Global Feed Markets: July - August 2012

Grain & Feed Milling Technology is published six times a year by Perendale Publishers Ltd of the United Kingdom.All data is published in good faith, based on information received, and while every care is taken to prevent inaccuracies, the publishers accept no liability for any errors or omissions or for the consequences of action taken on the basis of information published. ©Copyright 2010 Perendale Publishers Ltd. All rights reserved. No part of this publication may be reproduced in any form or by any means without prior permission of the copyright owner. Printed by Perendale Publishers Ltd. ISSN: 1466-3872

Digital Re-print - July | August 2012 Global Feed Markets: July - August 2012

www.gfmt.co.uk

GLOBAL GRAIN & FEED MARKETS

Every issue GFMT’s market analyst John Buckley reviews world trading conditions which are impacting the full range of

commodities used in food and feed production. His observations will inf luence your decision-making.

While the world

wheat crop may be

turning out 15/25m

under initial

forecasts – and as

much as 30/40m

under last year’s,

this market can

at least draw on

abundant carryover

stocks from recent

past, well-supplied

years.

TWO months ago the USDA shocked markets with a massive US maize crop forecast that promised to cap costs across the feed sector and take upward

price pressure off relatively adequate wheat supplies. Two months later, Mother Nature has provided an even bigger surprise – probably the worst US combination of drought and heatwaves since the 1950s – possibly even since the ‘dust bowl’ days of the 1930s. Crop estimates are sliding weekly. Maize production may turn out the smallest since 2006/7’s 267.5m tonnes, more than 100m under the USDA’s original 376m tonne target – perhaps even smaller. Soyabeans could shrink to a four year low of 76/78m tonnes compared with early hopes of 87m.

If that were not enough to contend with, Russia, Kazakhstan, Ukraine and the southeast quarter of Europe are suffering their own droughts and heat pressures, slashing further millions of tonnes off wheat and possibly coarse grain and oilseed harvests too.

Adding insult to injury, parts of north-west Europe have seen record breaking rains, both in duration and volume which, along with some cold temperatures, have put crops back and threatened quality in the two largest supplying countries – France and Germany as well as the UK. Hopefully a break in that weather as we go to press will alleviate this situation at least, rescuing the bulk of milling wheat crops from downgrades to feed – though for the next few weeks, these still hang in the balance. European rapeseed and sunflower crops could also be affected.

India, which a month ago seemed poised to enter the world market as one of the largest wheat exporters, has meanwhile been short-changed with its vital monsoon rains and the government there may be

thinking twice about the scope of its sales campaign amid its ongoing preoccupation with domestic food price inflation. That would be a pity for feed-grain consumers in Asia who have been viewing India as an alternative source of supplies to tight and expensive US maize and shrinking supplies of ‘Black Sea’ (former Soviet country) feedwheat. India’s oilseed crops might also be affected, raising its draw on global oilseed supplies and possibly reducing its oilmeal exports in a year when these too will be sorely needed.

Down under, parts of Australia have also had some worrying dry spells. So has Argentina. Both have reduced wheat plantings this year, suggesting these key exporters will not make up for northern hemisphere crop shortfalls. .

This combination has predictably seen prices soar as much as 40% to 50% across the grain and feed markets, with more than a little help from enthusiastic ‘investors’, eager to reprise the bull market of 2008/09 (when all the major commodities in this sector set record high prices).

Adding fuel to the fire, US and global consumption is not reacting quickly enough to the rise in costs – with maize and soyabeans already trading at their highest ever (details below).

Yet, if the worst-case yield scenarios materialise in the USA for maize and soya, there is no doubt demand will have to be cut radically to prevent

US crop disaster is a game-changer

Grain&feed millinG technoloGy32 | July - august 2012

GLOBAL GRAIN & FEED MARKETS

Every issue GFMT’s market analyst John Buckley reviews world trading conditions which are impacting the full range of

commodities used in food and feed production. His observations will inf luence your decision-making.

While the world

wheat crop may be

turning out 15/25m

under initial

forecasts – and as

much as 30/40m

under last year’s,

this market can

at least draw on

abundant carryover

stocks from recent

past, well-supplied

years.

