Global Grain & feed markets – May | June 2012

‘Between-crops,’ consumers hope for big feed grain recovery

MARKET dynamics are swinging firmly toward 2012 crop and demand prospects – and what a mixed bag the preliminary estimates present!

If all goes to plan, feed consumers could be cheering an 86m-tonne recovery in world coarse grain (mainly maize) production, two thirds of that coming from within the USA. That would be quite some rebound after the past season’s 45m tonne crop decline. It would not only leave plenty of room for expanding coarse grain consumption around the globe. It would also allow for some significant replenishment of rock-bottom stocks, removing much of justification for the past year’s record maize costs. Indeed some pundits are already talking of a possible return to the sort of maize prices markets grew used to over the last decade or two – perhaps 25% cheaper than present levels!

But will there be surprises on the demand side of the ledger too? Will China, for example, reveal a far larger than expected feed raw material deficit as many analysts have been forecasting, mopping up some of these extra supplies? Will cheaper maize prices also stir demand from other importers large and small? And just how much maize will be fed to livestock or used for ethanol fuel within the USA itself? In these uncertain economic times, opinions differ on these factors too, especially on the feeding prospects.
Wheat output, in contrast, is expected to drop next season by 17m tonnes on weather-reduced planted/harvested acreage. But with stocks of 197m tonnes to carry in from 2011/12 – and wheat feeding to livestock likely to decline too (as consumers switch back to maize)  – does a crop fall of this size really matter that much in the grand scheme of things?

Further forward in 2012/13 consumers are also promised perhaps 35m tonnes more soyabean production after this season’s 19m tonne drop, the bulk coming from Latin America where drought robbed farmers of a similar amount this year. Will that increase (if it comes off), mean lower soya costs eventually, as distant futures markets suggest? Or will the world’s mega-buyer, China, step in on a larger scale in this market too, keeping soya prices frisky? Either way, soya costs will be freer to stay firm in the absence of competition with very little overall supply growth expected for the alternative oilseeds that make up almost two thirds of world production.

Mother nature, as always, will have the final say on crop yields and production which, as last year showed, could look quite different to the forecasts once the last combines have come to rest. Right now, the biggest producer, the USA, is getting mostly favourable weather for possible record yields and earlier harvests. Europe has been severely challenged by winter frosts and droughts yet abundant rain might yet rescue decent crops in most member states. Further east there are dark mutterings about drought re-emerging in the former Soviet Union – not on the devastating 2010 scale but maybe enough to trim yields and current (already much lower than last year) wheat crop forecasts. China (the world largest wheat producer and consumer) also has some dyness issues while Argentine wheat farmers are cutting back sowings due to disappointing returns and government interference in their export market. Canada has sown 11% more, Australia maybe 4-5% less wheat but both might have better quality if they avoid last year’s untimely rains – which would be good news for millers..

Overall, if pundits like the US Agriculture Department are right, 2012/13 may well shape up as a much better supplied year for maize and soyabeans and an adequate one for wheat. That will certainly offer less justification for hiking feed costs – or even keeping them as high as they are now.

Taking into account the improving supply forecasts, the US grain markets have been dropping since our last review and have recently traded close to the lows of last December. Although wheat supplies are seen edging down (rather than up like maize and soyabeans) next season, Chicago wheat futures have actually seen the biggest dip, trading close to two year lows (with export prices for US hard wheats already down to those levels). Given the ongoing massive world wheat supply, this might seem a long overdue reaction with some distance yet to go.

Cheaper wheat has been hastened by a reversal in maize prices as traders start to believe that a massive, record US crop of the latter grain really is possible, given expanded sowing plans, early planting and currently ideal weather. As pointed our in earlier reviews, tight old crop markets have forced US maize prices to trade for many months at highly unusual premiums to wheat (even hard red winter wheat with its higher nutritional value). This phenomenon has sustained even the more abundantly supplied soft wheat markets at prices that would normally be considered out of synch with the loose fundamentals.

The notable exception to the latter has been Western Europe, where last year’s (and likely this year’s too) weather-reduced crop and lack of supplies from the Black Sea countries has kept wheat prices up on their own merits and above the world market (led by the US, Canada, Argentina, Australia). Indeed in some of the EU northern regions, especially Germany, feed wheat has been scare enough to sell at higher prices than milling wheat. Paradoxically, even while this has been going on, some better supplied member states (notably the UK) have been able to sell feed wheat to the USA. This underlines the global nature of the 21st Century commodity market, albeit with some help from rock-bottom ocean freight costs earlier in the year.

The past couple of months have also seen a marked increase in pessimism over the Euro-zone’s debt crisis and its potential to spread contagion to broader global markets. As we go to press the burning issue has shifted from if to when Greece might be forced out of the EZ, to the impact on Italian, Spanish and Portuguese debt, Spanish bank solvency, global economic activity etc etc. Along with signs of faltering Chinese growth and wavering US economic data, this has been a tremendous drag on all the markets – stocks, financials, energy – even the supposedly more ‘fire-proof’ agricultural commodities with their assumed solid demand as food staples.

At this stage it is hard to divine which is having – or will have – the greater impact on grain and feed markets – the potential for lost physical demand for commodities, the decline in liquidity of banks and hedge funds who speculated in agric futures from 2008/09 onward and have lost money on reversals and their other numerous bad bets, or the sheer negativity of ’sentiment.’  Whichever combination of these, the picture is one of uncertainty, nervousness and – despite the overall bias toward depressed raw material markets – a continuing outlook for price volatility across the grain and feed sector.
Main commodity highlights since our last review

Wheat supplies not quite so flush after all?

The past season saw the biggest world wheat crop ever as farmers responded to strong prices with larger sowings (+1.5%) and yields recovered from the series of weather events that slashed output around the globe in 2010.  Most of that crop recovery was in the former Soviet Union although India the EU, Canada, Australia, China and several smaller producers grew larger crops too, offset only partially by a few declines in countries like Argentina and Iran. Consumption also expanded to record high levels, mainly because so much more wheat was used in animal feeds to replace tight and expensive maize – in Europe, the USA, Asia, China, the CIS and others. Just how much more has been hotly debated over the past year but it does now seem the feed total was much larger than originally thought. In its latest appraisal, the USDA estimates feeding reached 146.7m tonnes – a rise of 31.3m or 5%. That’s almost 10m tonnes more than forecast in April and results in total wheat demand matching production. World carryover stocks this June 30 will not increase by 12.6m tonnes as expected earlier but remain about the same as last year. Yet at 197m tonnes, these are still huge by any measurement, equal to 28.4% of consumption or almost 15 weeks’ supplies.

The USDA has recently released its first take on 2012/13 world grain balances and they make interesting reading. As other analysts like the International Grains Council have been forecasting, the USDA expects 2012 wheat output to decline, by about 2.5% or 17m tonnes to some 678m. This assumes a 22m tonne reversal for Russia, Ukraine and Kazkhstan combined and declines of 5.4m tonnes for the EU, 3.5m for Australia, 2m for Argentina, offset only partly by a 6.7m increase for the USA, plus 4.1m for India, 2.1m for China and 1.74m more for Canada.

Global consumption of wheat is expected to fall back too next season, by about 8m tonnes, as various countries use more maize (assuming the big maize crop does come through as planned). However, world wheat stocks will decline by about 9m tonnes to 188m.
Taking these preliminary figures at face value, there is nothing overtly bullish for prices. Exporters like the USA, Australia, Canada, India – even Russia – would still have relatively big crops. Some exporters – chiefly the US, Australia, India and the former Soviets also carry in comfortable or in some cases (India and the US) larger than normal stocks.

These early pointers to ongoing adequacy of supply combined with weakening maize prices (maize strength has been the main support for wheat this season) and negative events in the world economy to drive down wheat prices to their lowest levels of the year during May. However, as we go to press that trend is at risk of a reversal to higher levels as weather shifts begin the question some of the more liberal crop estimates. Chief areas of concern are Russia and Ukraine – possible drought losses on top of quite severe winterkill (mainly in Ukraine), the EU – worse than expected winterkill and an earlier drought, the effect of which might be partly reversed by a ‘Monsoon’ spring – and lastly the US southern/central Plains where the top might be shaved off hard red winter yields by a spell of hot dry weather.

At this stage, potential losses to the 678m world crop scenario are not necessarily large – maybe 5m or 10m tonnes – but enough to constrain the complacency that was emerging about 2012/13 supplies. The reaction from markets has been exaggerated partly by the fact that the bellwether Chicago wheat futures contract had been heavily sold by speculators who, suddenly realising their exposure to weather shifts, greater than expected old crop demand or rallies in maize and soya, rushed to cover some of their ‘short’ position. This has recently recouped some of the losses in US prices and pushed European prices a little higher too. A weak euro has also played in to firmer EU milling wheat prices but that could reverse if the Euro-zone does get its act together.

Wheat is still plentiful as witnessed by the competition for ‘non-routine’ import orders from the big Middle East buyers and other milling wheat consumers. Not only are further countries like Canada and the US competing for Arab business; so are distant suppliers like Argentina and Australia, able to take advantage of still unusually low ocean freight rates. Even the former Soviet countries, supposedly concerned about approaching crop setbacks and ‘over-selling’ their remaining 2011 supplies, seem to be keen to remain in the contest for ‘opportunity’ custom, rather than end up with too much old crop stock at harvest time. On top of that, India has record stocks – four times and more its target level for state reserves. With yet another bumper harvest on the way, it could easily add 10m tonnes or much more to the global export mix, without jeopardising its own food security/inflation containment plans.

Despite this apparent plenty, wheat prices will probably not drop much more until the Northern Hemisphere harvest picture clears – for both wheat and maize. Until the US and other big suppliers prove their forecast large corn crops, the risk remains that wheat could again be in more demand than usual for the feed industry.

KEY FACTORS IN THE MONTHS AHEAD

  • How far will ‘Black Sea’ regional wheat crops decline this summer?
  • To what extent will EU winter wheat crops affected by the Jan/Feb freeze and the March drought recover amid recent plentiful rain?
  • Summer weather in the Northern Hemisphere where most of the world’s wheat is grown – yields nearly always affect crop size more than shifts in sown acreage.
  • A big US crop with plenty of hard red winter variety and improving spring wheat prospects will help hold down breadwheat prices globally.
  • How far will wheat consumption in feeds decline world-wide if the US, other major producers produce bumper maize crops?.
  • India  is likely to export far more wheat than expected earlier in the year, competition for more traditional exporters and helping to fill some of the ‘Black Sea’ supply gap.
  • Progress of sowings in key quality bread wheat supplier Australia and pre-harvest weather there – will it improve after after two years of rain-damaged crops?
  • The price of maize – it has been supporting wheat in the face of burdensome stocks for over a year.
  • Maize leads coarse grain comeback–
  • but the crop isn’t grown yet

The USDA’s first 2012/13 supply/demand forecasts dealt a body blow to maize bulls, predicting the US crop would rocket by 62m tonnes to a new record 376m. Even with a 23m tonne jump in US domestic use (mainly in the feed sector) and a 4.5m tonne increase in exports, that would still raise carryover stocks to more than double this season’s tight ending level at about 48m tones. The US maize crop – which has gone in early on a massive 96m acres – possibly more – still needs to be proved. Weather has been mostly benign so far. As we go to press, there are some concerns about possible hotter drier forecasts as crops approach early pollination which works better under cooler, damper conditions but such talk is par for the course at this time of the year. World corn supplies will also be boosted by bigger crops in Argentina (+3.5m tonnes), Canada (+1.9m), former Soviet countries (+1.5m), South Africa (+1.5m) and China (+1.9m). In total, world corn output could increase by 75m tonnes, putting it about 25m tonnes ahead of world consumption (despite a 54m tonne increase in the latter).

What issues might interfere with this prognosis for ample supplies and, logically, lower corn costs? Apart from US and European weather in the coming summer months, we need to keep an eye on demand developments. After the USA, the main area of demand growth for maize in the coming year will be China, seen adding 12m tonnes to its consumption which at 200m tonnes would be 7m tonnes ahead of local output. China has already emerged as the main growth factor in 2011/12 demand, importing 5m tonnes compared with less than 1m in 2010/11 and very little in previous years. Some sources put its feed grain deficit as high as 20m tonnes but that is probably far too high, given China’s ability to use quite a lot of its own lower grade wheat crops in animal feeds. (It has already used about 10m tonnes more wheat this season, avoiding the need to import the 10m tonnes of maize some US observers predicted a few months ago). Still, China’s regular purchasing forays on world markets will probably offer some support to US and world maize prices going forward.

Outside of China, the US and the big South American producing countries, demand for maize is expected to bounce back in a number of moderate/smaller importing countries in response to larger supplies and cheaper prices (perhaps not as low as the $3-4/bushel consumers got used to for most of the last ten years but still a lot cheaper than in the past season). The exception may be Mexico, a big US customer, which expects a better domestic crop.

Overall, the USDA expects this scenario to drive down the US seasonal average maize price to $4.20/$5 per bushel (with a mean of $4.60) compared with the past season’s $5.95/6.25 ($6.10). The futures markets meanwhile point to a drop from the current $6.35 to about $5.50 in a year’s time. One or two of our US trade sources are far bolder in predicting cheap maize prices back in the $4/bu area if these big supply forecasts come to pass. That would not be impossible but it would require wheat prices to backtrack too and both of these major grains would need a very favourable summer.

