what crops will give them the best return. Agriculture scientist RS Paroda says favourable MSPs “could play an important role in bringing more land under oilseeds. As of now, MSPs are evidently in clear favour of rice and wheat compared to oilseeds. This is mainly on food security consideration. Oilseeds too warrant similar consideration.” Nutritionists are campaigning for long that for a balanced diet and health reasons, the per capita use of vegetable oils by Indians need to be much higher than at present. Trade official Govindbhai G. Patel says India’s per capita consumption of 15.8kg (13.10kg on food account and 2.7kg on non-food head) compares poorly with the world average of 25.91kg. A much higher per capita use in China (25kg) is understandable, but Pakistan (22kg) being ahead of India in oils use shows how much leeway the latter has to make up. Between 2001/02 and 2011/12, India’s oils consumption rose 6.2mt (million tonnes) to 16.3mt. This is to further rise to at least 17.3mt in the current season.

That India needs some major breakthroughs in oilseeds productivity come to the fore due to its refiners and traders importing record quantities of cooking oils for two years in a row. According to SEAI executive director BV Mehta, India’s cooking oils imports are to climb to 10.5mt to 10.7mt in the oil year to end October 2013 from 10.2mt a year earlier. In the nine months to July 2013, imports are up 11% to 8.03mt. In each of the remaining three months of 2012/13, imports will range from 800,000 tonnes to 900,000 tonnes, says Mehta. He told Bloomberg that falling value of the Indian currency would “put some pressure on imports of edible oils.” But this being an essential commodity, there is no running away from imports, however big these may be. The country will have general elections in May 2014 and the last thing the ruling coalition led by Congress will do is to antagonize the public by letting cooking oils prices to rise sharply. And the only way to cap prices is by encouraging imports.

In India’s import basket, palm oil, sourced from Malaysia and Indonesia, has a preponderant presence. Palm oil has a share of around 77% of the total Indian imports. Because of this import composition, shipments of palm oil to India in the current season could rise by 800,000 tonnes, say trade sources. At the same time, the US, Brazil and Argentina are selling growing volumes of soybean oil to India, which too is emerging as a significant importer of sunflower oil. Capitulation of Indian rupee vis a vis US dollar began in May and imports till then though running well ahead of a year earlier did not raise much concern as palm oil prices were not finding a bottom for four consecutive quarters. In fact it was in July that palm oil was traded on Bursa Malaysia Derivatives Exchange at its lowest in more than three years.At the third weekend of August, however, Malaysian futures edged forward on expectations that production during the month would fall tightening stocks. The market will be awaiting release of August production and stocks data by the Malaysian Palm Oil Board on 10th September with much expectation. This is because palm oil production rolls into high productivity cycle starting July when Malaysian output was up 18.2%.

Large shortfall in domestic supply besides, its lowest prices among all cooking oils will explain India’s very large imports of palm oil, which is the principal oil in out of home consumption (OHC). OHC has more than 30% share in India’s per capita oils consumption. Excluding the affluent and health conscious, Indians in general are highly price sensitive. This creates scope for blending of palm oil with other oils. India’s growing population and rise in disposable income level will continue to expand the demand for cooking oils. Where will the demand be in 2020? Patel says, demand will rise to 20mt in 2015/16 and then to 24.2mt in 2020/21. It is nobody’s case that domestic production will catch up with demand growth. In a scenario like this, India’s import requirements will grow to 15.5mt in 2020/21. This no doubt is good news for Indonesia and Malaysia.

The Indian oilseeds sector suffers from low productivity. Productivity of soyabean is only 42% of world average, mustard seed 45%, groundnut 66% and sunflower seed 55%. Paroda says low productivity is mainly because of growing oilseeds in rain-fed condition. Biotic stresses, aggravated by climate changes, are also hurting productivity. Last year, Indian oilseeds productivity was down 5% to 1,135 kg a hectare due to insufficient rains and oilseeds production suffered an 8% setback to 30.01mt. Patel rues the fact that “only 24% land under oilseeds has access to irrigation water. As much of oilseeds production is rains dependent (the Indian monsoon lasts about four months), farmers perforce opt for early maturing varieties where the yield is less. While this is the case for summer-monsoon crops, limited irrigation facilities stand in the way of utilizing the entire available land for cultivation. The salvation for the Indian oilseeds sector lies in the government expanding command area of irrigation at rapid rates. 
Brazil expects record-breaking crop of over 200mt in 2013/14 

Encouraged by the continued strong demand for grains, notably soya, as well as by the 20% fall in the value of the Brazilian currency in recent months, which makes exporting more profitable, a grains crop of more than 200mt (million tonnes) is expected for 2013/14, writes Patrick Knight.