TWO months ago the USDA shocked markets with a massive US maize crop forecast that promised to cap costs across the feed sector and take upward

price pressure off relatively adequate wheat supplies. Two months later, Mother Nature has provided an even bigger surprise – probably the worst US combination of drought and heatwaves since the 1950s – possibly even since the ‘dust bowl’ days of the 1930s. Crop estimates are sliding weekly. Maize production may turn out the smallest since 2006/7’s 267.5m tonnes, more than 100m under the USDA’s original 376m tonne target – perhaps even smaller. Soyabeans could shrink to a four year low of 76/78m tonnes compared with early hopes of 87m.

If that were not enough to contend with, Russia, Kazakhstan, Ukraine and the southeast quarter of Europe are suffering their own droughts and heat pressures, slashing further millions of tonnes off wheat and possibly coarse grain and oilseed harvests too.

Adding insult to injury, parts of north-west Europe have seen record breaking rains, both in duration and volume which, along with some cold temperatures, have put crops back and threatened quality in the two largest supplying countries – France and Germany as well as the UK. Hopefully a break in that weather as we go to press will alleviate this situation at least, rescuing the bulk of milling wheat crops from downgrades to feed – though for the next few weeks, these still hang in the balance. European rapeseed and sunflower crops could also be affected.

India, which a month ago seemed poised to enter the world market as one of the largest wheat exporters, has meanwhile been short-changed with its vital monsoon rains and the government there may be

thinking twice about the scope of its sales campaign amid its ongoing preoccupation with domestic food price inflation. That would be a pity for feed-grain consumers in Asia who have been viewing India as an alternative source of supplies to tight and expensive US maize and shrinking supplies of ‘Black Sea’ (former Soviet country) feedwheat. India’s oilseed crops might also be affected, raising its draw on global oilseed supplies and possibly reducing its oilmeal exports in a year when these too will be sorely needed.

Down under, parts of Australia have also had some worrying dry spells. So has Argentina. Both have reduced wheat plantings this year, suggesting these key exporters will not make up for northern hemisphere crop shortfalls. .

This combination has predictably seen prices soar as much as 40% to 50% across the grain and feed markets, with more than a little help from enthusiastic ‘investors’, eager to reprise the bull market of 2008/09 (when all the major commodities in this sector set record high prices).

Adding fuel to the fire, US and global consumption is not reacting quickly enough to the rise in costs – with maize and soyabeans already trading at their highest ever (details below).

Yet, if the worst-case yield scenarios materialise in the USA for maize and soya, there is no doubt demand will have to be cut radically to prevent

US crop disaster is a game-changer

Grain&feed millinG technoloGy32 | July - august 2012

COMMODITIES

supplies running out completely well before the end of the season – a so-called ‘negative carryover stock situation.’ In reality, stocks will not be allowed to run out because prices will cut off demand well before that happens.

So the big question being asked as we go to press is at what price will a satisfactory level of ‘rationing’ of supplies occur? For soyabeans there has been talk of prices having to rise to from their recent near $18/bushel toward $20 or more – a prospect that already has soya meal – and thus the rest of the oilmeal complex- trading at record high prices. Maize

prices might have to increase from their recent $8 peaks by a fur ther 25% , i.e. toward the $10 /bushel level or higher.

Wheat, as indicated above, is the odd man out. While the world wheat crop may be turning out 15/25m under initial forecasts – and as much as 30/40m under last year’s, this market can at least draw on abundant carryover stocks from recent past, well-supplied years. In fact the stock/

consumption ratio for wheat at the close of the 2012/13 season that began July 1 is almost 27% compared with under 15% for maize (Sep/Oct season). Even so, once those wheat stocks (about 197m tonnes) start to get seriously diminished, it begs the question,

Grain&feed millinG technoloGy July - august 2012 | 33

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health like solvents, can it be done outside? Alternatively, check the area in question has adequate ventilation before starting and in case of the worst case scenario happening, make sure you have proper emergency arrangements in place and provide rescue equipment.