World barley production is also seen edging ahead in 2012/13, to 135.4m from the past season’s 133.7m. The increase is mainly in Europe and would have been significantly higher if not for the severe winterkill suffered across the EU earlier in the year and the subsequent stress from droughts. As the earlier harvested crop, barley has had less time than wheat to recover amid the recent welcome return to wet weather but will probably have been stabilised at least.

World barley consumption is seen rising slightly, putting it just ahead of production and resulting in stocks staying fairly tight through the coming season. With slightly higher rye crops and oats output more or less unchanged, global coarse grain supplies will be able to increase their share of world cereal feed consumption to about 84%, cutting wheat use in this sector by about 14m tonnes.

KEY FACTORS IN THE MONTHS AHEAD

  • Just how big will the US maize crop be this year – big enough to double carryover stocks and maybe cut another 25% off international maize prices?
  • Final size of Latin American crops
  • How much corn will West Europe & the former Soviet countries sow on failed winter wheat lands?
  • Possibly bigger than expected Chinese maize/feedgrain import requirements – currently seen anywhere between six and 20 million tonnes – enough to change the direction of US/European and international prices.
  • Will global economic recession curb meat/consumption in some developing countries, cut cap feed grain demand and help hold down grain and oilseed costs?
  • We continue to hear reports that speculators are taking money out of commodities – less fervent investment by this sector has contributed to lower grain and feed raw material costs in recent months.

Oilmeals

World oilseed crop estimates have shrunk by another 8m tonnes since our last review to around 237m – a big drop from the previous season’s 265m tonnes. Most of the latest decline is in soyabean production in South America where drought and heatwave damage earlier in the year turned out much worse than expected. Overall, soyabean output is expected to drop by the equivalent of about 22m tonnes of soya meal although the effect will be mitigated considerably by crushers drawing down relatively large carryover stocks from the previous crop. Despite this tightening of supplies, US soya meal prices have not risen much on domestic markets and soyabeans, after a brief rally to about $15/bushel in late April, have actually dropped to around $13.50 recently. This is a largely technical move, caused by speculators having overbought the futures markets and leaving themselves exposed to ‘profit-taking’ corrections. It also reflects the highly negative sentiment on global financial markets in the wake of the Euro-zone crisis which many pundits think will spill over into the global economy, causing weak demand for commodities linked to meat production. While this has helped restrain soya prices on the world market, it is not good news for consumers who want to see buoyant demand for meat products and feedstuffs. Another factor is the chronically weak euro, robbing consumers of any benefit when dollar prices for soya products dip.
Tightening Latin American soya supply puts increasing onus on the US to produce a decent crop this summer. Current estimates suggests it has sown more than the USDA predicted in March and early planting raises the prospect of good yields. However, the US crop will only fiull a small part of the gap left by disappointing South American crops. This will show in the market price later in the season when Lat-Am crops start to run out and import demand focuses more heavily on the US crop around third or fourth quarter 2012. Soon after that, markets will also be closely watching what the South Americans will sow in the autumn. A good soya price will be needed to encourage maximum acreage and much better weather than the past year’s to top up supplies in the spring of 2013. In the meantime, hopes of supplementing supplies rest on the East Europeans and the former Soviet countries pulling off better sunflowerseed crops and Canada producing a possible record rapeseed crop. However, even if these come to pass, world oilseed output is likely to fall well short of demand into 2013, drawing down stocks and keeping a fairly firm undertone under costs of protein meals.

KEY FACTORS IN THE MONTHS AHEAD

  • How much land will the US plant to soyabeans this spring – 75m, 76m acres or more? Consumers will have no trouble disposing of a bigger crop.
  • As they continue to shrink, how small will South America’s soyabean crops end up?
  • Chinese consumption and timing of imports will drive global protein demand
  • EU/CIS sunflowerseed plantings – to what extent might these start to compensate for disappointing rapeseed crops and global soya shortfalls in the meal sector?
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Strength, quality & experience

CASE STUDY: Chronos BTH forges long-term partnership with Weston Milling

Chronos BTH’s special working partnership with leading Australasian milling specialists Weston Milling is going from strength to strength.
Following extensive trials and two-year technical collaboration, eight CHRONO-BAGTM OML BF Series open-mouth bagging have been shipped to Weston’s flour mills in Sydney, Australia and

Auckland, New Zealand.

This is part of a major upgrade program for Weston involving their five mills in Australia and three in New Zealand. When completed, the overall bagging project, valued at over six million euro, will include not only the integrated bagging lines, but also palletisers and stretch hooders. The Weston project incorporates a combination of OML-1030 BF single spout lines, OML-2060 BF dual spout lines and OML-3090 BF triple spout lines.

 

A century of milling heritage

Weston Milling is one of the oldest and largest cereal processors in New Zealand and Australia, with a proud milling heritage dating back over 100 years. It operates at the heart of the agricultural industry with activities that stretch from ‘paddock to plate’.
Weston Milling has a strong reputation and tradition of quality. The company is committed to be the leading cereal conversion business in Australasia by fulfilling customers’ needs through the supply of reliable, high quality products and services. The company engenders the same ideology for flour milling, which has proved successful for thousands of years.
As a result, Weston Milling has exceptionally high expectations from its milling plant equipment and this investment with Chronos BTH is the first major change in bag packaging equipment at the mills since the mid-1980s. Craig Gough, divisional engineering manager, Weston Milling, is clear on his company’s philosophy, “we certainly don’t make decisions to upgrade our plants lightly and only expect to change-out critical equipment every 25 years or so. We have gone through a dedicated and exhaustive decision process over the past two years to evaluate the best technical solution available on today’s market.

“A critical blend of factors including reliability, performance, future proof capabilities and support, both local and remote. Technical merit is considered first and then cost. We are prepared to pay a premium for the best technical solution for Weston’s requirements. Ultimately Chronos BTH was selected from a shortlist of four international companies. Chronos BTH personnel have been very professional in understanding our requirements and the extensive trials carried out at their plant in Holland were extremely successful.”

 

Beyond bagging

The extensive project has gone beyond the bagging lines to encompass a complete redesign of Weston’s bag styles and types. Joint collaboration has also seen the evolution of Chronos BTH’s new and highly innovative BlockTop™ bag closing technique for flour and other food related industries. This provides a very strong, yet easy to open seal arrangement at the top of the bags.
Robbert van den Biggelaar, sales director, Chronos BTH, has worked closely with Weston personnel throughout the project and is extremely positive about the partnership, “This has been a challenging, yet highly rewarding two way experience for our engineers and other team members. In parallel Paul Woosley and his team from our exclusive agent in the region, Australian Prime Fibre Pty Ltd. (APF), have played a pivotal role throughout the project.
“We are delighted to have met or exceeded all Weston’s criteria and their input to the project has been invaluable. Their decision process and strategy dovetail perfectly with our philosophy of ensuring we design and develop the world’s most technically advanced, high-reliability bag packaging equipment. It is very reassuring and encouraging to be working with a company that recognises the importance of technical endeavour and expertise,” says Mr van den Biggelaar.

 

The filling process

The OML BF features highly effective, dust controlled ‘bottom-up’ filling techniques. Chronos BTH has pioneered developments in this type of filling for dusty powdered products such as flour and this proprietary technique ensures high accuracy, whilst also bringing important reductions in bag costs.
At the start of the filling process, an empty bag is automatically placed on the filling spout. The filling spout moves to the filling position then moves progressively down the bag during the filling cycle. This controlled process, which maintains a minimum distance between the filling point of the vertical screw and the product in the bag significantly minimises dust emission and reduces product aeration. The vertical screw is frequency / servo control driven, allowing all powdery products to be filled hygienically, accurately and quickly.
Another key advantage of the OML BF product range is its cost effective, modular design, offering the capability of one, two or three filling heads per line with corresponding bagging speeds of 300, 600 or 900 bags per hour. Depending on customers’ current and future requirements, lines can be built with redundant filling head frames allowing highly cost effective future proof upgradeability.
The bagging lines are a critical part of the Weston operations and as Craig Gough concludes, “our mills operate almost continually throughout the year and therefore technical support is a very important part of the overall project. We are looking forward to the bagging line installs together with the palletisers and stretch hooders.”
Facts and figures
Merger and acquisitions by Premier Tech have combined the companies Chronos Richardson (established in 1881), BTH, Richard Simon, Howe Richardson, Forberg into today’s Chronos BTH, bringing together more than a century of technical innovation, application experience and expertise. Today Chronos BTH has modern, state-of-the art production facilities in the Netherlands and Italy, supported by skilled engineering teams focusing on innovative research and development programmes. Experienced sales and service offices in the Netherlands, Germany, Italy, United Kingdom and France help provide high-tech, valued added products and comprehensive customer services.
Chronos BTH, together with its Premier Tech Chronos sister companies in the Americas and Asia, is one of the world’s leading manufacturers of packaging solutions in the field of Industrial Flexible Packaging. With production facilities in Canada, the USA, Thailand, India and China, the company group is active in more than 50 countries, supported by a long established network of Customer

 

Service Specialists.

Chronos BTH is a single point of contact for all of its customers’ packaging and material handling needs. Each piece of equipment is designed, manufactured and integrated in-house. Chronos BTH is recognised worldwide for its customised and innovative weighing, bagging, baling, palletising and load securing solutions for a broad spectrum of industries. It offers manual, semi-automatic, fully automated or turnkey solutions for bagging a diverse range of bulk materials in the food, feed, chemicals, minerals and horticulture industries. Its bagging portfolio includes open-mouth bagging systems, valve bagging systems, horizontal and vertical FFS systems as well as filling systems for flexible and rigid containers.

New weighing software for UK co-operative

CASE STUDY: Weald Granary, United Kingdom

Following increased demand for wheat tonnage and with a growing membership, the Mereworth, Kent based co-operative Weald Granary has installed a Precia-Molen GeneSYS™ Enterprise Software system as part of an on-going development programme.

Owned by a membership of local farmers, Weald Granary is a non-profit making organisation functioning as a grain drying, cleaning, handling and marketing facility. Serving Kent, Sussex, Surrey and Essex, the facility is one of a number of co-operative stores in the UK and Scotland and is part of the Openfield Store Network (OSN).
Weald Granary chose the Precia-Molen GeneSYS™ Enterprise Software because it met four criteria:
To bring the entire vehicle unloading operation, including contract validation, sampling, laboratory testing, weighing and discharge on two Precia-Molen weighbridges under the control of a single PC network.

To be fast enough to cope with the increased traffic in ‘harvest time’ and ensure that they have all been tested and accepted for delivery.
Flexible enough to adapt to any future needs of Weald Granary, allowing new commodities to be added to the database if necessary.
To be fully supported with technical back-up and updates.

John Smith, Managing Director, Weald Granary, says, “The installation of the GeneSYS™ Enterprise System is proving an important part of our ongoing site expansion and development program here at Weald Granary. We increased storage capacity at the Mereworth site by 26 percent for harvest 2010 with no additional staffing requirement.”
With the impressive facilities currently handling approximately 100,000 tonnes per annum from 192 farmers alongside an annual projected growth of 4-5,000 tonnes from a projected 10-12 new members, the Precia-Molen GeneSYS™ Enterprise system has changed the fundamental time resource completely, throughout the stores, administration, marketing and stock control of the products.

 

A smooth transition

Currently employing seven HGV staff and five store personnel, the Weald Granary team are supplemented by casual staff in harvest time (8-10 weeks); At its peak 3,500 tonnes per day is delivered in from farmer members to the facility with each member requiring quality confirmation and weight data from the granary.
For the Weald Granary project, Precia-Molen installed one surface mounted weighbridge-type VS400, capacity 50,000kg, one RFID reader, ticket printer and a dialogue display. This has smoothly accommodated the transition to phase eight, providing total farm management through the integration of the weighing system with the stock management system, allowing the farmers easy access to their data through the web portal.

 

An assurance scheme

One of the key features of the GeneSYS™ Enterprise system is that it maintains the traceability of assured combinable crops after they have left the farm, which complies fully with TASCC guidelines. TASCC was developed because farmers and end users wanted to be sure that crops of grain, oil seeds and pulses were treated responsibly once they left the farm.
That includes wheat processed by flour millers and malting barley for the brewers and distillers in the drinks industry. It also provides independent verification that the trade is meeting food safety laws. The scheme is audited and certified by an independent certification body, in accordance with the internationally recognised standard EN45011.
This means that the certification body is itself independently assessed every year to ensure that the standard is implemented and administered consistently and fairly. The scheme is made up of a Scheme Manual and four codes of practice (Storage, Haulage, Merchants and Testing Facilities).
The Storage Scheme is operated to a joint scheme with the Grain and Feed Trade Association (GAFTA) covering combinable crops and feed materials.

 

An achievement

Since the installation, the software has provided an expandable system which has provided many benefits including: increased overall efficiency; decreased paperwork and decreased management of paperwork; and remote access to the system.
Mr Smith says, “The IT platform has provided customers and farmer members with all the information they require at the time they want it. It has reduced data entry and double handling of data freeing up staff to focus on other tasks.”
A simple and effective system
Gaining access to the site is through a one-way system which directs the driver to the incoming weighbridge where the driver gains access by receiving a card from the Precia-Molen automatic card dispenser.