This will be 15mt more than the already record 185mt of this year. Although slightly less land will be planted to maize this year, an extra million hectares will be planted to soya, an increase of 4%.

The year 2013 will not see a repeat of last year’s record exports of maize, however, a year when the collapse of the US crop allowed Brazil to export a record 22mt of the grain.

Much of this maize went to Asian countries such as Japan, Thailand and Taiwan, which normally get their needs from the US and rarely buy the grain from Brazil. This takes several days longer to reach them than maize from the US does.

With prospects of a large US maize crop this year, large stocks are building up in Brazil. This has encouraged many farmers to switch from maize to soya for the 2013/14 plantings. A 90mt soya crop is expected 2013/14, 8mt more than

harvested this year, and Brazil could edge past the US to be the world’s leading soya producer, as well as exporter next year. In the past few years, China has become by far Brazil’s leading market for beans, taking more than 80% of the 60mt exported. China has now become an important market for soya oil as well.

Most of the extra soya will be planted in the centre west, notably in Mato Grosso state, as well as in the north east and north. Some of the extra soya will leave from ports on the Amazon river or in the north east. Several key roads in the area previously impassible for most of the year are being paved and new stretches of rail track opened to traffic. As a result, slightly less soya will have to travel 1,500km south along congested roads to the equally congested ports of Santos and Paranagua.

Continuing the trend of the past few years, the area planted to grains in the south and south east of Brazil will increase very slightly, as there is no unused land in the south. Any increase in the area planted to soya there, will be the result of a switch away from maize.

In the centre west, where little maize is planted in the summer, but the winter maize crop has more the doubled in the past few years to more than 45mt this year, the 7% increase in the area planted to soya this summer will be mainly because ranchers are selling low yielding pasture lands to arable farmers.

In the north east, where plantings will be up by more than 10%, most of the increase will involve previously fallow land which, bought by investors with deep pockets.

The fact that the states in the north east area are relatively close to ports such as Itaqui, where major investments will permit loading capacity to rise to at least 5mt in the near future, is encouraging investors. On the other hand, the lack of good roads, a shortage of manpower and the absence of services, are negative factors in this frontier area.

The area being planted in the northern region, on the fringes of the Amazon rain forest, is growing fastest of all, although from a very low base. There too, the paving of roads previously impassable during much of the year, will allow more soya to reach riverside ports. Work on making several rivers navigable has begun, notably by clearing rocks which interfere with navigation when water levels are low.

There is concern that the current high soya price has encouraged the sudden increase in the rate at which the Amazon forest is being cleared of its native trees. Although the rising price of timber may also be an explanation.

The gradual improvement to logistics is expected to accelerate in future. The Brazilian government has finally realized that farm commodities are much more attractive for Brazil than trying to compete with manufactured goods made in countries such as China and others in Asia, where the cost of labour is a fraction of what it now is in Brazil.


The opening of new routes in the north will benefit the soya and increasingly of the maize being shipped to China in increasing quantities, as demand for the feed needed to produce meat, increases there.

Ships take three or four fewer days to reach China from ports in Brazil’s north and north east, than from ports in the south east, where queues of up to 70 ships often build up in May and June.

The widening of the Panama canal, now almost complete, will allow larger ships to use this route, the shortest from Brazil to most Asian countries. More will leave from Amazon river ports such as Santarem, Belem and a new riverside port at Santana, being built in the state of Amapa, to the north of Marajo island, all two or three days less sailing time to China than Santos or Paranagua, or ports in Argentina, for that matter.

A total of 19mt of this year’s massive 45mt winter maize crop has been grown in Mato Grosso state, where the grain was planted on 3.5 million hectares this year. Five times as much winter maize has been grown in Mato Grosso this year, compared with just three years ago.

Winter maize is put in the ground immediately after soya has been harvested, in March or April. Soya beans were planted on about 8.5 million hectares in Mato Grosso as a summer crop 2012/13, which shows the potential the state has for producing more winter maize, should a market for it exist.

Storage capacity in the centre west has not kept pace with the surge in the amount of both soya and maize grown there. There is only enough storage in the area for about two-thirds of the summer soya crop in the area, very little of it on farms

Soya beans have been shipped out more slowly than usual this year, as farmers and traders wait for prices to rise.

This meant there was little space for the new crop maize in warehouses, so millions of tonnes of maize have had to be left out in the open, running the risk of deterioration should the rains come early.