Getting caught out >But it is often the apparently mundane

and routine things that catch people out. That is why it is so important to constantly check that work areas are free from obstruc-tions such as trailing cables and that buildings are kept in good repair. And remember to think about visitors’ safety as well; once they have set foot on your premises their safety becomes your responsibility. Toilet and welfare facilities should also be provided and cleaned regularly as well as a clean drinking water supply maintained. Microbiological hazards are critical too. It is not just the well known zoonotic infections such as brucel-losis or ring worm, but the need to maintain awareness of the threat of infection from animal wastes and other materials that can harbour hazardous micro-organisms.

Machinery and vehicles >Farm machinery continues to increase

in size, power and sophistication. Often it is complex and highly expensive. Its use needs to be restricted to trained, competent

people. For example, if tractors, farm vehicles and other workplace vehicles fall into the wrong hands, the repercussions can be lethal. Obviously, these vehicles should be properly maintained and suitable training given to all operators.

Remember, in agriculture the most com-mon cause of serious and fatal injuries involves moving and overturning vehicles. Proper guarding is absolutely vital, for exam-ple, to prevent the terrible accidents that can occur with PTO shafts. Incidents occur when the vehicle has been left unattended; always check the vehicle braking system and make sure it is properly maintained. It is also advisable to use the ‘safe stop’ procedure whenever you leave a vehicle; handbrake on and controls in neutral, before turning the engine off and removing the key. Each vehicle and piece of machinery needs to be assessed against actual conditions of use so that safe systems of work can be put in place.

Avoiding falls >Falls are the second highest cause

of death in agriculture, but most fall injuries can be avoided. To stop your farm losing out on time and money as a result of fall injuries, ensure that all work at height is planned and super-vised, with competent people in charge. Falls often happen from roofs, ladders, vehicles, bale stacks, among others, so it

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FEATURE

and other finance houses are raising medium/longer term forecasts for feed and food raw materials and bodies like the OECD and FAO are warning about these factors threatening rising future prices.

To some extent, this is all self-fuelling. However, there is no gainsaying the sheer uncertainty over current maize and soya crop outlooks, the tighter than expected wheat supply and the lack of adequate ‘rationing’ of consumption – mainly for soya and maize. It all gives little cause for optimism on forward grain and feed costs. This deficit will take time to sort out, probably another crop year at least, during which any further weather problems could find markets sensitive indeed.

Main commodity highlights since our last review Wheat - not running out yet

Two key factors have dominated wheat trade in the past two months – the rising value of corn and the collapse of wheat crop prospects in the former Soviet Union. Each leg up for US maize futures is immediately reflected in higher wheat prices in the US, in Europe and on global wheat export markets.

The extent of the downturn in former Soviet country crops has clearly surprised markets thinking back in June that this was no repeat of 2010 when droughts, heat and wildfires slashed the region’s output to just 81m from the previous year’s 114m tonnes. Since then, the total FSU crop forecast has dropped from 98m to 88.6m tonnes but the latest figures coming out of Russia and Kazakhstan especially now suggest the total could again end up closer to 82, even 81m tonnes. The region enters 2012/13 with about 26m tonnes of carryover stocks – about the same as in 2010/11 – so not much real change in that balance. In 2010/11, the main three CIS exporters shipped 13.8m tonnes, down from 35.8m the year before. This season, USDA expects them to export 23m - which now looks rather optimistic - versus last season’s 36.8m. It all sounds familiar. But how important is this export drop to the wheat market? Firstly, world import needs are already seen 13.6m tonnes lower – almost equal to the drop in CIS export availability – due to less demand from a whole range of countries led by the EU, China, Egypt, South Korea and Mexico. However, this lower demand figure might be optimistic too, based in part on reduced feed use of wheat (minus 17m in total). Will that actually happen if maize supplies run dangerously low? Expect to see wheat feed forecasts start to rise in the weeks and months ahead and imports with them, reducing the bearish impact of the shrinking world wheat trade factor. However, even if world trade in wheat does increase, the current season’s supply from the main

recently traded on the markets (again, see below for details) – with demand still to be rationed, with funds and other ‘outside’ speculators possibly only partly aware of the gravity of these supply shortfalls, the grain and feed markets are sailing in uncharted waters. Prices reflect that, getting more volatile in late July at these high levels.