The driver enters the relevant information including reference number, vehicle registration, and contractor code and commodity type. The GeneSYS™Enterprise System then retrieves the contract details from the database and checks that the transaction is valid.
Should there be a query on a load, the system incorporates a search facility (truck/member/quality), which allows the operator to quickly interrogate the database ensuring minimal time delays. Having already un-sheeted the load, a sample is drawn off by a remotely operated vacuum spear sampler adjacent to the weighbridge and sent to the on-site laboratory for sampling.
By the time the sample arrives at the laboratory, the GeneSYS™ LIMS module laboratory Information Management System will already have printed off a sample document with a checklist of the quality tests required for this load. The results of each test are keyed in by laboratory staff and automatically checked against the pass/fail criteria.
If the sample passes all the quality tests, the driver is given permission to unload. If the sample fails for any reason, the vehicle is put on ‘waiting’ status and the test details are flagged up on the screen. This allows staff to contact the supplier to inform them the load has been rejected, or to negotiate acceptance below contract specification.
Having received a ‘pass’ the driver then moves forward to transfer his load into the appropriate silo. When he has completed his delivery the driver, draws away from this area and proceeds to the site exit via the outgoing weighbridge.

Any incoming load, dry or wet, can be dealt with effectively as the load can be calculated as a dry net weight through weight loss calculations within the GeneSYS™ Enterprise System (through algorithms). Through its database, the system will automatically calculate the moisture content in any grain type and subsequently provide data on the parameters of protein, (for example, Hagburg-suitability for dough in bread making), specific weight and screenings (cleanliness).

Outgoing deliveries of grain are handled by the partnership with DHL with trucks entering the one- way system passing onto the incoming weighbridge and then to the appropriate silo for loading. Exiting the site, they move onto the outgoing weighbridge for sampling and weighing of the load.
Here again a sample is then drawn off by a remotely operated vacuum spear sampler adjacent to the weighbridge and sent to the on-site laboratory for sampling. The results obtained from the outgoing load are then retained by the GeneSYS™ Enterprise System which can be remotely accessed by OSN to check the quality parameters of each individual load if required.
At Weald Granary, Mr Smith says, “The site operation is a lot more organised and less stressful now with staff having easy access to all the information they require to carry out their job roles.”

Fast, reliable and flexible: the world of modern bulk weighing

by Ray Vrtiska, Vice President, Bulk Material Handling Sales Intersystems, USA

Bulk weighers are designed for continuous weighing of bulk material. The fast, reliable and flexible systems can provide an accuracy of 0.1 percent or better. Features of the computerised control system can include colour display, menu driven operation, a wide variety of printer options, programmable keys to operate other equipment, power-loss protection, manual backup controls, self-diagnostic and self-trimming.

Systems can also incorporate a RFID tag reader for automatic programming of rail cars and can interface with central control PLCs. The unit can be linked to a host computer and can also be used to update an existing weighing system.
Installation of factory-assembled systems is simple and quick. Intersystems factory-assembled bulk weighers are available from 1,000-100,000 BPH (2600 MTPH) and are prewired, preplumbed and preconfigured.

En-masse conveyor characteristics

Designed to be totally enclosed, the en-masse conveyor is equipped with roller chain and polyethylene flights that move inside and convey the material. Conveyors can be stainless steel, painted or galvanized housing. A variety of side and bottom abrasive resistant steel liners can be easily removed and replaced.
These conveyors can be installed with intermediate discharges for applications where you are going over more than one drop point. The electrically operated intermediate discharge diverts the material into a selected bin. Loading can be made at any point on the conveyor. Unloading is done through the intermediate discharge gates or at the end of the conveyor.
Intersystems en-masse conveyors are very adaptable and may be configured in a series of horizontal and/or inclined segments (up to 90 degree incline) with conveying capacity available from 20 to 1500 MTPH.

Self-cleaning conveyors

The Intersystems Kleen-Drag conveyor features en-masse capacity with cleanout that is superior to the typical round bottom or screw conveyor. This self-cleaning en-masse conveyor is designed especially to prevent ‘pockets’ of material inside the conveyor where an intermediate discharge is required. When changing materials (type, sort, grade), the conveyor helps to avoid partial mixing of current and subsequent materials.
The conveyor is equipped with self-cleaning, flush-mount intermediate gates to eliminate material nests as well as polyethylene flights to minimize carry-over. The tail section has a rounded shape that follows the path of the moving flights, providing a full sweep of the conveyor.

Enclosed belt conveyors

Enclosed belt conveyors require significantly less horsepower than a drag or screw conveyor. The increasing need to move materials in larger volumes and at faster rates makes reduced horsepower very beneficial. The enclosed design contains the dust emissions inside of the conveyor, eliminates cleanup of spillage around the conveying equipment and protects workers from moving parts. Conventional belts have been used for many years to move a variety of commodities, but they were never totally enclosed. Now you can enjoy the existing benefits of belt conveying plus improved sanitation in their operation.
The material is loaded onto the upper (working) section of the belt and moves along the conveyor. The lower section of the belt is for return (empty). Thus, the belt is both a carrier (carrying the materials) and traction (traction transmitting) element. Material loads through one or more inlets located on the conveyor. Unloading of the conveyor can be made at the end of the conveyor in the drive section (standard), in the middle of the conveyor, or with intermediate discharges. The enclosed belt can be designed for inclines or reversing applications.

The Intersystems way

The Intersystems enclosed belt conveyor offers a solution to the problems of dust emissions and spillage that exist with most conventional belt conveyors. Commodities are conveyed on a totally enclosed belt that runs on ‘spools’ and then returns on a slider bottom made of anti-static UHMW. Any carry-over of material is pulled back to the tail where a unique tail design reloads the material back onto the moving belt. The conveyors are equipped with spiral wing pulleys that reload carryover material back onto the top belt to eliminate build-up in the tail section.
Intersystems belt conveyors provide a carrying capacity up to 2,600 MTPH. Along the entire length of the housing, as well as at grain dust outlets, special reels support the belt and shape it as necessary for moving the material without carryover. Belts can be PVC, rubber or food grade.
Gravity screeners feature a lined internal by-pass, manual or electric control for the by-pass gate, service platforms and standard screens for corn, wheat and soybeans. A high-capacity internal by-pass saves the cost of building an external by-pass and saves height in installation.
The Intersystems 40,000 BPH Gravity Screener with a 60,000 BPH internal by-pass was developed in response to an industry demand for larger screening capacity and higher capacity throughput.

 

Sample selection

The process of extracting a sample and moving it to the collection cabinet can be performed automatically and fully controlled by the operator through the control system.
In-line automatic samplers provide representative sampling grain and any other free flowing material including liquid from gravity flow or from the discharge section of an enclosed-belt conveyor. Sampling is performed automatically at regular intervals or on command of the operator and the required amount of product is passed into a container for collecting samples. Excess sample is returned to the material stream.

Depending on the product characteristics and application, Intersystems can supply various models of crosscut and gravity samplers for operation in-stream with different slopes and capacities.
Truck probes allow for representative and repeatable sampling from trucks, rail cars, tubs, bulk-bags and other methods, avoiding dust and spilling of material. Standard construction for the truck probe stand, mast and boom is heavy carbon steel and all are equipped with a rugged hydraulic power unit. An automatic control system provides comfortable and quick sampling and transports the samples to the collection point for further classification.
Intersystems’ compartmentalised or core model probe assures uniformity of representative samples.

Gentle handling

Bucket elevators are designed for gentle material handling while carrying grain and other materials in a vertical direction. Bucket elevator assembly includes head, boot and elevator legs constructed of stainless steel, painted or galvanized housing. Material is passed through the boot hopper to the elevator buckets or is taken out of the bottom of the boot by the elevator buckets and carried up to the head section to discharge the buckets. Material is fed to the boot with the help of a conveyor or by gravity flow. In the elevator head, there is a rotating drum with buckets. The material transportation, primarily, is performed by buckets which are fixed to the elevator belt that is moving up inside the elevator legs.
Each Intersystems bucket elevator is equipped with NFPA compliant explosion panels on the top of the head as well as with a break mechanism to eliminate return movement of the elevator belt.

Rice and contract terms

by Pamela Kirby Johnson OBE, Director General, The Grain and Feed Trade Association (Gafta)

Rice contracts may be negotiated and agreed up to twelve months or more ahead of the time for shipment. This means buyers and sellers have taken a view on what the forward market price will be when the time comes for the contract to be performed. It is expected that every contract will be fulfilled on the terms agreed irrespective of any rise or fall in the market price.
Most transactions start with either an email or telephone call between sellers and buyers by one of them making an offer, with an acceptance of that offer and their agreement on the price. When these three elements, offer, acceptance and price, are agreed a contract is made.
However, as Groucho Marx said, a verbal contract is not worth the paper it’s written on. Clearly it is not good business practice to leave the arrangements for fulfilling a complex transaction to a telephone call or to an email exchange. So the parties, or their brokers, will follow up a deal with a written contract confirmation. This confirmation of the contract should identify key terms such as price, the delivery or shipment period and detailed quality specifications.

 

Letters of credit

Along with the price and quality terms, the time for delivery or shipment is probably the most important factor which traders will bear in mind when negotiating a deal. Any stipulation as to time for performance is generally thought to be at the heart of a contract and it is not unusual to hear the comment ‘time is of the essence’.
Likewise, payment for the goods is obviously crucial and generally speaking it will depend upon the relationship between sellers and buyers as to whether any credit terms are agreed. Countries have witnessed tectonic shifts in their economies where prices have dramatically risen or fallen; nevertheless by the time of performance contracts still have to be fulfilled. Letters of credit are mostly used to secure payment for goods. When letters of credit are not opened in time or their terms are not in accordance with banking or contract requirements it is a breach of the contract and will probably give rise to a dispute. Gafta contracts contain instructions on how the documents representing the goods should be tendered and how payment should be made, with useful codes of practice to give guidance.

Specification factors

Clear, quality specifications are crucial and based on a number of factors. For sellers it is the anticipated harvest or what is available for that season’s shipments. For buyers it is the needs of their customer or final consumer, not forgetting the legislation buyers have to comply with in the country of destination on import, which will often differ from that of the exporting country.
Most rice is described simply in contracts as either Basmati, Long, Fragrant, Paddy, Husked, Milled, Parboiled or Glutinous Rice. Some rice crops are handled and transported in vast bulk tonnages and that implies that the harvest from one producer is similar enough to that from any other, to be sold via a common grading and distribution system. On the other hand depending on the rice variety or origin, for some rice it will be necessary to maintain its identity, for it to be segregated and labelled specific to origin or quality.
Depending on the origin or rice variety, the parties will negotiate the classification of rice and the quality specifications on each and every transaction, concentrating on moisture content and maximum percentages of foreign or damaged grains which must not be present. Moreover, in accordance with the Gafta terms there is an over-riding requirement that the rice is guaranteed to be in good condition and of satisfactory quality at the time of shipment, with the promise that the goods must be fit for all purposes for which goods of the kind in question are commonly supplied, that is for human consumption.

During the negotiation of a contract buyers may also seek additional guarantees with regard to limits of undesirable substances or pesticides levels depending on their own national legislation in the country of import.

 

The GM issue

Genetically Modified (GM) rice poses a major issue for many countries, be they exporters or importers. For example, in the European Union it is unlawful to import rice of a GM event that the European Food Standards Agency has not approved. There have been cases where rice has been checked by customs officials when imported, seized and in some cases destroyed if comprising wholly or partially an unapproved GM event. Currently for feed imports there is an EU low level presence tolerance of 0.1 percent, but this does not apply to food. At the time of writing this article representation is being made to the European Commission to adopt this ‘technical solution’ for food. Unfortunately, many countries’ citizens still react adversely to GMO and it becomes a political and emotive issue. Our representation on this matter is that decisions and approval processes should be based on science based policies and evidence.

The Gafta standard

Many of the other contract terms will not be the subject of detailed discussion by the parties at the time of negotiation as they rely on the knowledge that they will be covered by the appropriate Gafta standard contract terms. Whether the buyers and sellers are specialists in milling or food processing, together with the shippers, exporters and importers, they are all traders of the vast movement in rice being transported around the globe, and who rely on the standard Gafta CIF or FOB contracts. These standard terms will give instructions to the buyers and sellers on the next steps in fulfilling the transaction and provide protection in certain circumstances. They will also show who carries the risks and responsibilities for the goods at any given time. Good contract terms will alleviate many risks parties face and this is a reason so many companies incorporate in their contract confirmations reference to the Gafta standard terms and conditions.
Gafta contract forms provide continuity of purpose and operational consistency of the way trade is customarily done and complement the essential elements of the trade by setting down the means and methods by which a contract is to be performed by the parties. These standard contracts provide a framework on which the parties may rely to supply rice from country of origin to country of consumption. When choosing to incorporate a Gafta form of contract in their own individual contract terms, the parties should have uppermost in minds the means and mode of transport and choose a contract appropriate for the carriage of goods by sea, by road or rail, in bulk or bags, or in containers, as the situation warrants.
A trader will need to know where he stands either on having to deliver the goods or being in a position to receive the goods. What happens if ships do not arrive on time due to shipping vagaries? Then the contract terms allow the possibility of an extension of time to be claimed for a few days, with payment of allowances to compensate for the delay. But then any breach of an obligation regarding shipment and delivery means a breach of a condition of the contract, which could give rise to the innocent party having the right to reject.

