On Tuesday 14th October, the annual HGCA Grain Market Outlook conference brought together leading industry figures to address the world’s global grain market. Peter Kendall (Chairman, Agriculture and Horticulture Development Board) led the opening address, remarking that, ‘changing perspectives’ was a fitting title for the analysis that was to take place.

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Changing Perspectives: GFMT visits the Home
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3. F 30 | November - December 2014 GRAIN&FEED MILLING TECHNOLOGY
Changing Perspectives:
GFMT visits the Home Grown Cereals
Authority (HGCA) Grain Market
Outlook Conference
On Tuesday 14th October, the annual HGCA Grain
Market Outlook conference brought together leading
industry figures to address the world’s global grain
market. Peter Kendall (Chairman, Agriculture and Horticulture
Development Board) led the opening address, remarking that,
‘changing perspectives’ was a fitting title for the analysis that was
to take place.
Kendal stated that the Agriculture and Horticulture development
board remains committed to helping global supply chain businesses
and local farmers alike. Notably, ‘there are changes we all face with
supply and demand, weather events, and particularly again this year
when we look at geo-politics’ he said.
Also formally unveiled by Kendall as part of his opening address
and elaborated upon by Jack Watts (lead analyst, cereals and oilseeds
AHDB/HGCA) was the new AHDB ‘Grain Market Daily’ report,
the latest addition to the AHDB market intelligence offering, which
ensures the very best information in a fast format.
“A lot of global eggs in a very small basket”
These are interesting times regarding the global grain market
outlook. The world is currently in its second consecutive year of
global grain surpluses. Coupled with this the weather has been kind,
‘it’s been a brilliant year for farming. It just hasn’t been a great year for
farmers’ kendall added. Overall, 720 million tonnes of wheat is fore-cast
to be produced globally in 2014/15. However, this is equivalent
to the growth in demand that has been steadily creeping in due to
the westernisation of diets in China and India.
Maize currently accounts for two thirds of the world’s feed grain
supplies with production accelerating. At present, global maize pro-duction
is set at a staggering 980 billion and the forecast outlined in
the opening address was that it is predicted to reach the one billion
tonne mark.
The global grain markets are of course influenced therefore by
what happens with maize and what happens in the UK market. 70
percent of maize exports are currently in the hands of three coun-tries;
the US, Brazil and Ukraine. This means that we are ‘looking at
a situation where a lot of global eggs are in a very small basket’ said
Kendal. This he warned could have serious repercussions, a chink of
light might be around the corner, but also, the poor weather could
also have a big impact.
Grain Market Outlook-Quality versus quantity
Jack Watts, lead analyst, Cereals and Oilseeds, HGCA pro-vided
an overview of the global grains perspective commencing
with the global situation, the EU situation and the UK situation,
moving on to narrow down as to how the UK is interfacing with
the rest of the world.
At present, we are experiencing a second consecutive surplus,
stabilising the grain stocks after the extremes of 2012/13 when
weather and disease issues caused a global shortage. ‘Volatility
really does matter’ he said; we are facing a massive opportunity
for UK farmers that can be managed by sophisticated tools and
controls over our supply chains’.
With regards to the production of coarse grains and wheat,
the market knows the demand is growing and we are looking at
the second consecutive surplus of global grains. Latest FAO data
suggests there is over a 20 percent grains to stock use ratio on
coarse grains. This is the highest level it has been in at least ten
years giving a huge amount of confidence to the stock market.
However, Watts quickly pointed out that we are only ever
one weather event away from the drawing down of grain stocks.
World grain production forecasts predict that there is likely to
be a strong performance by Northern Hemisphere exporters.
However, the situation is not rosy everywhere as outlined by
Watts, import regions such as North Africa and the Middle East
should remain as the key targets for exporters. Soon the focus will
return to the Southern Hemisphere where the weather is going
to be hugely important.
by Olivia Holden and Roger Gilbert

4. GRAIN&FEED MILLING TECHNOLOGY November - December 2014 | 31
The growing dominance of maize
– One billion tonnes by 2016?
The prospects for wheat and maize production around the world
are currently changing; according to the USDA we could be looking
at a record level of maize production of one billion tonnes by 2016.
In recent years, 2010, 2011, 2012, we became very used to maize
being a ball driver in the market, however, disappointing US maize
yields really tensed up the supply of feed grains around the world.
The dominant maize exporters, the US, Argentina, Brazil and
Ukraine count for about 80 percent of global maize exports. If we
compare that to the wheat market, the top four exporters only
count for 63 percent of the market thus concentrating the risk in
fewer parts of the market.