Big political decisions may have to be made – like adjusting the US renewable fuel mandate to curb some of the 125m tonnes of US maize that now gets sucked into the bio-fuel sector annually. The government has for the moment ruled this out but if the crop is as small as many experts now think, expect that decision to be revisited fairly soon. As one of our US sources put it, “at the stroke of a pen, this could send corn prices tumbling.” Feed and other ‘traditional’ consumers of corn will rightly demand some action along these lines. Remember, as recently as 2005, the US only used 33m tonnes of corn for ethanol, before Mid-eastern political strife and Hurricane Katrina helped the US decide to use this feedstock to cut dependence on foreign fossil fuel fuel supplies.

In addition, recent press repor ts are surprisingly confident t ha t t he l a t t e r objective – US fuel independence might now be achievable without constantly raising use of food commodities for this purpose , ins tead using shale gas and other reserves. One

report this month reckoned these domestic sources could provide the US with at least 100 years of complete fuel self-sufficiency. Of course, that will not happen overnight and it would seem unfair and impractical to call time on corn ethanol industry without warning. However, in the context of these emerging alternatives, the constant need to supply more corn for global feed and food consumption, the need to control food price inflation etc, one might be forgiven for wondering if corn ethanol is becoming an unaffordable luxury for which the writing may be on the wall.

Speculators are meanwhile taking more interest in the grain and oilseed futures markets as investments, an unwelcome development for the consumer, given their propensity to exaggerate price spikes. Banks

how will markets behave without that large cushion if crops happen to under-perform again next year?

The prospect is not fanciful. Not only do Australia and Argentina run the risk of dry weather, farmers in the USA – the largest single country producer and exporter of wheat – are already starting to worry whether the legacy of this devastating drought may linger into the autumn when next year’s winter wheat crop is sown.

These three producers are, of course, all key contributors to the quality end of the bread wheat spectrum. On the plus side, Australia and Canada might expect better pre-harvest weather than the last two years, raising the quality component of their next crops.

One unusual side phenomenon of this bull

market is the way that wheat – despite that relatively looser stock/use ratio – has outpaced gains in the much tighter maize market. Since June 1, Chicago wheat futures’ first delivery month has been up by almost 55% at its recent peak compared with gains for maize of 43% and soyabeans of 33% over the same period (though soya is 53% over its 2012 low of $11.60/bu).

This is partly due to wheat having been sold short earlier by speculators looking at the large carryover stock and partly due to ideas that wheat consumption will boom as a replacement for maize and, to a lesser extent, soya.

With f inal US (and other foreign) crop losses still to be fully counted – maybe millions of tonnes better or worse than the estimates

Grain&feed millinG technoloGy34 | July - august 2012

and other finance houses are raising medium/longer term forecasts for feed and food raw materials and bodies like the OECD and FAO are warning about these factors threatening rising future prices.

To some extent, this is all self-fuelling. However, there is no gainsaying the sheer uncertainty over current maize and soya crop outlooks, the tighter than expected wheat supply and the lack of adequate ‘rationing’ of consumption – mainly for soya and maize. It all gives little cause for optimism on forward grain and feed costs. This deficit will take time to sort out, probably another crop year at least, during which any further weather problems could find markets sensitive indeed.

Main commodity highlights since our last review Wheat - not running out yet

Two key factors have dominated wheat trade in the past two months – the rising value of corn and the collapse of wheat crop prospects in the former Soviet Union. Each leg up for US maize futures is immediately reflected in higher wheat prices in the US, in Europe and on global wheat export markets.