 

‘Force majeure’: unforeseen circumstances

The agricultural trade has felt the impact more than most of changing weather patterns. We have witnessed droughts, fire and floods, in various countries in just a few years. These major changes to what is thought to be traditional weather patterns have resulted in loss of crops and variations in quality. What happens then when there is an impediment to shipping such as strikes, floods or fire often referred to as ‘force majeure’? In those circumstances the contract will allow a period of time for the impediment to end and for the parties to continue with the fulfillment of the contract.
On occasion contracts may have to be cancelled where a government imposes an export ban, and where there is no fault in those circumstances by the exporter, there would be no breach of the contract. Otherwise, if a party fails to fulfill his obligations they will be in breach of the contract terms.
If a party is in breach of the contract the default clause comes into play and provides the formula to compensate the innocent party for that failure. Depending on the precise nature of the breach damages are calculated on the basis of the difference between the contract price and the market price, on the day of default, on the mean contract quantity. The intention being to put the innocent party in the financial position they would have enjoyed had the contract been fulfilled.

 

Beyond contracts

To accompany contracts there are a number of useful rules, guides and codes of practice. Incorporated into the contracts are weighing rules so that goods are weighed by the same methods worldwide and likewise there are rules for taking and testing samples which apply both at load ports at origin and discharge ports.
There will of course be difficulties and disputes from time to time and the most popular method chosen by parties for the settlement of their disputes is through arbitration. When parties enter into a contract incorporating a reference to the terms and conditions of a Gafta contract form they have agreed that their disputes will be heard and determined by arbitrators in accordance with the Gafta Arbitration Rules. The object of arbitration is to obtain the fair resolution of disputes by an impartial tribunal comprising commercial people who will deal with the case without unnecessary delay or expense.

Arbitrators have to be familiar with the operations in the commodity markets; have knowledge of the basic principles of contracts and; also understand the legal principles underlying contracts, carriage and insurance contracts and letters of credit. Arbitrators are acting in a judicial capacity to ensure that they meet the basic requirements of justice and must act with fairness and impartiality towards both the parties.

Mediation

Although not often used, mediation is an alternative dispute resolution procedure to facilitate the parties in settling their differences to find a resolution and reach a settlement.
All the contracts’ clauses provide a wide range of measures to ensure the smooth trade from origin to destination. The standard contracts Gafta provides are the standard terms which are almost entirely in place for commercial, financial and legal purposes, to be adopted by two parties, a willing buyer and a willing seller, to form the basis of their individual transactions.
However, there are additional demands made outside of the contract terms by consumers and retailers who need assurances on the safety of their food. For these purposes GTAS, the Gafta Trade Assurance Scheme, was introduced to help demonstrate an all year round good practice and due diligence for food safety. GTAS aims to provide, within one complete HACCP based trading scheme, the best professional practices which are designed to maintain consumer confidence for the delivery of safe food.

Future challenges

Looking to the future, there are emerging issues where parties need to have assurance on the social conditions in countries of origin and also in relation to the environment. Environmental challenges are many and varied, and consumers are keen to know that they are supplied from sustainable sources. When any future biotechnology, social and environmental demands are made the mechanism needed by the trade on how to meet the challenges can be addressed within the framework of the Gafta Trade Assurance Scheme. In essence GTAS is the standard of best practice for all trade operations.
The theory of comparative advantage, common sense and experience all tell us trade is good for economic growth. Trade helps all areas of major concern today, including social and environmental standards. The association started over 130 years ago with the aim to promote free trade internationally and this still applies today with Gafta continuing to seek an ever better trading environment.

Mould control in grain and feed preservation

by André Meeusen, application manager and Yvonne van der Horst, technical manager, Kemira ChemSolutions b.v., The Netherlands

Moulds are ubiquitous and unavoidable contaminants in all animal feeds. Virtually all animal feeds contain moulds and viable mould spores which continue to pose a threat to grain quality.

Moulds are fungi which are distinguished by the formation of mycelium (a network of filaments or threads), or by spore masses. Conditions that favour moulds include moisture levels higher than 12 percent, warm temperatures, the presence of oxygen, and prolonged storage time.

Many moulds are toxigenic and produce mycotoxins, a secondary metabolite created by moulds that is toxic to organisms other than the mould itself. The growth of moulds and production of mycotoxins by these moulds in feed ingredients can cause significant economic losses. They consume valuable feed nutrients such as vitamins and amino acids and they convert energy into water and CO2 and can cause temperature increase as a result of their carbohydrate metabolism (see below)

C6H12O6 + 6 O2 =>  6 CO2 + 6 H2O + Heat

Mould growth depletes the nutrient density and affects feed palatability and consequently decreases feed intake. Moulds cause lipid oxidation and pigment deterioration and are detrimental to animal health, performance and reproduction. The most frequently found mycotoxins are aflatoxins and ochratoxin produced by Aspergillus, the latter are also produced by Penicillium and zearalenone and trichothecenes produced by Fusarium moulds.

 

Toxin binders vs. organic acids

Animal feed is susceptible to mould growth. The microbiological quality of feed is a comparatively unexplored area but is receiving more attention due to the recognition of mycotoxins as a widespread economic threat.

The use of toxin binders in feed is a widespread application, however, this is not an efficient way to tackle the problem as they damage the nutritional quality of feeds. These toxin binders, which usually contain different types of clay minerals, are not that efficient and may even compromise nutrient digestibility. Moreover, mycotoxin contaminated feeds can impair the animals’ health and productivity due to loss of appetite, feed refusal, allergic reactions, reproductive failure, suppression of the immune system and even mortality.
Contamination by moulds and consequently, the production of mycotoxins, can be greatly reduced by using organic acids as inhibitors. Organic acids effectively inhibit the growth of moulds, yeast and bacteria in different types of feedstuffs and prevent recontamination after production of the compound feed. This extends shelf life, maintains nutritional value, and prevents formation of mycotoxins.

Mould and moisture

Development of moulds in feed depends on the interaction of several factors, including the presence of spores, the availability of nutrients, storage time, temperature and moisture. Water activity, i.e. the presence of free water, is the most important factor in the growth of moulds. Indeed, microbial spoilage of food and feeds occurs at different levels of moisture and the water activity (aw) concept describes the water available for microbial growth.

Most feed mills optimise or maximise moisture levels during feed production to compensate for losses that occur during grinding, pelleting and cooling processes. Moreover, a sufficient moisture level reduces the energy usage during the pelleting process and results in better pellet quality. The drawback of increasing moisture levels is that increasing levels of free water creates ideal conditions for rapid mould growth and the development of mycotoxins. Moulds and yeast grow at aw > 0.75 and aw > 0.85 respectively.
Products that protect feeds against mould growth and at the same time lower the aw are based on calcium or sodium propionate. Propionic acid is reacted with calcium or sodium to produce a salt with high propionic acid level, 76-78 percent depending on the salt form. The acid is completely buffered, has a good solubility, is safe to use and easy to handle. Their efficiency in shelf life extension when used in feeds is dose related and can be easily demonstrated by an in vitro accelerated method, increasing moisture content and storage temperature, by measuring the CO2 production over time. An efficient preservative effect is obtained up to the moment that CO2 production starts to increase (Figure 1).

 

Grain preservation

Animal feeds generally contain mould spores which originate from raw materials used. The  three genera of moulds – Aspergillus, Penicillium and Fusarium cause most cases of mycotoxin contamination in many grains and their byproducts and in vegetable proteins. Their optimal growth is mostly influenced by temperature and this determines their global presence.
Aspergillus and Penicillium species will grow better in warmer-tropical climates whereas Fusarium moulds prefer cooler temperate climates. Moulds are obligate aerobe and their proliferation can thus be controlled by oxygen free storage, such as silage. They consume carbohydrates and provoke fat hydrolysis leading to nutritionally low quality grains. Organic acids are known in the feed industry as an effective and affordable tool to control mould growth in grains and their byproducts during transport and storage.

Anaerobic preservation of grains usually applies when moisture is very high, from 25 – 45 percent. Grains are crimped before ensiling with formic acid based products.
Aerobic preservation is usually done with whole grains with moisture content between 15 – 25 percent.  Typically, blends of different acids or acids with other active compounds are used, with propionic acid being the principle active component. The level of propionic acid needed under local conditions depends on kernel quality, initial mould counts, storage conditions and time.

 

Straight vs. buffered acids

The mechanism of inhibition of growth of moulds by organic acids is generally not considered a pH phenomenon. It is the propionate ion or radical (CH3CH3CO0-) that is the active mould inhibiting ingredient in propionic acid, so attempts have been made to use salts of propionic acid to overcome the odour and corrosion problems.
To enter into the mould cell, the acids have to pass a double barrier, the cell membrane and the outer cell wall of these moulds. Inside the moulds the organic acids dissociate decreasing the intracellular pH and compromising the cell metabolism. The three-dimensional structure and the lipophilic character of propionic acid seems to play an important role for the acids to pass through this double barrier.

Kemira has developed several mould control products containing appropriately buffered acids avoiding the typical drawbacks of straight acids. The organic acids in the liquid Kemira Mould Control product range are buffered with ammonium or sodium, ensuring reduced corrosivity and volatility and a long lasting preservation effect.
Ammonium buffering has the advantage of delivering a proton H+ supporting a more effective mould inhibitory effect. The inclusion of a lipophilic compound assures a better surface contact with grains and an easier penetration into meals and feeds. It will also improve the water binding capacity of feed materials and lower the water activity of feeds. This extends the shelf life, maintains the nutritional quality, and prevents the formation of mycotoxins in feeds and feedstuffs.

 

Formic acid based mould inhibitor

Traditionally propionic acid is used against mould and mycotoxin formation. The relative shelf life depends to a great extent on the propionic acid content. Indeed, the lowest survival rates for Fusarium spp. and Aspergillus niger were achieved with the highest actual propionic acid contribution, irrespective of the type of mould inhibitors tested.
As the leading global producer of formic acid-based products for the animal feed industry, Kemira has developed a new liquid mould inhibitor for grain preservation based on formic and propionic acid with an excellent ammonium-sodium buffering system to minimise volatility and corrosivity and ensuring proper handling properties. It is activated by lipophilic compounds. Formic acid does not have this lipophilic characteristic but it contains the highest antimicrobial properties as this is the smallest molecule of all the organic acids and has a > 60 percent higher number of active organic radicals per kilogram of pure substance.

The efficacy of such a novel ammonium-sodium buffered formic acid based product (Kemira Mould Control LF1) on reduction of Aspergillus niger in grinded whole wheat grains was assessed in a laboratory study done in the Kemira R&D center in Espoo-Finland and compared to ammonium buffered propionic acid (Kemira Mould Control LP1 NC). Figure 2 shows that the initial inoculation with Aspergillus niger in grains without preservatives resulted in significant growth during the first week. Both Kemira Mould Control LP1 NC and Kemira Mould Control LF1 at 0.2 w/w-%, inhibited growth of Aspergillus niger in grinded whole wheat grains over a 2 weeks period and total kill off was obtained with both products at 0.4 w/w-%.

The same laboratory tests have been repeated in Wessling Laboratories. Also here the inclusion of 0.4 percent with both products showed to be efficient in killing off both types of moulds during a two weeks incubation period. The Fusarium moulds seemed somewhat more sensitive to the formic acid based mould inhibitor with total kill off at seven days already (Table 1).
The efficacy of Kemira Mould Control LF1 was further assessed in a simulated field trial at Wageningen UR, The Netherlands.  The trial measured mould and temperature development of fresh harvested grains during a four month storage period at ambient temperature and  results were compared to Kemira Mould Control LP1nc.

The treatment with the formic acid based Kemira Mould Control LF1 at 0.7 percent showed the biggest effect in preventing  the temperature to increase. It was significantly (P<0.05) lower than both the positive control (propionic acid based) and negative control. Moreover, results showed that Kemira Mould Control LF1 at 0.4 percent is as effective in inhibiting mould growth and preventing temperature increase in freshly harvested grains with high moisture content (17.6%) as the propionic acid based Kemira Mould Control LP1nc. Mould growth was reduced from 5 log platable fungal colonies per gram in the non-treated grains down to 1.34 log/gram and 1.15 log/gram respectively.
This was also confirmed in a field trial in UK, monitored by Aberystwyth University in which freshly harvested wheat with a moisture content of 17.9 percent was rolled and treated with different dosages of the ammonium-sodium buffered formic-propionic acid based product or with the ammonium buffered propionic acid only and stored for eight months in 10 ton bins.

At nine litres per ton of grains, both products allowed easy storage without any temperature increase in the bins during the eight months. Initial mould counts at three weeks showed both products to be effective, compared to an untreated sample.

This makes Kemira Mould Control LF1, a formic acid based blend with a novel ammonium – sodium buffering and activated by lipophilic compounds, an interesting alternative to the traditional propionic acid based products, assuring the fast killing of any mould that appears on grains and assuring a save and long preservation.

 

More information:
Kemira ChemSolutions b.v.
Email: feed@kemira.com

 

NIR IN PRACTICE

by Chris Piotrowski, Director, Aunir, UK

NIR spectroscopy is an analytical technique that allows a rapid, non-destructive determination of a sample’s properties. It is used in various industries for identifying compounds and chemical structures which can then be accurately related to the nutritional, chemical and physical properties of the material.

How does it work?