The focus remains on the US as a key player and a dominant
force in supply of this feed grain to the world market. In light of the
US maize demand, there has been a recovery in exports to absorb
extra production as ethanol plateaus.
China is one area we currently need to be aware of; currently
China’s policy towards maize is changing explained Watts. In terms
of soybean where there is no room to be self sufficient, China is
generally very happy to interact with the world market. On the
other hand, when it comes to wheat and rice, where there is a huge
desire to be self-sufficient, China dips in and out of the market as
and when required. China is however becoming more and more
accommodating of the fact they will have to interact with the global
grain market. We saw a lot of this last year after China had imported
over three and a half million tonnes a yield of maize, at this point in
time it stands at only 73,000 tonnes. In all, China is very good in the
feed grain market and has a huge amount of influence, but it is not
consistent and it very much depends on what the need is.
"The market no longer has to
be concerned about spot
supply of feed grains, however,
the market remains more
than aware that as market
countries grow - we are only
ever one weather event
away from not being able
to meet global demand"
Jack watts, Lead Analyst, AHDB/HGCA
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5. F 32 | November - December 2014 GRAIN&FEED MILLING TECHNOLOGY
(Left to Right) Dr Julian McGill, Senior Economist at LMC
International, Sergey Feofilov, Director General of UkrAgroConsult,
Dr Patrícia Luís-Manso, Agriculture Research Director for Platts
and Jack Watts -Lead Analyst (Cereals & Oilseeds) AHDB/HGCA
The global wheat situation
Although it is not possible to generalise about the wheat situation
this year, the headline figure suggests that the world is looking at
record wheat production met by growing demand. Although we are
starting to see demand creep in and levels build up, this is still giving
us a surplus and a fairly stable stocks to use ratio at the headline
level. It is ‘quality not quantity that is the issue’ said Watts. Looking
at Canada in particular, the issue will be one of logistics. ‘Canada is
our latest, almost case study example of challenging logistics around
the world’ said Watts.
The global grain trade is set to increase by 20 percent, however,
demand growth is currently dislocated from production growth.
Logistics are required to deliver and move such grain. Over time,
logistics, both port logistics and internal logistics are going to be an
incredibly important factor of delivering price signals to the farm.
India and China are set to take a back seat this year. Farmers
there will experience different price signals to the rest of the world.
Indian wheat is set to become more of a ‘political’ beast, as opposed
to a ‘market’ beast due to minimum support prices and the National
Food Security Act.
Global Wheat importers and exporters
The focus tends to always be placed on where Egypt have
imported from, however, as Watts stated, the import market is
incredibly diverse and Egypt only represents a very small part of that
market. China remain in the top ten, yet, as outlined above and In
Watt’s analysis, self-sufficiency does remain to be the number one
objective. We should expect to hear more about Iran over course
of the next year. Due to the changing political situation going on in
Sergey Feofilov,
Director General of UkrAgroConsult
Peter Kendall, AHDB Chair
that part of the world it is becoming more acceptable to western
importers.
On the export side of things, since 2007 there has been a growing
global obsession when the world nearly ran out of wheat. There is
a keen interest to understand, ‘where are all the stocks?’ remarked
Watts. The US remains an area of intense interest; the world loves
US wheat stocks described by Watts as ‘essentially the comfort blan-ket
for the world’. If there is ever an issue we are generally assured
by the fact that we can buy US wheat, we know what it is and that
we can get it exported.
It is forecasted that there might be a rise in export stocks in the
US however we cannot have a certain level of confidence about this
at the present time. The rest of the season must progress forwards
first. Eyes are focussed upon Australia and El Nino weather impacts.
It was a dry September and as a result, Australian wheat crop is not
going to fall in half. The possible flip side to El Nino could potentially
mean a break in the long running drought for key US states who
are producers of Soft Red Winter, Hard Red Winter and Hard Red
Spring. Wetness back in these US states could spike up production.
Global Barley Perspectives
There is a contrast In terms of supply and demand for barley.
Production has been lower and the stocks to use ratio is actually
looking quite tight. The UK produced 7 million tonnes of barley for
the second consecutive year. We have not done so since 1996/1997.
Placing barley in its global context means that Australia is more
important to the barley market than the wheat market; however,
there is a reluctance of Australian farmers to come forward before
they commit. In Canada, barley has been the biggest loser. It was
typically a powerhouse In terms of production and exports. This is
now coming to an end. There is now a niche developing in the global
market with regards to barley that someone could exploit.