The extent of the downturn in former Soviet country crops has clearly surprised markets thinking back in June that this was no repeat of 2010 when droughts, heat and wildfires slashed the region’s output to just 81m from the previous year’s 114m tonnes. Since then, the total FSU crop forecast has dropped from 98m to 88.6m tonnes but the latest figures coming out of Russia and Kazakhstan especially now suggest the total could again end up closer to 82, even 81m tonnes. The region enters 2012/13 with about 26m tonnes of carryover stocks – about the same as in 2010/11 – so not much real change in that balance. In 2010/11, the main three CIS exporters shipped 13.8m tonnes, down from 35.8m the year before. This season, USDA expects them to export 23m - which now looks rather optimistic - versus last season’s 36.8m. It all sounds familiar. But how important is this export drop to the wheat market? Firstly, world import needs are already seen 13.6m tonnes lower – almost equal to the drop in CIS export availability – due to less demand from a whole range of countries led by the EU, China, Egypt, South Korea and Mexico. However, this lower demand figure might be optimistic too, based in part on reduced feed use of wheat (minus 17m in total). Will that actually happen if maize supplies run dangerously low? Expect to see wheat feed forecasts start to rise in the weeks and months ahead and imports with them, reducing the bearish impact of the shrinking world wheat trade factor. However, even if world trade in wheat does increase, the current season’s supply from the main

recently traded on the markets (again, see below for details) – with demand still to be rationed, with funds and other ‘outside’ speculators possibly only partly aware of the gravity of these supply shortfalls, the grain and feed markets are sailing in uncharted waters. Prices reflect that, getting more volatile in late July at these high levels.

Big political decisions may have to be made – like adjusting the US renewable fuel mandate to curb some of the 125m tonnes of US maize that now gets sucked into the bio-fuel sector annually. The government has for the moment ruled this out but if the crop is as small as many experts now think, expect that decision to be revisited fairly soon. As one of our US sources put it, “at the stroke of a pen, this could send corn prices tumbling.” Feed and other ‘traditional’ consumers of corn will rightly demand some action along these lines. Remember, as recently as 2005, the US only used 33m tonnes of corn for ethanol, before Mid-eastern political strife and Hurricane Katrina helped the US decide to use this feedstock to cut dependence on foreign fossil fuel fuel supplies.

In addition, recent press repor ts are surprisingly confident t ha t t he l a t t e r objective – US fuel independence might now be achievable without constantly raising use of food commodities for this purpose , ins tead using shale gas and other reserves. One

report this month reckoned these domestic sources could provide the US with at least 100 years of complete fuel self-sufficiency. Of course, that will not happen overnight and it would seem unfair and impractical to call time on corn ethanol industry without warning. However, in the context of these emerging alternatives, the constant need to supply more corn for global feed and food consumption, the need to control food price inflation etc, one might be forgiven for wondering if corn ethanol is becoming an unaffordable luxury for which the writing may be on the wall.

Speculators are meanwhile taking more interest in the grain and oilseed futures markets as investments, an unwelcome development for the consumer, given their propensity to exaggerate price spikes. Banks

how will markets behave without that large cushion if crops happen to under-perform again next year?

The prospect is not fanciful. Not only do Australia and Argentina run the risk of dry weather, farmers in the USA – the largest single country producer and exporter of wheat – are already starting to worry whether the legacy of this devastating drought may linger into the autumn when next year’s winter wheat crop is sown.

These three producers are, of course, all key contributors to the quality end of the bread wheat spectrum. On the plus side, Australia and Canada might expect better pre-harvest weather than the last two years, raising the quality component of their next crops.

One unusual side phenomenon of this bull

market is the way that wheat – despite that relatively looser stock/use ratio – has outpaced gains in the much tighter maize market. Since June 1, Chicago wheat futures’ first delivery month has been up by almost 55% at its recent peak compared with gains for maize of 43% and soyabeans of 33% over the same period (though soya is 53% over its 2012 low of $11.60/bu).

This is partly due to wheat having been sold short earlier by speculators looking at the large carryover stock and partly due to ideas that wheat consumption will boom as a replacement for maize and, to a lesser extent, soya.

With f inal US (and other foreign) crop losses still to be fully counted – maybe millions of tonnes better or worse than the estimates

Grain&feed millinG technoloGy34 | July - august 2012

How far will wheat consumption in feeds rise as users look for alternatives to tight and expensive US maize?

Will a disappointing Indian monsoon curb its new export programme – those supplies are needed to fill in for shortfalls from ‘Black Sea’ wheat producers.

Will dry weather worries recede in Australia and Argentina – and will Australia’s quality improve after two years of weather-damaged crops?

How high will maize prices go? However, well supplied, wheat can’t ignore this trend.