Traditional ‘wet chemistry’ facilitates a greater level of understanding about the make-up of different materials. However, this technique requires heavy investment of time and money.
Organic molecules absorb infrared radiation at an energy that is characteristic of their composition. Every chemical compound is characterised by one of six types of molecular vibration; symmetrical stretching, asymmetrical stretching, scissoring, rocking, wagging or twisting. Each of these types of vibration absorbs light energy at a different frequency.
NIR spectroscopy measures the absorption of light energy shone at a material in order to produce a spectra. The resulting spectra can then be compared to other spectra of known materials to identify it.

In practice, a sample of material is placed on the reading pane of an NIR spectrometer, which will then take the measurement and produce a spectra file.
NIR analysis is very quick and simple, meaning that individuals operating the equipment do not need any special qualifications. Another benefit to NIR analysis is that there are no hazardous chemicals involved, allowing analysis to be carried out at various stages of production. And since NIR is non-destructive, it is perfect for use in plant breeding and raw material quality control since the sample can be used again.

Understanding NIR

Analysis of chemical compounds has rapidly evolved over the last century, but there are still many parameters measured which are not true compounds. For example, crude fibre is the material which remains after the action of acid and alkali on a sample of feed. There is no such compound in nature. Whereas reference chemistry on such compounds is not reliable, alternative techniques such as NIR remain pure.

Scanning a sample using NIR will only produce a spectra file. This then needs to be compared to a database of other spectra files of known substances in order to correctly determine the components in the material. Calibration databases are expensive to create in terms of both time and financial investment. Thus, a market in which the licensing of spectra databases for reference purposes has developed.

Licensing a set of calibrations cuts out the need for massive financial investment and eliminates any time delay in obtaining results since the predicted data is immediately available. Once an NIR machine is set up with calibrations, the technique for carrying out analysis is relatively simple and thus can be carried out by any member of staff, not necessarily a highly skilled technician. The results of NIR analysis are available instantly, allowing important decisions about quality control to be taken immediately. The future of NIR capability will allow further flexibility for analysis.

Who uses NIR?

Sample analysis can be carried out in the following three ways. Firstly, by an agreed standard method such as protein analysis (Dumas or kjeldahl). Secondly, by empirical methods such as those employed for oil or crude fibre analysis. Finally, there are subjective methods based on experience such as taste or smell, but these subjective methods are not an accurate measure for quality control purposes. Traditionally, quality control is carried out through wet chemistry analysis, but since this method is slow and expensive, alternatives such as NIR spectroscopy have been sought out.
NIR can be used across a wide range of industries. Animal feed and ingredients, flour and milling, wet and dried forage, animal proteins, pet food, aqua feed and plant breeding companies all utilise NIR analysis.

NIR in the pet food industry

NIR is a proven technique used by pet food manufacturers for the rapid, on-site multi-component analysis of raw materials and pet foods. Samples of pet food require little or no preparation, making NIR a quick, clean and chemical-free way of analysing for key quality parameters such as protein, oil, fibre, ash, moisture and even starch gelatinisation.
An NIR system is ideal for rapid analysis and it lowers the cost of achieving quality because it allows increased testing frequency at no extra cost. Analysis using NIR technology is employed by 90 percent of UK-based pet food manufacturers.

As part of the Premier Pet Nutrition complete pet nutrition package, pet food and raw material NIR calibration factors are provided. The NIR calibration factors help pet food brands to constantly improve standards for product quality, conformity, assurance and safety.
The impact NIR can have on a pet food manufacturers business is illustrated by one of Premier Nutrition’s clients who saved €100,000 in one year by using NIR as part of a complete pet nutrition package.

Premier Pet Nutrition also uses NIR innovatively at its own factory to test every incoming micro-ingredient (for example, vitamins, minerals, and nutraceuticals) to ensure identity and conformity. This adds another level of assurance in the final premix product.

NIR in determining corn quality

Feed represents around 70 percent of the cost of production of monogastric animals globally. Sourcing low cost ingredients is important for the economic success of companies involved in animal production, as is the quality of these ingredients. Ingredient quality will impact animal performance and consequently production costs. Cereals such as corn, sorghum and wheat are generally the major ingredients in animal feed formulations and so their quality will have a direct effect on animal performance.

The Corn Quality Service is a service provided by AB Vista, in association with Aunir. The service allows customers to automatically predict the quality of corn used in their feeds by determining the cereal composition and quality parameters such as vitreousness and protein solubility. The service allows monitoring of cereal quality, anticipating any variation, and assisting with decisions on dosing of additives such as feed enzymes. Adding an enzyme to the feed, for example, will maximise productivity and uniformity even when the cereal quality varies between batches and seasons. NIR spectroscopy is used by over 50 percent of animal feed manufacturers worldwide, confirming the value that can be gained from NIR in commercial applications.
1 If you are not profiting from Quality Control, Sampling and Analysis, why do any of it? Steven Tayfield, May 2012. Published in Feed Compounder, May 2012, p. 28-29.

LC-MS/MS: The New Reference Method for Mycotoxin Analysis

by Dr Eva-Maria Binder Chief Scientific Officer, Erber Group, Austria

The analysis of mycotoxins has become an issue of global interest, in particular because most countries already set up regulative limits or guideline levels for the tolerance of such contaminants in agricultural commodities and products.

Approximately 300 to 400 substances are recognised as mycotoxins, comprising a broad variety of chemical structures produced by various mould species on many agricultural commodities and processed food and feed. Globalisation of the trade of agricultural products contributed significantly to the discussion about potential hazards involved and increased the awareness of mycotoxins. Safety awareness in food and feed production has also risen due to the simple fact that methods for testing residues and undesirable substances have become noticeably  more sophisticated and available at all points of the supply chain.

Image

Modern mycotoxin analysis

The most important target analytes are aflatoxins, trichothecenes, zearalenone and its derivatives, fumonisins, ochratoxins, ergot alkaloids, and patulin (1). Various mycotoxins may occur simultaneously, depending on environmental and substrate conditions. Considering this coincident production, it is very likely, that humans and animals are exposed to mixtures rather than to individual compounds. Recently, the natural occurrence of masked mycotoxins, where the toxin is conjugated, has been reported, requiring even more selective and sensitive detection principles (1,2,3).

So far most analytical methods deal with single mycotoxins or mycotoxin classes, thus including a limited number of chemically related target analytes only. But as additive and synergistic effects have been observed concerning the health hazards posed by mycotoxins, efforts have been increased to search for multi-toxin methods for the simultaneous screening of different classes of mycotoxins.

High performance liquid chromatography (HPLC) and gas chromatography (GC) have traditionally been the favored choices for the analyst when sensitive, reliable results are required with minimum variability. The major disadvantage of mycotoxin analysis using GC is based on the necessity of derivatisation that can be time-consuming and prone to error, so that nowadays GC methods are used less frequently.

HPLC can be coupled with a variety of detectors, e.g. spectrophotometric (UV-Vis, diode array) detectors, refractometers (RI), fluorescence (FLD) detectors, electrochemical detectors, radioactivity detectors and mass spectrometers. Particularly the coupling of liquid chromatography (LC) and mass spectrometry (MS) provided a great potential for the analysis of mycotoxins, as the need for pre- or post-column sample derivatisation was eliminated. Thus, no other technique in the area of instrumental analysis of environmental toxins developed so rapidly during the past 10 years.

Image

Mass spectrometry

The technology of liquid chromatography-mass spectrometry (LC/MS) opens the perspective of efficient spectrometric assays for routine laboratory settings, with high sample throughput. This technique, which in many cases utilises multi-mass spectrometer detectors, can be used to measure a wide range of potential analytes. It has no molecular mass limitations, a very straightforward sample preparation, does not require chemical derivatisation and has, due to the rugged instrumentation, limited maintenance needs. Therefore, liquid chromatography/mass spectrometry (LC/MS) and particularly LC coupled to tandem mass spectrometry (LC/MS/MS) have become very popular in mycotoxin analysis.

A liquid chromatography/tandem mass spectrometric method for the determination and validation of 39 mycotoxins in wheat and maize was used for analysing A- and B-type trichothecenes and  their metabolites, zearalenone and derivatives, fumonisins, enniatins, ergot alkaloids, orchratoxins, aflatoxin, and moniliformin (1).
A multi-mycotoxin method for food and feed matrices based on liquid chromatography/electrospray ionization-tandem mass spectrometry (HPLC/ESI-MS/MS) covered the analysis of 186 fungal and bacterial metabolites. The method is based on a single extraction step using an acidified acetonitrile/water mixture followed by analysis of the diluted crude extract (13).

The development of LC/MS methods for mycotoxin determination is impeded to some extent by the chemical diversity of the analytes and compromises that have to be made on the conditions of sample preparation (1).
Considering the wide range of polarities of the analytes the seemingly high selective MS/MS detection could lead incorrectly to the perception that matrix interferences could be eliminated effectively and quantitative results may be obtained without any clean-up and with very little chromatographic separation.

Unfortunately, co-eluting matrix components influence the ionization efficiency of the analyte positively or negatively, impairing the repeatability and accuracy of the analytical method (1). As a consequence, only a few approaches describe the successful injection of crude extracts, and the majority of publications depict a sample clean-up prior to liquid chromatography with solid-phase extraction (SPE) as the most efficient procedure, and in particular the use of Mycosep® columns proved straightforward and efficient (4,5,6,7,8,9).

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Stable Isotope Dilution Assay

In order to overcome matrix effects and related quantification problems, external matrix calibration for each commodity tested was recommended. This  is extremely time-consuming and proved to be very impractical under routine conditions, where one is confronted with a variety of matrices every day. As an alternative approach, the use of [stable] isotope labelled internal standards has been introduced recently (10). These substances are not present in real world samples but have identical properties to the analytes.

Internal standards are substances which are highly similar to the analytical target substances, i.e. their molecular structure should be as close as possible to the target analyte, while the molecular weight has to be different. Within the analytical process, internal standards are added to both, the calibration solutions and analytical samples, and by comparing the peak area ratio of internal standard and analyte, the concentration of the analyte can be determined.
Ideal internal standards are isotope-marked molecules of a respective target analyte, which are usually prepared via organic synthesis by exchanging some of the hydrogen atoms by deuterium, or by exchanging carbon [12C] atoms by [13C]. Physico-chemical properties of such substances, and especially their ionization potential is very similar to or nearly the same as of their naturally occurring target analytes, but because of their higher molecular weight (due to the incorporated isotopes) distinction between internal standard and target analyte is possible.

Variations during sample preparation and clean-up as well as during ionization are compensated so that methods with especially high analytical accuracy and precision can be developed. Optimally, these isotope labeled analogues must have a large enough mass difference to nullify the effect of natural abundance heavy isotopes in the analyte. This mass difference will depend generally on the molecular weight of the analyte itself, in case of molecules with a molecular weight range of 200 to 500, a minimum of three extra mass units might be required.

Isotope labelled standards supplied by Biopure are fully labelled thus providing an optimum mass unit difference between labeled standard and target analyte. For example, the [13C15]-DON standard, which is available as liquid calibrant (25mgl-1) was thoroughly characterised by Häubl et al.(9) with regard to purity and isotope distribution and substitution, the latter being close to 99 percent. Fortification experiments with maize proved the excellent suitability of [13C15]-DON as internal standard indicating a correlation coefficient (R2) of 0.9977 and a recovery rate of 101 percent +/- 2.4 percent. The same analyses without considering the internal standard resulted in R2=0.9974 and a recovery rate of 76 percent +/- 1.9 percent , underlining the successful compensation for losses due to sample preparation and ion suppression effects by isotope labeled internal standards (10,11).

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Conclusions

Direct coupling between a liquid phase separation technique such as liquid chromatography and mass spectrometry has been recognised as a powerful tool for analysis of highly complex mixtures.
The main advantages include low detection limits, the ability to generate structural information, the requirement of minimal sample treatment and the possibility to cover a wide range of analytes differing in their polarities.
Depending on the applied interface technique a wide range of organic compounds can be detected and flows up to 1.5ml/min can be handled (12).

Despite their high sensitivity and selectivity, LC/MS/MS instruments are limited to some extent due to matrix-induced differences in ionization efficiencies and signal intensities between calibrants and analytes. Ion suppression/enhancement due to matrix compounds entering the mass spectrometer together with the analytes limit also ruggedness and accuracy and pose a potential source of systematic errors.

Stable isotope labelled internal standards have been proven to overcome these problems as well as to compensate also for fluctuations in sample preparation, e.g. extraction and clean-up. Numerous LC/MS/MS methods for the determination of mycotoxins have been developed and published in recent years, however so far only a few were based on stable isotope labeled analytes, mainly due to their limited availability and quality.

Only recently calibrants of thoroughly [13C]-labeled mycotoxins have been introduced thus opening a broad field of applications and improvement in mycotoxin analysis. Thus in particular the development of unified multi-toxin methods being suitable for the determination of many types of analyte/matrix combinations poses a great challenge for the future.

References:

1 Sulyok, M., Berthiller, F., Krska., R., Schuhmacher, R. 2006. Development and validation of a liquid chromatography/tandem mass spectrometric method for the determination of 39 mycotoxins in wheat and maize. Rapid Commun. Mass Spectrom. 20, 2649-2659.

2 Berthiller, F., Dall’Asta, C., Schuhmacher, R., Lemmens, M., Adam, G., Krska, A.R. 2005. Masked mycotoxins: Determination of a deoxynivalenol glucoside in artificially and naturally contaminated wheat by liquid chromatography-tandem mass spectrometry. J. Agr. Food Chem. 53, 9, pp. 3421-3425.

