Miller Magazine Issue: 115 July 2019

89 MARKET ANALYSIS MILLER / JULY 2019 trade policy uncertainty, Bayer’s Philip Miller points out how new technologies and climate change can shape the grains and oilseeds sectors.” Unheard of a decade ago that you’d be growing corn in Western Canada. A combination of climate change and breeding technology have made that happen.” said Mr. Miller. Jonathan Brooks, Head of OECD Agro-Food Trade and Markets Division expects demand for ag commodities to decrease in the next decade except for dairy. “Dairy demand will be driven by India. The grains and oilseeds sector will be affected by slowing demand growth for the three main uses: food, feed and fuel, leading to a flat to falling price environment. We expect the growth in demand for agricultural commodities to slow dra- matically over the next decade, except for dairy. Per capita income effect seen slowing.” The African food import markets expected to grow from its current USD35 bln a year to USD110 bln by 2025, accord- ing to Eastern Africa Grains Council’s Gerald Masila. India has the largest area under rice and is the world’s largest ex- porter, but comes second in production to China due to re- liance on rains, small scale farming and low mechanization. So main speakers concurred in the opinion that 2019/20 will be managed by weather and Trade War. By that time, the new season is coming. After a re- cord wheat crop 2017/18 TY, Russia decline in wheat exports but remains the leading seller. In 2018/19 TY, wheat exports number expected to be 37 MMT or 21% of total world wheat exports. 2019/20 TY production and exports might be not less. Russia covered world main wheat consumer such as Egypt, Turkey, Bangladesh etc. As per all grains exports, Russia takes the 4th stage with 12% of world trade with more than 42 MMT. India has the largest area under rice and is the world largest trader but comes second in production to China due to reli- ance on rains, small scale farming, and low mechanization. Few days after USDA’s NASS has been published new numbers which emoted market: instead ‘intended to plant’ it was read as ‘planted’ but US’s farmers didn’t realize their intentions because of weather conditions. Market players still don’t understand how much corn has been planted and waiting for renewing clear data. Meanwhile in Brazil dryer weather in Mato Grosso has allowed farmers in the state to make good progress in harvesting their 2018/19 safrinha corn crop. According to the IMEA the safrinha corn in the state was 40.8% harvested on the 1st of Jul. This represented an ad- vance of 16% for the week and it is nearly double last year’s harvest pace of 21.8%. The most advanced re- gion of the state is the mid-north where 53% of the corn has been harvested. Farmers are reporting record corn yields as safrinha corn to be planted during the ideal planting window and later beneficial weather for the en- tire growing season. Some small negative for the crop was poorer quality seed from some of the earliest har- vested corn due to wet weather but grain quality has since improved as the harvest has progressed and the grain elevators have been able to blend the poorer qual- ity corn with better quality corn to meet the standards. The second-largest safrinha corn producing state is Parana. For the end of June, they reported that 34% of the safrinha corn had been harvested. The corn that has not yet been harvested is rated 2% poor, 16% average, and 82% good. Recent wet weather in southern Brazil has slowed the harvest pace somewhat. The state of Parana is expected to produce approximately 19% of Brazil’s safrinha corn production. Conab is estimating the 2018/19 Brazilian corn crop at 97.0 million tons with 70.6 million tons from the safrinha crop (73% of Brazil’s total corn production) and 26.3 mil- lion tons from the full-season corn crop (27% of Brazil’s total corn production). Some private estimates have the 2018/19 Brazilian corn production at 100 million tons or slightly higher. Brazil’s corn exports come primarily from the safrinha production and Brazil is now the sec- ond-largest corn exporter after the United States. IMEA recently indicated that the cost of producing both crops in 2019/20 is on the rise: for high technology corn production to R$ 2,724 per hectare. This would equate to approximately $3.13 per bushel if a farmer produced 92.4 bu/ac on the exchange rate of 3.8 Brazilian reals per US dollar. Farmers in the municipality of Nova Mu- tum, which is located in the mid-north region of Mato Grosso, estimate that if the corn price was $2.15 per bushel, it would take a yield of 110 bu/ac to break even. These yields may seem low compared to yields in the U.S., but virtually all the corn in Mato Grosso is a second crop planted after soybeans. In their May report, Imea estimated the cost of pro- ducing cotton in Mato Grosso in 2019/20 is R$ 9,146 per hectare or approximately $975 per acre. This rep- resents an increase of approximately 2% compared to April. The main reason for the increase was once again the higher cost of inputs priced in dollars. The vast ma- jority of cotton in Mat Grosso is also produced as a second crop after soybeans.