Maize could lose 100m tonnesNobody two months ago could have

expected to the US maize crop to sink as low as some of the recent estimates under serious consideration. Demand will have to be rationed by price and pressure, as mentioned above, is growing to take some of the strain off traditional users by reducing demand from the relatively newer corn ethanol sector.

Crops in Ukraine and Russia ( joint output about 32m tonnes) are also under stress from drought and heat and could go lower, fur ther crimping supplies for export. On the plus side, Europe itself has a good crop on the way of an estimated 65.5m tonnes versus last year’s 64.6m and less than 56m in 2010. That should take some of the pressure of domestic feed users but prides will still rise in sympathy with the US/global market.

concerns, Russian exporters have continued to make the running on recent world import deals, making the cheapest offers. Indeed in early August, the US, EU and Canada have hardly got started on their 2012/13 sales (the US is even running behind targets).

Still, that hasn’t stopped Chicago wheat futures rising to four year and European milling wheat to 17-month highs – prices that could yet look cheap in a few month’s time if corn strength continues to fee this bull market.

KEY FACTORS IN THE MONTHS AHEAD

Are all the ‘Black Sea’ wheat crop losses yet counted?

It has just adequate supply but will the EU have adequate quality – weather key this month

A big US crop with plenty of hard red winters and improved hard spring

wheat prospects may help contain breadwheat prices globally.

exporters looks adequate at this stage. The USA for one, the world’s leading exporter, can sell the world a fair amount more than the 32.5m forecast by USDA (plus 4.4m tonnes) without drawing down its still large carryover stocks to risky low levels. We can also expect Canada, Europe and Australia (which still has large stocks) to maximise export opportunities. Even the CIS countries may yet surprise the markets with a more exports than the trade expects (somewhere around the 18/20m mark?). Remember that in 2010/11 – the Ukraine and Russia responded to the shock of crop losses with what many saw as an excessively cautious export policy. Carrying into 2011/12’s year of crop recovery (and accumulating some stocks too), this did little for the region’s reputation as a reliable supplier. Remember too that the CIS region, especially Russia, has big future plans to expand its grain trade, especially into Far East Asia where export port infrastructure is being built up at considerable cost. Provided domestic cereal/bread prices can be kept under reasonable control – and their crops don’t fall too much further - CIS governments might yet take a bolder approach to export opportunities than markets are assuming, with a view to future trade, especially toward the latter end of this season if their 2013

crops show more promise. It’s interesting to note that, even amid all their current crop

Latest 2012/13 balance = USDA Main producers (000 tonnes)

2010/11 2011/12 2012/13

China 115.2 117.9 118

EU 135.7 137.4 133

FSU 81.1 114.4 88.6 ..or 81/82?

Australia 27.9 29.5 26.0

Canada 23.2 25.3 26.6

Argentina 16.1 14.5 12

WORLD TOTAL 651.1 694.7 665.3 or 657/658?

World end stocks 197.2 197.1 182.4 or 176/177?

Grain&feed millinG technoloGy36 | July - august 2012

COMMODITIES

Grain&feed millinG technoloGy July - august 2012 | 37

On the other hand, dough rising can also be controlled through specific chemical or physical agents. Fluctuations in the raw material quality are easier to balance in the extrusion process. In addition, it is possible to accurately adjust the texture, colour, and particle size.

Moreover, extrusion is a highly energy-effi-cient process. The much lower water contents in the product formula in comparison to tra-ditional production, in conjunction with short retention times, ensures low energy costs, especially during subsequent drying. The energy costs per ton of finished product – based on

a capacity of two metric tons per hour – are twice as high in the traditional process as in the extrusion process. In addition, the extruder offers the flexibility required to produce related products such as baking peas and croutons or even bread chips on a given processing line by selecting an appropriate configuration.

Extrusion increases value generation

Even very dark flours (low-grade flours) and wheat bran are suitable as raw materials for processing by the extruder. Low-grade

flours as well as wheat bran are as a rule sold at low prices to the feed manufacturing industry. The extruder enables also such ‘by-products’ to be upgraded into high-grade foods. Both by-products can be processed into breakfast cereals, but are also used in a modified form as ingredients in other foods. Bran flakes are highly popular today. Extruded wheat bran, for instance, can fetch double the price of wheat bran in its native form. The opportunities that wheat bran presents as a high-grade food are significant. The high dietary fiber content of wheat bran gives the product an ‘aura of health’.