3 Schneweis, I., Meyer, K., Engelhardt, G., Bauer, J. 2002. Occurrence of zearalenone-4-β-D-glucopyranoside in wheat. J. Agric. Food Chem. 50 (6), pp. 1736-1738.

4 Biancardi, A., Gasparini, M., Dall’Asta, C., Marchelli, R. 2005. A rapid multiresidual determination of type A and type B trichothecenes in wheat flour by HPLC-ESI-MS. Food Additives and Contaminants, 22 (3), pp. 251-258

5 Berthiller, F., Schuhmacher, R., Buttinger, G., Krska, R. 2005b. Rapid simultaneous determination of major type A- and B-trichothecenes as well as zearalenone in maize by high performance liquid chromatography-tandem mass spectrometry. J. Chromatog. A, 1062, 2, pp. 209-216.

6 Biselli, S., Hummert, C. 2005. Development of a multicomponent method for Fusarium toxins using LC-MS/MS and its application during a survey for the content of T-2 toxin and deoxynivalenol in various feed and food samples. Food Add. Contam. 22 (8), pp. 752-760.

7 Tanaka, H., Takino, M., Sugita-Konishi, Y., Tanaka, T. 2006. Development of a liquid chromatography/time-of-flight mass spectrometric method for the simultaneous determination of trichothecenes, zearalenone and aflatoxins in foodstuffs. Rapid Commun. Mass  Spectrom. 20 (9), pp. 1422-1428.

8 Milanez, T.V., Valente-Soares, L.M. 2006. Gas chromatography – Mass spectrometry determination of trichothecene mycotoxins in commercial corn harvested in the State of São Paulo, Brazil. Journal of the Brazilian Chemical Society, 17 (2), pp. 412-416.

9 Klötzel, M., Gutsche, B., Lauber, U., Humpf, H.-U. 2005. Determination of 12 Type A and B Trichothecenes in Cereals by Liquid Chromatography- Electrospray Ionization Tandem Mass Spectrometry. J. Chromatog. 53, 8904-8910.

10 Häubl, G., Berthiller, F., Krska, R., Schuhmacher, R. 2005. Sitability of a 13C isotope labeled internal standard for the determination of the mycotoxin Deoxynivalenol by LC-MS/MS without clean-up. Anal. Bioanal. Chem. 384 (3), pp. 692-696.

11 Häubl, G., Berthiller, F., Rechthaler, J., Jaunecker, G., Binder, E.M., Krska, R., Schuhmacher, R. 2006. Characterisation and application of isotope-substituted (13C15)-deoxynivalenol (DON) as an internal standard for the determination of DON. Food Add. Contam. In print.

12 Sakairi, M., Kato, Y. 1998. Multi-atmospheric pressure ionization interface for liquid chromatography-mass spectrometry. J. Chromatography A, 794, 391-406.

13 Vishwanath, V., Sulyhok, M., Labuda, R., Bicker, W., Krska, R. (2009) Anal. Bioanal. Chem. 395:1355–1372.

World grain & feed markets outlook – March | April 2012

by John Buckley – for Grain & feed Milling Technology magazine

Plentiful wheat but questions over feedgrain outlook
CHOPPY markets have persisted across the grain and oilseed complex since our last review, as traders have tried to calculate the net bullish/bearish sum from a whole set of colliding fundamentals. On the negative side, these include shrinking South American maize and soyabean crops, dwindling US maize supplies, big winter wheat crop losses in the former Soviet Union – perhaps (though to a lesser extent) much of Western Europe too and incipient drought in the UK, France, Spain and Poland. Yet against these remains the main market anchor – massive world wheat stocks carried over from last year’s record harvests.

Market attention is also turning increasingly toward 2012 crop prospects in the Northern Hemisphere – probably lower wheat production, possibly significantly higher coarse grain output – especially maize and probably barley too – but a likely shortfall in raw material supplies for the oil-meal protein sector amid inadequate American soyabean and European rapeseed crops.

Market bulls have also been excited by resurfacing ideas that China could be about to raid the world market for extra grain and oilseed supplies to fill its growing feed deficit. Yet while China remains a voracious consumer of imported soyabeans, it has so far not lived up to forecasts that it will mop up remaining US maize supplies, astutely spreading purchases over origins for both maize and feedwheat. Another mitigating factor – other global demand for coarse grains and soya may be growing less quickly than in recent years amid ongoing economic turmoil and tight trade finance which appears to be forcing some developing countries to scale back or delay livestock expansion plans in case their meat demand suffers from lower consumer spending. The bio-fuel juggernaut is also slowing markedly in the USA as profitability declines with reduced government support, high raw material costs (maize) and a buildup in ethanol stocks, implying supply has been growing too fast for demand (even with the US exporting record amounts of ethanol to countries like Brazil!).

Meanwhile, sentiment on the ‘macro’ markets – energy, gold, currencies, equities and the grand economic factors driving them – continues to shift almost daily from bear to bull and back again as pundits continually change their minds (often almost daily!) on prospects for Euro-zone/US economic recovery, the extent to which slowing Chinese GDP might dampen Asian/global growth etc etc. This has created a situation in which the highly influential fund community don’t seem to know whether to carry on investing in agricultural commodities or dump them for more promising assets (whatever they might be in today’s strange economic climate). It all makes for uncertain markets ahead.

That said, there are many encouraging signs for feed grain consumers. The US has already started to sow a massive maize crop that will (weather permitting) start to restore tight US and global stocks of the grain.  The USA’s fastest up-and-coming maize export rival, Ukraine, also plans to plant a record maize area on failed winter wheat land, promising to intensify the fight for feed grain import customers next autumn. Europe will probably plant more maize too. There also seems to be no shortage of feedwheat including record supplies left over from two downgraded Australian milling wheat harvests, another record Indian wheat crop, still large supplies from last year’s reviving Russian and Kazakh crops.

The main worry is soya – if the Latin American crops are as low as some analysts think, things could get tighter than expected by the autumn when the US might not be counted on (based on early estimates of sown area) to begin making up for Latin American crop shortfalls. Europe – east and west – does not seem to be sowing enough rapeseed to keep up with demand. Although this is more of a problem for edible oil than for meal users, it does influence the relatively tighter protein supply. Still, Canada may go some way to making up this deficit in terms of global rapeseed supply. 

Main commodity highlights since our last review                    

Wheat poised to up or down?
The predominant theme for wheat has remained huge supplies.  Prices are still well above the levels seen last time stocks were anywhere near this large but support continues to come from several directions. These include tighter maize, consequent potential for more wheat feeding, higher wheat production costs over the last decade, ongoing concerns about the adequacy of forward quality breadwheat supplies and, not least, ideas that world production peaked in 2011 and will slip this year (the International Grains Council recently suggested by about 15m tonnes). With about 10m tonnes more stocks likely to be carried into 2012/13, that drop might not seem too important, but it does underline the fact that some Northern Hemisphere countries have less than ideal weather as we go to press.
Wheat has also been supported by speculative funds holding a record large short or sold position on Chicago futures markets, effectively betting on prices going down. This makes wheat sensitive to price rises in other grains, especially maize as short sellers have to cover their positions with margin deposits, or close them out. The net effect tends to be exaggerated price rises in wheat, often down to non-wheat factors.

Since our last review, when prices were nudging their lowest levels since the summer of 2010, the trend has been upward, Chicago rising by about 12%, EU wheat by as much as 13.5% at one stage. There have been plenty of backers for prices going higher still or into reverse. In the US, traders have been looking to stronger exports firming the market as competition from the Black Sea countries – usually the main factor driving wheat export prices down – remained on a smaller scale and more expensive than usual. That is partly down to logistics – Russia, Ukraine and Kazakhstan all had seasonal problems getting what grain they had to sell across frozen transport systems and out of ice-bound ports. It also reflected unease in the Ukraine where maybe half this year’s winter wheat crop was lost to autumn droughts and recent arctic weather. As this land is more likely to be replanted with maize than spring wheat, the authorities there are anxious to conserve wheat supplies and will likely carry in more old crop stocks than last year but that will help them continue sort of wheat export presence in 2012/13, once the final crop outcome is known. Kazakhstan and Russia still have a lot of old crop grain to move and are expected to step up efforts to clear more in second quarter 2012, rather than be forced into a buyers’ market to clear store space when their next crops arrive. So far Russia expects a bigger 2012 wheat crop, Kazakhstan somewhat less.

The ‘Black Sea’  (former Soviet country) supply hiccups of the past couple of years are not expected to dent their long term ambitions to expand grain production and exports with new ports and upgrades underway even now. It thus makes sense for them to start soon, improving their image as reliable suppliers – though their cheap costs will always be the key factor driving this expansion.   

Recent EU private estimates suggest EU 2012 soft wheat output prospects have been trimmed a bit more than expected by the cold weather in Jan/Feb. With dry weather in several countries bringing further threats to yields, some estimates of EU total production are as much as 2m tonne or more below last year’s 137.5m compared with earlier ideas of a crop increase of at least 2m tonnes. While last year’s was crop wasn’t stellar, (compared with 139m in 2009 and 151m in 2008), it was better than the previous year’s and nothing like as low as the doomsayers forecast back in the early summer droughts and heatwaves when some talked of 25-30% crop losses. That remarkable ‘recovery’ suggests it may be a bit too early for markets to get too excited about the weather but, nonetheless, this will need monitoring closely in the months ahead.

On the debit side of world wheat supply for the year ahead, we have early forecasts that Australian production might drop back by 3m or 4m tonnes while it clears last year’s surpluses – but that would still be a big crop, close to the peaks that preceded last year’s, upgraded this month to a record 29.5m tonnes. If Australia got better harvest weather, it could even end up with more milling wheat to export rather than the feed wheat surpluses of the last two rain-plagued years. Ukraine’s winter wheat crop could also be down 30-50% – maybe down 8/11m tonnes – while Kazakh sowings are also seen lower but Russia’s higher. Merging in a possible 6m to 8m tonne gain for the USA, 1-2m tonnes for Canada, flat to lower EU output etc, the early world production forecasts of a 15m tonne drop are certainly possible but there are many blanks to fill in yet. Whatever the outcome, huge stocks will mean adequate supplies.

Where are those large wheat stocks? While Europe clearly has lower than usual stocks to start 2012/13, the top exporter, the US remains awash with 23.5m tonnes. The world’s largest wheat consumer and producer, China, is meanwhile estimated to hold about 61.5m tonnes going into 2012/13  – 57% more than in 2008/09, although the true size and quality of these reserves is questioned by many. Kazakhstan may struggle to clear its large 2011/12 wheat surplus with just three months of the season to go. Although much of this is believed to be lower quality, it can compete in feedgrain marketx. India is loosening wheat export policy and while it may sow less next year, it could still end up with even bigger supplies as this season’s record 87m tonne crop leaves record carryover stocks of over 18m tonnes.

Markets have also been enlivened over the past few months by heavier demand for wheat from the Middle East and North Africa. Some of this reflects politics – Iran’s nuclear standoff and its accompanying threat of conflict and Gulf shipping disruption, the turmoil in Syria, reminding us that the Arab spring has opened a pandora’s box of regional  risk and a need for these countries to remain well-stocked on basic foodstuffs. Iran is also one of the world’s biggest wheat consumers and its own crop has fallen short this season.  A drought in Morocco which could be spreading to half the North African Maghreb region, could also lead to sustained higher demand for wheat from the EU and other suppliers.

Grain merchants/shippers have recently been switching export sourcing of wheat and maize away from the Black Sea region – mainly Ukraine and Russia – where a combination of recent Arctic weather and adverse 2012 crop outlooks has hampered grain movement and made farmers reluctant to sell, starving export ports of grain and pushing their prices up. Some of this business is going to EU & US exporters but they are having to fight for business still with Canada, Australia and Argentina and the Black Sea exporters are expected to make a comeback soon to clear remaining stocks as their transport systems thaw. This competition for import custom should keep could wheat prices under control.  

Overall, there is nothing on the supply side to justify driving wheat prices sharply higher at the moment and, if EU crops do better than expected again, maybe reason for further declines. Canada, the USA and Australia together might even improve the quality wheat supply, helping to keep the high grade breadwheat premiums under control. However, wheat prices will also be determined by those of maize, through the feed connection, making a successful US maize crop vital to forward price stability too.

USDA – offers mixed bag of March data
The current season has three months to run for wheat and is about halfway through for maize and soyabeans. Latest appraisals for global supply and demand from the USDA have contributed to the confused state of the markets. For wheat, for example, rather than raising world 2011/12 wheat ending stocks as the trade expected in March, the USDA trimmed these by 2.5m tonnes as cuts of 3.5m in China, 500,000 tonnes each in the US and Kazakhstan were only partly offset by 1.5m tonnes added to the EU.  

World wheat stocks fell despite an even higher (new record) figure for world 2011/12 wheat production of 694m tonnes (up 44m from the previous season) as USDA also raised consumption by 3.5m tonnes. China alone accounted for 2.5m tonnes of this extra demand, Iran 0.5m, smaller countries an aggregate 500,000 tonnes although wheat use estimates were cut by 1.2m tonnes for the EU and 200,000 for the USA.

The USDA also raised its estimate of world wheat trade by 3m tonnes, the lion’s share of the extra imports going to Iran (+1.8m) which has been a heavy buyer in the last few weeks. The additional exports were expected to go to the USA (1m), Brazil, Australia, Kazakhstan (500,000 each) and Turkey (300,000).

