NEWCOMERS CHALLENGING UNITED STATES’S SUPREMACY OF AGRICULTURAL TRADE

Agricultural trade grew significantly between 2000 and 2016 — from $570 billion to $1.6 trillion, FAO reveals in its The State of Agricultural Commodity Markets.  While traditional food exporting giants like Europe or the United States remain top agricultural exporters in value terms, newcomers are challenging their supremacy, report says.

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With climate change poised to alter significantly the ability of many world regions to produce food, it is expected that international trade in agricultural products will have an increasingly important contribution to feeding the planet and responding to climate-related hunger flare-ups, says a new report by the UN’s Food and Agriculture Organization (FAO). Food production in countries in low latitudes — many already suffering from poverty, food insecurity and malnutrition — will be hardest hit, the report notes. Regions with temperate climates, on the other hand, could see positive impacts as warmer weather lifts agricultural output.

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The report also provides an overview of the performance of the international agriculture trading system in recent years, and the direction in which it is headed. While fast agricultural trade growth between 2000 and 2008 gave way to contractions during 2009-2012 and then to sluggish growth ever since, the bigger picture is that in value terms agricultural trade grew significantly between 2000 and 2016 — from $570 billion to $1.6 trillion. Much of this was driven by economic expansion in China as well as increased global demand for biofuels. Notably, the profile of emerging economies in global agricultural trade has greatly increased, with rising per capita incomes and reduced poverty levels. This has boosted food consumption and imports and led to gains in agricultural productivity, driving up food exports, not only to markets in the industrialized world but also to other countries in the Global South.

Indeed, while traditional food exporting giants like Europe or the United States remain top agricultural exporters in value terms, newcomers are challenging their supremacy. For example, between 2000 and 2016, Brazil increased its share in global food trade from 3.2 to 5.7 percent, China leapt ahead of Canada and Australia to become the world’s fourth most important agricultural exporter, and Indonesia and India increased their agricultural exports enough to place them among the world’s top ten biggest food exporters (8th and 10th, respectively). Over the same period, the combined share in total export value of the United States, the European Union, Australia and Canada declined by ten percentage points.

IGC: GRAIN PRODUCTION TO SHOW
A SECOND CONSECUTIVE DECLINE
The International Grains Council (IGC) announced its monthly grain report on the 27th of September. At 2,072 million tons, world total grains (wheat and coarse grains) production in 2018/19 is forecast to show a second consecutive annual decline, as increased output of maize (+27 million tons) and sorghum (+1m) is seen being outweighed by reductions for other crops. After a difficult growing season in a number of regions, wheat production is expected to retreat by 41 million tons y/y, while the smallest barley harvest in six years is envisaged.

According to the report, the forecast for world total grains (wheat and coarse grains) production in 2018/19 increased 9 million tons higher m/m (month-on-month). The new forecast is declared as 2 billion 72 million tons. Nearly all the adjustment is for maize, including increased figures for the US (+6.1 million tons), the EU (+2.7 million tons) and Ukraine (+1.2 million tons). The wheat crop is placed a fraction bigger m/m, with an upgrade for Russia partly offset by a cut for Australia. A 7 million tons m/m boost for grains consumption is also mainly for maize. While lifted by 6 million tons m/m, the predicted end-2018/19 carryover of 544m would be down by 64m y/y (year-on-year), led by declines for maize (-38m) and wheat (-17m). After roughly offsetting alterations for wheat and maize, the trade forecast is little changed m/m, at a record 369 million tons.

With fieldwork underway in the northern hemisphere, the Council’s early assessment for wheat planting prospects for the 2019/20 crop is for the first area gain in four seasons, encouraged by the potential for better returns. However, additional rains would be beneficial in some regions. In contrast, lower prices and difficult weather conditions could contribute to a reduction in winter rapeseed sowings in the EU.
Upward revisions for the US, Canada and China lift the projection for 2018/19 world soyabean output by 4 million tons, to a peak of 370m, the 9% y/y gain stemming from prospects for big or record crops in major producers. The net increase in availabilities is channelled to higher figures for consumption and carryovers, the latter predicted to be up by nearly 30% y/y, mainly on heavy accumulation in the US. The outlook for trade is raised by 1 million tons, to 155m, up fractionally y/y.

BARLEY HARVEST TO SHRINK TO SIX-YEAR LOW
With projected gains for food, feed and industrial uses, global total grains consumption is seen reaching a new high of 2,136 million tons (+29m y/y), as increases for maize (+35m) and sorghum (+2m) are only partly offset by reductions for other grains. World stocks are forecast to contract for a second season, by 64 million tons to a four-year low of 544m, with China accounting for over half the total. Aggregate carryovers in the major exporters are predicted to drop to 140 million tons (-35m y/y), including falls of 14m in the EU, 10m in the USA and 6m in Russia. The ratio of world stocks-to-use could be down to 25%, the least in five seasons and about three percentage points below the five-year average. A predicted record level of world trade includes new highs for maize and barley, but declines for wheat and sorghum.

US AND BRAZIL RUNNING
TOWARDS RECORD IN SOY
World soyabean trade in 2017/18 is seen rising by 4% y/y, to 154 million tons, as reduced shipments to China are more than offset by bigger deliveries to other markets, including Argentina, the EU, North Africa and Near East Asia. Prospects for 2018/19 remain tentative given that the southern hemisphere planting season has only just commenced. Nevertheless, Brazil and the US are likely to thresh record crops, and with output in Argentina anticipated to rebound, global production could expand by 9% y/y, to 370 million tons. While uptake may rise further on gains in Asia and South America, inventories are predicted to grow by nearly 30% y/y. Much of the increase stems from significant accumulation in the US, where the 2018/19 carryout is seen more than doubling, to 22.8 million tons. Despite a likely decline in shipments to China, trade is projected to edge up to 155 million tons.

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RICE PRODUCTION COMES
CLOSER TO 500 MILLION
Linked to heavy shipments to markets in Far East Asia, principally Indonesia and the Philippines, more than offsetting softer demand from Africa and China, global rice trade in 2018 could expand by 1% y/y, to a record of 48.1 million tons. Although output in China is set to decline, the 2018/19 world outturn is tentatively predicted to reach a high of 491 million tons, including good main crops in leading exporters. With food use of rice seen trending upward, aggregate end-season stocks may contract, including the first reduction in China in 12 seasons. Trade is anticipated to climb in 2019 on stronger demand from Africa and Asia.

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We also suggest you to read our previous article titled "DRAWDOWN IN WORLD GRAIN STOCKS".

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