The basis for making all the products mentioned above is grain flour. This is what the extru-sion process has in common with conventional bakery proc-esses. The difference however lies in the dough texture. The dough framework of conven-tional bakery goods is based on proteins such as gluten and pen-tosans. The texture of extruded products is based on starch. The raw material must have a starch content of at least five to ten percent in order to ensure a stable end product texture. The protein content may be low, that is, below ten percent. Flours with such protein contents are typi-

cally unsuitable for baking. As the flour price is – among other factors – also influenced by the protein content, low-protein flours are less expensive than high-protein ones. The extruder therefore allows also inexpensive flours to be processed.

More InforMatIon:Christopher Rubin, Bühler AG

Tel: +41 71 9551111Fax: +41 71 9553851Email: [email protected]: www.buhlergroup.com

Extruded Bran Sticks – a by-product transformed into valuable food

Grain&feed millinG technoloGy July - august 2012 | 17

FEATURE

COMMODITIES

Grain&feed millinG technoloGy July - august 2012 | 37

to sow and grow it. However, that relief will not be coming to the markets until the spring of 2013. In the meantime, we can expect soya meal prices to remain frisky, especially if there is any hint of a Latin American weather problem. Fortunately, back-to-back drought years in the region tend to be rare.

Soya costs will also be determined by demand from the top buyer China and other leading importers of beans and meal. With soya meal hitting record high prices, global demand may be curtailed below the 181m tonnes forecast by USDA (+5m for the second year running after leaps of 9m in both 2009/10 and 2010/11). China – 28% of world consumption - has been slow to cut its demand but recent signs suggest it may be on the turn lower. Second largest market Europe is expected to consume about 30m for the second year in a row. Some Asian and other buyers may cut back, however.

In terms of total oilmeals, there are no obvious replacements for the soya shortfall with most oilseeds producing similar crops to last year. On the other hand, growth of world demand for protein meals in total slowed over the past season to 3.8% from the previous year’s 5.1% and the coming season is expected to see growth of just 2.3%. Depending on how supply and price pan out, growth could be lower still, providing some restraint in this bullish market.

KEY FACTORS IN THE MONTHS AHEAD How low will the US soya crop go?

At what price will demand be rationed? It’s not happening at $17/bu!

Chinese consumption and timing of imports remain and important influence on soya and other oilmeal costs

What size this year’s EU/CIS rapeseed and sunflowerseed crops? Probably not enough to much sway the bull trend in the dominant soya sector.

How much will Latin American soya producers plant this autumn? They could help put the brakes on escalating soya/oilmeal costs but it’s a long wait till they harvest in Q1 & Q2 2013!

H o w w i l l speculators respond i f the US/global maize a nd soy a a nd w o r l d w h e a t crops cont inue to shrink? Believe i t or not , their reaction so far has been descr ibed as ‘restrained’ by many pundits. But

they won’t stand by as onlookers if the prospect of another 20% or 30% on prices looks viable.

Oilmeals – supply curbed by falling crush growth

Weather in August will determine whether the coming US soya crop is 80m or 75m tonnes and will thereby decide whether consumers end up paying $15/16 or $20 -p lu s per bushel for supplies. If the crop does fall to the lower end of the scale, prices will be f irmer

across the entire oil meal complex. On USDA’s assumption of an 83m tonne

crop, world soya meal production in 2012/13 (starting this October) will reach 183.5m tonnes against last year’s 177m. Even that will entail drawing down quite a lot of carryover stocks from last year’s crops. Clearly the US situation could push the figure well below 180m.

The best hope for some price restraint is that South American soyabean producers, who plant from October onwards, will sow a far larger crop. The price incentive is there, they have the land. All they need is the weather

KEY FACTORS IN THE MONTHS AHEAD

How low will the US maize crop go – 300m, 270m, even lower? This factor will probably over-ride all else and influence markets right through to the following harvest in 3rd quarter 2013, probably preventing major price reversals

The contribution to world corn supplies from Latin America, Europe, the former Soviet countries and India

Will the US government trim the renewable fuel mandate/corn ethanol use – probably if the crop estimate contracts much further and pipeline stock requirements demand it.