On balance, this USDA report was broadly supportive for US and European wheat prices but not excessively so, given the broader context of record world wheat stocks and a likely larger sown area for 2012 which, even with some trimming of yields from last year’s record highs, should keep wheat markets amply supplied going forward.
IGC outlook for 2012/13 – summary – World wheat area is expected to expand by 1.5% for the 2012/13 harvest, including gains in North America and the CIS. Bigger maize and barley crops may reduce use of feed wheat which will nonetheless stay relatively high. Growth in food demand should be sustained at the long-term trend while gains in fuel ethanol production will lift use in the industrial sector. Only a modest decline in world wheat carryovers is projected at the end of 2012/13. Because of reduced feed wheat demand, global trade is forecast to show a small decline.

KEY FACTORS IN THE MONTHS AHEAD

  • How much more wheat have Russia, Ukraine, Kazakhstan left for export?
  • How badly will EU winter wheat crops be affected by the Jan/Feb freeze & current droughts?
  • What will the summer weather bring for Northern Hemisphere crops – yields nearly always affect crop size more than shifts in sown acreage.
  • Better rains in recent months than in the same period last year should boost the US hard red winter bread wheat crop on larger sown area.  But will US spring wheat sowings be up or down – a big factor in world top quality wheat supply.
  • World wheat import trade is strengthening amid greater demand for feedwheat and crop shortfalls for bread wheat in some importing countries, including Iran and Morocco.
  • India  is likely to export more wheat, helping to keep world prices under control.
  • Will Australia cut wheat sowings back as much as some say and will that matter so much to breadwheat consumers if weather there improves after two years of rain-lowered quality?
  • Wheat remains likely to take much of its price-direction from maize – a big US maize crop could this summer could mean less demand for feed wheat – a US maize shortfall could be the rising tide that lifts all boats.

Maize – tight now but supplies could rise this year
Several surprises in USDA’s latest maize estimates left the bulls feeling fenced in during March.  The market consensus was expecting another cut in world production after droughts in Latin America. In the event, USDA raised the world crop by 800,000 tonnes and even increased the South American total (Brazil +1m). If this turns out accurate, one of the worst droughts in recent decades will not prevent the two big Lat-Am maize exporters having 2.75m tonnes more supply than last year! They may, as USDA predicts, export a bit less as both are using more domestically. But that isn’t expected to make much of a draw on supplies from the main exporter, the USA, whose foreign sales are still seen falling (to 43.5m tonnes from last season’s 45.3m tonnes). The more important factor, it seems, is the 14m tonnes of maize now expected to come out of the Ukraine this season compared with just 5m normally – plus the strong competition from abundant feedwheat, especially from Australia’s last, weather-affected crop.  

World maize consumption growth remains relatively robust. USDA raised its estimate by 2m tonnes to a new record of almost 870m tonnes – 25m or 3% more than last season. The lion’s share of this growth is in China (15m tonnes), the rest spread over Brazil, India, Europe and a number of smaller users.

Because production was higher than expected, world stocks fell less than markets anticipated – by just 800,000 tonnes. At 124.5m (by September this year) the end season world maize supply will still be historically low, especially in relation to even increasing demand. Yet this equation has probably been well factored into maize prices in the $6.50’s/bu (about $256/tonne) for many months now.

Just before its monthly supply/demand updates, the USDA also issued annual projections in its ‘baseline’ (budget calculations) and its Outlook Forum meetings which suggest a US maize crop this year in the region of 350/360m tonnes. This assumes the forecast 94m acres (38m ha) is all planted on time and gets normal weather. With current unusually warm conditions (and assuming no repeats of the rain delays of the past two years) some US crop pundits are talking of an unusually early start to planting that might boost the total to as much as 100m acres. To many others, that seems a bit fanciful. Yet with implied bumper yields from an early start, even 94m acres could produce a US crop this summer big enough to double the country’s ending stocks (by September 2013) to over 40m tonnes. That would take much of the steam out of maize prices (and via their feed link, dampen wheat prices too). Timely sowing might also mean an early harvest. That would take pressure off tight old crop stocks too.

What could still drive up maize prices, though, is China’s potential reappearance as a major maize importer. While the USDA figures imply China might just about meet its estimated 191m tonne maize consumption from domestic output, other sources (some Chinese officials as well as western trade experts) think the crop there will fall short by as much as 20/22m tonnes. Maize prices in China have reached record levels recently and reserve stocks bought from farmers are less than a tenth of last year’s levels, leaving it with limited tools to cool the market at a time when it wants to continue expanding livestock herds and meat consumption. Bigger imports are not only an obvious solution but economically feasible, even after shipping costs. China has already bought about 3.7m tonnes of maize from the USA compared with a few hundred tonnes this time last year. However, it is also discussing some big maize deals with Argentine suppliers as well as supplementing its feed needs with a lot of Australian wheat imports.  The USDA is not getting too excited about China yet, on paper at least, keeping its forecast for China’s total maize imports at 4m tonnes. If that rises sharply, though, it could squeeze US old-crop supplies and get prices rising sharply again. China, of course, knows it can have this impact so, rather than jack up the cost of its future imports, it may well try to delay buying until a (hopefully) larger US new crop arrives to cool thing down, or at least continue to spread its imports over other suppliers and other grains. It can also use more of its own larger 2011/12 wheat crop for another 2.5m tonnes of animal feed.  

US ethanol plants were recently reported to be moving heavily into the red amid the recent rise in corn costs and an end to government subsidies. Although weekly ethanol output still exceeds year-ago levels and the USDA target pace, it has begun to flag, stocks are building up and with talk of higher than expected ethanol yields from last year’s better quality crop, some think corn demand in this sector could actually drop 5%.

US maize exports could also be reduced if Ukraine sows as much maize as some recent forecasts (4.5/5m ha) and achieves anything like last year’s big yields – maybe supplying 5m to 10m tonnes more. Even at the low end of crop forecasts, Latin America will also have plenty to export in coming months.

With plantings soon to commence in the northern hemisphere, the IGC forecast global maize area for 2012/13 up 0.6% to a record 167m ha. World barley sowings are also seen rising by 8% from last year’s low level, especially spring barley after losses to winter crops.

KEY FACTORS IN THE MONTHS AHEAD

  • Markets still need to know the final impact of drought on Argentine and Brazilian maize crops
  • China’s maize ‘deficit’ – it could be millions of tonnes more – or less than analysts claim – a big swing factor in global import demand, ending stocks and prices.
  • The US crop is being planted record early in some states – that could mean more acres but just how many more – and what impact on yields?
  • Ukraine is sowing much more maize this year and will compete with the US and Argentina for export trade – bearish for prices
  • Global economic problems continue to erode consumer confidence but so far, it seems the potential impact on meat, feed and grain demand might have been exaggerated.
  • Speculative activity in commodities – are the funds pulling out of ‘agric’ futures? Or squaring their books for the next wave of investment?

Oilmeals – soyabean stocks will drop, maybe pushing prices up        
The less welcome news this month is for protein consumers as the latest Latin American soya crop figures from the USDA slide by another 6.4m tonnes. These are near the bottom end of the recent range of analyses from local South American experts, officials, visiting trade observers etc, reappraising the effects of drought in December and January (lingering on in even as we go to press in some parts of both Brazil and Argentina). The implied tighter Lat-Am supply has helped propel soya prices even higher during March when the US markets reached their highest levels for six month.

Although the USDA has cut its world soya crushing estimate by 2.6m tonnes (Brazil -1m, China and EU both -500,000 tonnes), global ending stocks of soyabeans for September 2012 are now seen 3m tonnes lower than before at 57.3m tonnes. This is not a historically tight figure like that of maize but it does point up the need for a bigger US soyabean crop than that now indicated by the USDA. Based on 75m sown acres, this suggests about 88/89m tonnes versus last year’s 83.2m. Until that crop is planted, up and running, the possibility of further soya price rises cannot be ruled out, especially if the Latin crops shrink further. As in  the maize market, soya is also supported by strong demand from China. This is expected to continue as China’s own oilseed crops are shrinking due to farmers planting more maize. China also likes to have plenty of forward cover and is probably concerned about the adequacy of both South American and US supplies going forward.  However the Latin Americans did start 2011/12 (last September) with much larger than usual stocks whose heavy autumn/winter export sale put the US export programme behind and created a little slack in this market. Also, with two thirds of Brazil’s crop now harvested and Argentine combining just starting, these exporters will be accelerating sales in coming months, helping to keep soyabean and meal prices under control for the time being.

Chinese officials meanwhile signal growing longer term protein import needs, rising demand for soyabean/rapeseed/product imports amid expected lower domestic crops for a second year running and growing livestock/feed demand. The USDA’s recent ‘baseline’ projections were also bullish for China, viewing a rise in its imports of almost 60% over 10 years as it switches more of its own soya crop land to maize production.

Even with the 2011/12 expansion above (the main factor in growth of global soya crush), world total soyabean processing is only expected to increase by 6m tonnes in 2011/12 compared with 11.5m last season and over 16m in 2009/10. That takes some of the pressure off smaller new crop soya supplies, as does the near 69m tonnes of soyabean stocks with which the season started (against 60m last year and 43m in 2010/11). How low these stocks might go in 2012 will not be clear until the Lat-Am crop situation clarifies. In the meantime, $13/14 beans may be buying some extra US soya acres beyond the USDA’s recent 75m acre (30.35m ha) forecast, so the crop there could turn out a bit bigger after all.

KEY FACTORS IN THE MONTHS AHEAD

  • How low will South America’s soyabean crops end up?
  • How much land will the US plant to soyabeans this spring – 75m, 76m acres or more?
  • Chinese consumption and timing of imports
  • EU/CIS rapeseed plantings – up or down for 2012?

 

World grain & feed markets outlook – January | February 2012

by John Buckley – for Grain & feed Milling Technology magazine

Grain and feed commodities started 2012 on a stronger note as a prolonged hot, dry spell over the Latin American grain belt sparked fears of major crop losses from this key exporting region. Some analysts drew comparisons with 2008/09 when similar weather chopped more than 17% – 14m tonnes of maize and 20m tonnes of soyabeans off South American production, squeezing world supplies and prolonging the descent from that season’s record world grain and oilseed prices. That season, drought also coincided with a short US maize crop (down 24m tonnes) but was offset by a record wheat harvest which gave consumers choice and helped stop prices running completely out of control – also similar to the current season.
In the event, things don’t look anything like as bad 2008/09 as this issue goes to press in late January. Although Argentine weather might yet turn dry again, a series of rain events in January has favoured most of the drought-stressed areas and temperatures have cooled. Relief may have come a bit too late to put back all the lost yield potential for maize trying to pollinate during the December heat-waves but it has almost certainly stemmed losses at far lower levels than the pessimists feared.

That was underlined in mid-January when the USDA’s monthly world forecasts trimmed just 3m tonnes from Argentina’s maize crop estimate and left Brazil’s unchanged. USDA also lopped just 1m tonnes from Brazilian and 1.5m from Argentine soya crop estimates. In fairness, most market analysts see these estimates (which still suggest record or near-record crops) as a bit too generous. However, they are probably nearer the likely outcome than some of the earlier dire forecasts.
In fact, in its second bearish global forecast in as many months, the USDA calculated far looser supplies overall, including rises rather than expected cuts for US 2011 maize and soyabean crops, lower US wheat and soyabean use, higher US wheat and maize stocks as well as those far higher than expected Latin American crop estimates. Higher Ukrainian, EU and Russian production also left world maize output and stocks slightly higher than in the previous month and 40m more than last year’s.
That said, coarse grain supplies will be lighter than the trade hoped last autumn, in a season in which the US maize crop has again fallen short of target (314m rather than the initially forecast 330/335mnnes).
On the plus side for supply, record maize production and exports are coming out of eastern Europe, chiefly Ukraine, which has been happy to slash its prices to establish itself as a serious challenger to the US and Argentina. Along with the huge global supply of competitively priced feed-wheat, this has considerably dulled the impact of smaller than expected American maize crops.

