Miller Magazine Issue: 121 January 2020

47 COVER STORY MILLER / JANUARY 2020 veloping markets. Beyond the fundamentals of supply and demand, one of the key challenges for global grains trade in recent years has been increased tensions between major mar- ket players. However, impediments to trade take many forms and non-tariff measures (NTMs) have increased in number and complexity over many years, and today represent one of the key challenges to the free flow of global trade. The impact on wheat trade of NTMs is particularly sig- nificant, accounting for as much as one-third of all such grain-related measures according to some estimates. NTMs are often used as a means of protecting against risks to human, animal or plant health, but there are dan- gers that such measures can be become a more general policy tool to regulate imports. Legitimate or otherwise, NTMs can increase the com- mercial risks to traders, as well as inflate costs related to compliance and administration. Maximum Residue Limits (MRLs) are often cited as one of the major chal- lenges, with traders facing tightening and often diverg- ing standards in different countries. Food safety-related measures are sometimes criticised for being based on societal expectations, rather than science, including in relation to genetically modified organisms, as well as en- vironmental and sustainability requirements. At the very least, NTMs can add cost and complexity to day-to-day business. One of the Council’s overriding aims moving forward will be to continue to promote the expansion of inter- national trade, and to secure the freest possible flow of this trade, including the elimination of trade barriers and unfair and discriminatory practices. MAIZE MARKET: SOUTH AMERICA AS NEW DRIVING POWER! With about one-tenth of world production exported annually, maize is considered to be less exposed to trade issues compared to soyabeans and wheat, where nearly one-half and one-quarter of outturns are shipped abroad, respectively. Nonetheless, trade is an increas- ingly important component of the global maize supply and demand balance sheet, with flows doubling over the past decade, driven by growing feed use in parts of Eu- rope and Asia. Owing to larger deliveries to most regions, global trade in maize in the twelve months to June 2020 is predicted to expand for an eleventh consecutive season, to 168m t, up by 2% y/y. While the IGC projection was boosted recently, in part because of brisker than anticipated pur- chases by South America and Pacific Asia, the figure for annual growth is well below average gains of 10% for the prior two seasons. One should also be mindful of the outlook’s downside potential. Aside from the broader challenges facing global trade, encompassing softening economic momentum, trade tensions, heightened geopolitical risks and rising protec- tionist sentiments, more market-specific factors are seen capping gains in maize consumption, most notably the outbreaks of African swine fever in Asia. Since the first case was reported in China in August 2018, the high- ly contagious disease has spread across Pacific Asia to other major livestock producers including South Korea and Vietnam. Although regional demand for maize has been relatively resilient in the face of the epidemic, due in part to the shift to alternatives to pork, imports by Chi- na and Vietnam are forecast to dip for the first time in several years, while a threat of fresh outbreaks persists. Still, China’s 2019/20 imports could yet surpass expec- tations while the country’s annual purchases are limited by a 7.2m t tariff rate quota (TRQ). Stiffer competition from alternatives is also seen limit- ing maize feeding and imports in some regions, including in the EU and Canada. Arrivals to the former could retreat by one-fifth y/y in 2019/20, to around 20m t, amid more comfortable supplies of feed grain and fodder. Never- theless, the volume will still be the second highest ever, while the bloc will remain the top importer for a third suc- cessive year. Deliveries to the EU, typically mostly from Brazil and Ukraine, saw a very strong start to the July/ June season thanks to attractive international prices and local harvest delays, but the pace has been slowing – cumulative purchases as at mid-December were down slightly y/y. On the export side, the major suppliers have enjoyed mixed fortunes over the past few months, but with prices now beginning to converge. Helped by huge surpluses and depreciating local currencies against the US dollar, export prices in Argentina and Brazil have been highly competitive, persistently undercutting of- fers from the US. As a result, dispatches by the South American suppliers have progressed at a record pace, while US sales have consistently lagged well behind the previous year. However, the latter’s export position has strengthened somewhat lately as weakness in Gulf quotations contrasted with supply-related price gains