Almost forgotten amid the US crop disaster, still potential for China to continue much larger than normal maize imports.

Will global economic recession curb meat/consumption in some developing countries, cap feed grain demand and help anchor rising grain and oilseed costs?

Maize exports – main suppliers

2010/11 2011/12 2012/13

USA 45.3 48 40/30/20?

Argentina 15.2 14.5 15.5

Brazil 11.6 11 12.5

Ukraine 5 14 14

Others 14.8 9.5 15.5

Grain&feed millinG technoloGy38 | July - august 2012

3 good reasons for developing the Siberian market: ü Novosibirsk, Altai and Omsk have the largest arable lands in Russia ü Livestock breeding makes up over a quarter of the total volume of Russia ü A quarter of Russian milk production comes from Siberia

AgroExpoSiberia 2012: October 30 – November 2, Novosibirsk/SiberiaInternational Trade Fair for Agriculture and Animal HusbandryIFWexpo organises since 1992 trade fairs in Russia: www.ifw-expo.com

Grain&feed millinG technoloGy July - august 2012 | 39

THE BEST WAY TO PREDICT THE FUTURE IS TO CREATE IT. —Peter F. Drucker

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Hygiene, Health and Safety

Wheat and the Screenroom

Mill Processes and Performance

Product Handling, Storage and Distribution

Flour

Power and Automation

Flour Milling Management

Course Fees 2012-13

The cost per module is: £320 (+ VAT at 20% where applicable)

includes postage, textbook and exam registration

nabim Members: £210 per module (a discount of £110)

Non-UK Companies: £270 per module (a discount of £50)

An indispensable tool for developing the knowledge and

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A clear presentation of the industry and process, in 7 modules.

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Grain&feed millinG technoloGy July - august 2012 | 39

THE BEST WAY TO PREDICT THE FUTURE IS TO CREATE IT. —Peter F. Drucker

Turning ideas into opportunities.PROGRESSIVE FEED PROCESSING

What will tomorrow bring

wenger.com

BElGIUm TAIWAN BRASIl CHINA TURkEY INDIA

Why retire a workhorse that’s still doing the job?

Simply put, your old dryer may be costing you a bundle. In fact, today’s Wenger dryer could save you enough in operating efficiency alone to cover the replacement of your old dryer. Additionally, our new advanced dryer designs give you less potential for cross-contamination and bacteria build-up; feature new direct drive spreaders for level product bed and uniformity of final prod-uct moisture; and afford quicker, easier inspection and cleaning.

Contact us now. With new concepts and fresh initiatives, we’re ready to help you develop the product possibilities of the future.

Wenger12_Feed_210x147mm.indd 1 6/21/12 3:47 PM

Hygiene, Health and Safety

Wheat and the Screenroom

Mill Processes and Performance

Product Handling, Storage and Distribution

Flour

Power and Automation

Flour Milling Management

Course Fees 2012-13

The cost per module is: £320 (+ VAT at 20% where applicable)

includes postage, textbook and exam registration

nabim Members: £210 per module (a discount of £110)

Non-UK Companies: £270 per module (a discount of £50)

An indispensable tool for developing the knowledge and

competence of flour millers and their colleagues.

A clear presentation of the industry and process, in 7 modules.

Dedicated tutor support given to every student, providing

professional guidance throughout the course year.

To enrol or find out more, contact:

nabim 21 Arlington Street London SW1A 1RN UK Tel: +44 (0)20 7493 2521 Fax: +44 (0)20 7493 6785 email: [email protected] www.nabim.org.uk

Flour Milling Training Internationally recognised distance learning programme

Developed for millers by industry professionals

Studied every year by hundreds of millers worldwide

Seven steps to success

www.gfmt.co.uk

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In this issue:

• Generating added value by extrusion

• Health & safety in the working environment

• Powder Containment

July - August 2012

• Nutritional impact of pellet binders

• Technological expertise

Understandenzymerecoveryinpelletedfeed

• A fresh perspective on UK milling wheat

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