Overall, it is likely that increasingly competitive crops, such as
oilseeds and maize, could be marginalising the barley crop. Policy
could also be an influencing factor. Wheat export policies pushed
Argentine farmers toward barley from wheat. Now, the ‘clampdown’
on the barley area and disappointing results for Argentine farmers are
reversing the trend. China is prioritising wheat and maize production
over barley. Chinese feed barley imports are being supported by
artificially high maize prices, making barley a cheaper alternative feed
grain.
The European Grain Market
Europe has experienced a wet summer, however, this has pro-duced
a ‘double whammy’. Firstly, from a yield point of view France
and Germany, benefitting from the summer moisture have been
able to boost crop yields. However, in turn, this has caused issues
for French wheat quality. Although 20 million tonnes was produced,
John Tipples (Chairman, HGCA) stepped down after seven
years as HGCA chairman. With a farming background,
having attended the annual HGCA Grain Market Outlook
conference for over a decade he stated that he hoped the
conference ‘played some small part in helping farming
businesses with the challenges faced in the global market
place’. ‘The grain industry is one that works well together,
it is a vibrant industry and although this year is going
to be tough facing lower prices, the outlook has to be
positive when growing feed for an increasing population’

7. F 34 | November - December 2014 GRAIN&FEED MILLING TECHNOLOGY
only seven and a half million tonnes of wheat produced in France
was grade one French wheat, about a third of what we normally see
produced. There is 17 million tonnes of grade three wheat in the
market place up from 4 or 5 million tonnes previously.
Therefore, there has been a real shift in European wheat quality.
There is usually always an assumption that French wheat is at an
exportable standard and this year is really challenging that. Therefore
how much wheat crop has been downgraded to feed is an issue,
although, what can be defined as feed wheat and milling wheat is a
‘constantly moving grey area’ remarked Watts. The issue for the EU
market is not one of quantity, but one of quality. Have strong yields
come at the expense of quality? Furthermore, Non-EU exports are
likely to be higher priority for EU exporters this season.
The UK situation
Watts confirmed that In terms of the UK situation, if there would
ever be a story in years to come regarding the grain market for 2014
it will be how UK wheat production has moved from one extreme to
the other. There has been a huge surge in production. 2014 has seen
the largest upswing in UK wheat production we have ever seen year
on year. This will set the challenge and gauntlet for what the market
has to achieve over the remainder of this marketing season. With
regards to barley, this year there are higher opening stocks, with a very
big surplus to deal with. This will be the biggest supply and demand
balance to deal with in modern times in a post-intervention era. The
UK also remains competitive on the world stage when it comes to
barley exports.
Key messages for the year ahead
Overall, there has been another big surplus this year. ‘The market
no longer has to be concerned about spot supply of feed grains’
said Watts. However, the market remains more than aware that as
market countries grow ‘we are only ever one weather event away
from not being able to meet global demand’.
However, the market will only be able to respond as and when
that weather event happens. ‘It is not possible to speculate’ said
Watts, the only way forward is to utilise effective risk management.
On the whole, Watt’s analysis demonstrated that the wheat market
has become a complex picture, however it is impossible to generalise
when it comes to forecasts.
The success ahead in 2014/2015 has already been determined,
effective price management in conjunction with this is what’s needed.
Also lying ahead of us is the issue of un-marketed grain and how we
are going to price it, ‘information is the key and coupled with this,
timely info’ confirmed Watts.
Ukraine-It’s Importance and influence
Sergey Feofilov (Director General, UKrAgroConsult) spoke about
‘the importance and influence
of Ukraine in global grain mar-kets’.
With Ukraine being one
of the major key exporters,
the world is currently await-ing
to see what the political
developments will mean for
the grain market outlook in
2015. Ukraine is currently the
third biggest exporter of corn
in the world, the sixth biggest
exporter of wheat, the fifth
biggest exporter of barley (in
2008-2010 Ukraine was the
world’s number one) and is
currently the number one big-gest
exporter of sunflower oil.
However, the key chal-lenges
for Ukraine are cur-rently
climate warming (the
climate can be very unpredict-able),
political risks, low global
development rates, intensified
competition and the adequacy
of export logistics. Ukraine is
located ideally for exports and
the climate and soil are almost
idea for farming. In 2013,
approximately 6 million tonnes
per hectare was produced,
in comparison to almost ten
million tonnes per hectare
produced by the US, and just
less than eight million tonnes
per hectare in Argentina. The
grain outlook for 2014/15 for
exports is set at approximately
33, 430 thousand tonnes, up
on 31, 920 thousand tonnes
in 2013/14. The main export
regions in 2013/14 by des-tination
saw 46 percent of
the total 19.5 million tonnes
going to the EU, 14 percent
to Egypt, and 11 percent to
Korea. Other destinations
included Japan, Iran, Israel,
Tunisia, and China.
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