 

So has a slower trend in world demand for maize. In the largest consuming country, the USA, maize offtake has actually fallen by about 1.8% as corn ethanol growth has flat-lined while feed use has dropped. This is quite a contrast to recent seasons when ethanol use was growing in leaps and bounds.
Global demand for corn is still up overall by 25m tonnes (the lion’s share of growth in China, Brazil and India). However, that’s nowhere near the 40m tonne expansion seen in 2009/10.
Even so, US/global maize stocks remain at their tightest level in relation to consumption for decades – less than eight weeks’ supply cover. A bigger world crop will be vital this summer/autumn, even to meet a continued slower rate of demand growth. That means markets will remain highly sensitive to any US, European or former Soviet country weather problems in the months ahead and the level of spring plantings in these countries too.
So far, the auspices are encouraging. Pundits are looking for a rise of 3% or more in US planted area for maize which, with a return from last year’s (low) to normal yields – about 160 bu/acre – could result in a crop increase to 350/360m tonnes. That would more than take care of demand growth, the shortfall currently foreseen for South American maize crops – and still leave some over to start rebuilding low stocks.
Ukraine, which lost a lot of its winter-sown wheat and barley, maybe 20-30%, to drought, intends to plant much of this land up to maize instead. It makes sense. This season’s Ukrainian maize exports are expected to rocket from a normal 5m to a record 12m tonnes. With maize selling at $6 instead of the usual $4 to $5/bushel (sometimes considerably less) this grain should bring in a lot more foreign exchange than Ukraine’s often low-grade wheat exports. Europe also saw a huge rebound in its maize crop this season to a record 64.3m tonnes from less than 56m in 2010. This has not only boosted domestic use and exports but will add some to seasonal ending stocks too.
These are the main reasons why the ‘tight’ US maize futures market is currently forecasting prices will be 7.5% cheaper at end-2012 – returning to a 17% discount to wheat after months of highly unusual maize/wheat premiums.
As we expected in earlier issues, the world wheat crop has been consistently under-rated in recent months, largely due to better than expected harvests in the former Soviet Union. The main CIS or ‘Black Sea’ producers’ output is now estimated to have rebounded from last season’s drought/heat-wave-reduced 81m tonnes to 114m. This is expected to allow regional exports of 35m tonnes compared with less than 14m last season. Only a few months ago, some trade pundits were rubbishing ideas that sales would come anywhere near the 25/30m tonnes vaunted by other analysts. Heavy exports from these countries have been the biggest factor bringing down world and European wheat prices in 2011.
Although this ‘front-loaded’ export campaign appears to be slowing now – and CIS grain prices slowly rising – this season also has bigger exports from good crops in Canada, Argentina and (despite a lot of weather damaged grain this year) Australia. So, while world wheat import trade is seen about 5.5m tonnes higher this season than last, the buzzword for many months has been competition. This, rather than any strictures on supply, is the main reason why US and EU exports are currently expected to drop by about one third this season and  why prices in both markets were 20% cheaper in January 2012 than this time last year .
That trend may continue. World consumption of wheat may be up by 27.5m tonnes or 4% this season but production is growing faster, so stocks will rise. In fact, the current USDA forecast (for June 30 2012) is for a world carryover of 210m tonnes – 31% of consumption needs (about 16 weeks supply). Some analysts even put them higher than the all-time record 211m of 1999/2000.

 

At the same time, the International Grains Council is forecasting world wheat sowings 1.7% higher for 2011/12 crops. If yields hold steady, that could deliver the first world crop in excess of 700m tonnes.
Steady yields might be a tall order for some countries. Last year’s world average wheat yield was a record 3.1 tonnes/hectare (+7%) eclipsing a slight decline in sowings. This winter, East European and US crops have dryness issues that could work against maximum potential. The EU has also been short-changed on rains in some south/eastern member states. Nonetheless, there is an overall impression of ‘generally favourable’ conditions around the main northern hemisphere wheat belt. Indeed, some countries, especially Australia, Germany, Canada and the Ukraine, might also expect a bit more luck with grain quality – i.e. better summer growing/harvest weather after two years of unusually challenging conditions.
This combination – big crop, huge stocks, bigger sowings, questions why the Chicago futures complex should be forecasting wheat prices 11.5% higher at the end of 2012 than they are now. Consumers will rightly question the reliability of this futures ‘price revelation’, given that this time last year, Chicago wheat was forecasting $8.55/bushel for end-2011 compared with the actual price with which the year end of of $6.45¼. Chicago futures ‘price discovery’ was just as wrong on maize. A year ago it saw a 10% drop in prices over 2011. Despite a 40m tonne (5%) recovery in world output, values actually rose 15% amid the US crop shortfall and China’s return as a major importer.
While still on the futures markets, we might also question why, if maize is the main factor holding wheat up as most trade analysts accept, wheat should be forecasting a 17% premium over the coarse grain by the end of 2012? Shouldn’t it be the other way around?

 

As well as the ‘fundamentals’ (supply/demand issues) above, grain and feed markets continue to keep an eye on ‘macro-economic factors that might influence physical demand, speculative activity etc.  Over the least few months these factors have been broadly bearish for prices. The nagging Euro-Zone debt crisis lurches on without real resolution but maybe with a little less impact from the markets. Financial pundits continue to warn of potentially severe repercussions for global economic growth and thus on demand for food, feed and fuel commodities. It has been a big restraint on grain and oilseed bulls but markets seem to have grown tired of listening to this story. A steep drop in demand for ocean freight and lower shipping costs for grain also suggests something is slowing down. Yet the total export trade estimates for the major grains and oilseeds in 2011/12 (ends June 30 for wheat, Sep 30 for coarse grains) remain relatively robust.
Meanwhile, the speculators who played such a large part in record grain and oilseed prices over the last two or three years are still there but a less strident force, having not got the profits they expected last year for investments in wheat and soyabean futures at least. We can expect some banks and hedge funds to continue trying to talk prices back up at the first hint of a weather problem, especially for maize with its record low stock/use ratios. But aside of the Argentine drought factor, 2012 does not at this stage look like a promising year for the funds to gamble again on price rises.
Main commodity highlights since our last review
Will wheat prices drop back?
Although not directly affected by the South American drought threat, wheat joined the end-year rally in soyabeans and maize, even rising faster than the latter as funds who got into the habit of selling this surplus market were forced to buy back some of these positions. There was also much talk of wheat’s value as a feedgrain rising if Latin American weather did cut supplies and drive up prices of maize.
European wheat prices had to follow the US/world trend in first half January with added support from the weak Euro which dropped to 15-month lows against the US$ at one point. This could boost EU export sales prospects although there has been little sign of any incoming trade bonanza yet amid still plentiful supplies from North and South America, Australia and CIS countries.

 

The USDA’s US wheat planting estimates were also bearish (up 3% on last year’s) larger than expected and focused on hard red winter wheat (+6%), the mainstay of US exports and a top indicator of world bread wheat value. If US spring wheat plantings went up by the same amount and national average wheat yields returned to the 2010 level (46.3bu/acre), the crop would be closer to 60m than last year’s 54.4m.
Against that, Ukraine might lose 25-30% of its winter wheat crop. Assuming more of this land went to maize than spring wheat that could mean 5m or 6m less wheat next summer from this source, However, even from this year’s bumper crop, Ukraine is only expected to raise exports from 4m to 7m tonnes – not the biggest factor in the current highly competitive export market.
More important may be whether Russia, Kazakhstan and European countries manage to repeat last year’s good yields and whether the US, Canada (which plans to raise are by 12% !) and Australia get the right weather for plenty of good milling quality wheat.
The current supply/demand situation for these grades looks better than a few months ago, when US Dark Northern Spring wheat for export from the Gulf was trading fob terms at $420/430 per tonne (hitting a high of $579 in the summer). The January 2012 cost has fallen to a 13-month low of $366/tonne.
Whether or not the world gets a 700m or 650m tonne wheat crop for the coming season, it will also start with massive carryover stocks from this year, equal to 16 weeks’ consumption. If the crop does reach the upper end of forecasts, a burdensome wheat supply may have to be priced lower to raise its share of the feed ration – unless of course, maize crops in the Americas or elsewhere do run into serious problems.
EU wheat prices as reflected on the Paris futures market dropped from a high of €209/tonne in early January to €194 a week later, then back to the €208 again recently. It seems remarkable that the European markets are trading so high against the wheat supply backdrop. Back in December, for example, EU March milling wheat could have been bought for just €179.75/tonne. London feed wheat futures at the same time were around £140.50/tonne but have recently breached £168.50. Moreover, feed demand in the UK has been unusually slow for the time of year with compounders reportedly intent on making sales than wheat and other commodities.
However, markets here are largely following the US response to Argentine weather/crop reports with the other eye on Euro-zone issues and their effect on the single currency’s value versus the dollar. More volatility is likely ahead as these issues are resolved (or not) although some analysts are looking for a possible further slide in EU soft milling markets into 2012 due to the ongoing weight of export competition and the possibility this will lead to end-season wheat stocks turning out larger than expected.
Russia’s aggressive early season export campaign – a key factor in setting low world and EU wheat prices –  appears to be easing now as most of the freely available quality grain gets used up and its domestic and export prices rise. Recently there has been talk of it using export taxes after March to conserve domestic stocks although many analysts have played this down as a bullish factor. By then it will have cleared at least 20m tonnes, as markets expected. Also Ukraine and Kazakhstan still have more wheat to sell although Ukraine is not expected to have so much good quality breadwheat while Kazakhstan may need better prices to draw grain from its interior, where most of it now lies, to export ports. However, the US, Canada, Argentina and Australia are likely to remain in the export frame for a while yet.
If these countries get normal weather for their 2012 crops, it would not be surprising to see world and EU wheat prices lower at the end of 2012 than they are now.
KEY FACTORS IN THE MONTHS AHEAD
•    The weather once North American, European and CIS winter-sown crops break dormancy – yields nearly always influence swings in crop sizes as much or more than shifts in sown acreage.
•    Will the USA yet pull a reasonable 2012 winter wheat crop out of a challenging dry autumn/early winter period & will farmedrs there plant more spring wheat too?
•    A bit of an upturn in import demand for wheat has some analysts looking for another year of string world trade
•    Don’t forget India’s plans for another record crop. Some of this could move onto world markets
•    Above all, wheat is likely to take much of its price-direction from maize, especially if the latter crop falls short.
Coarse grains – a need to rebuild maize stocks
Maize prices nudged $8/bushel last June as traders worried about a US crop shortfall amid rising Chinese demand. The crop did disappoint and China did import a lot (though nowhere near as much as the bulls predicted) but prices still dropped by 25% in second-half 2011 – thanks to large crops elsewhere.
However, US and global maize balances look tighter on paper than that price decline might suggest. Those wafer thin stock/use ratios offer a potential flashpoint if the Latin American crops go lower than we expect or the US runs into any planting weather problems.
Cheaper maize has also helped to prop up US ethanol demand at higher than expected levels – still running over 3% up on the year despite the removal on January 1 of government blending subsidies and import tariff protection. Although earlier excpected to show no growth this season, US ethanol use of maize is being supported by strong exports caused by lack of competition from Brazilian ethanol after a short sugarcane crop there. That said, US ethanol stocks are climbing each week, implying demand is lagging supply, so things may yet slow down as we move further into 2012.
The USDA recently raised its world 2011/12 maize crop forecast to 868m tonnes – 41m more than last year. That’s about level with consumption, which grew by 25m tonnes. Assuming the main factors in demand growth – China and Brazil – grow at the same pace next year, the world crop will need to advance by at least that much to defend already tight stocks against further, unacceptable erosion of the pipeline supply. Between them, the US and China might just pull that off but will Europe and Ukraine get the same favourable weather that boosted last year’s yields? Clearly there is no room for complacency over forward maize prices yet.
KEY FACTORS IN THE MONTHS AHEAD
•    The final impact of drought on Argentine and Brazilian maize crops
•    China’s maize ‘deficit’ may be smaller than the bulls thought a year ago but is probably growing – so imports may rise beyond this season’s forecast 4m tonnes – a potentially bullish factor.
•    US spring planting weather, the timing and size of increase in actual sowings
•    ditto Ukraine
•    Global economic problems continue to erode consumer confidence but has the potential impact on meat, feed and grain demand been exaggerated?
•    Speculative activity in commodities – they could be drawn to maize by the tight balance – especially at US spring planting time if the weather plays foul
Oilmeal supplies look adequate
In the protein sector, the Latin American drought has trimmed estimates for global soyabean supply in 2011/12 and pushed US prices of soyabeans by 10%, soya meal by about 16% from the lows since our last issue. However, the effect on overall oilseed supplies has been offset by a series of upward revisions for 2011 crops of sunflowerseed, rapeseed and groundnuts. Also, by drawing down soyabean stocks, crushers will keep 2011/12 soya meal supplies up (about 3.7% over the previous season). Globally, protein meal supply will also increase by about 3.4%, easily keeping pace with growth of consumption.
If the Latin American crops come through with modest drought losses, prices will be under no obvious upward pressure. The next landmark after that will be US sowing weather in April and May. Early estimates see crop area up or down slightly but the timing of maize sowings may shift plans.
This time last year, Chicago futures were seen 4% lower by end 2012 but despite peaking twice in the $1,450’s (February and August), the near month hit a low of $1,100 in mid-December amid heavy export competition from last year’s record South American crops.
Along with a slightly higher crop estimate from the USDA, lower US crush and export projections, the US soyabean supply situation looks  fairly comfortable with projected ending stocks of 7.5m tonnes – a five-year high. Soya has also been restrained by reports that the largest, fastest-growing importer, China took less in 2011 than 2010 – its first annual drop in seven years. But at this stage, the USDA still sees its total 2011/12 (Sep/Aug) soyabean imports rising by 8%.
Big sunflower supplies from the CIS countries should mean more coming into European crush to replace short rapeseed oil supplies. That suggests there will be more sunflower meal on the market as the by-product, at competitive prices. The trade will be keenly watching European/CIS spring sunflower sowing for clues to whether this bonanza will continue, especially with uncertainty over the impact of weather in timing and size of this year’s EU winter plantings. Overseas, Canada expects to sow a record rapeseed crop but big consumer India has had some weather challenges with its own rapeseed crop.
Overall, the oilseed sector should be adequately supplied if Latam crops pull through. The Chicago futures markets currently suggest soya prices will stay flat through 2012 which suggests confidence in supplies. Other oilmeals usually take their cue from soya,  So this is fairly promising for restrained protein meal costs as a whole.
KEY FACTORS IN THE MONTHS AHEAD
•    South American crop weather
•    Chinese consumption and timing of imports
•    US planting progress/acreage sown this spring
•    EU/CIS rapeseed plantings – up or down for 2012?