Grain trade sees higher volumes, lower value – Rabobank report

The global market for grains and oilseeds has contracted in value by about 15 percent, thanks to price declines, even as trade volume has grown by about 150 million tonnes

Price declines have resulted in a 15 percent contraction in the value of global market grain and oilseed markets,  even as trade volume grew by 150 million tonnes, according to a Rabobank report.

South America and the Black Sea region have seen the strongest growth in export volumes as a strong US dollar made if difficult for US farmers to compete.  Brazil increased exports by 73 percent since 2011, and accounted for more than half of a 50 million-tonne increase in global soy supply over the past five years, threatening to displace the US as the world’s largest soy exporter.

In the Black Sea region, Russia, Ukraine and the Eastern European Union nations have all boosted grain and oilseed exports by around 50 percent. However, export growth may slow as methods for attaining quick gains, like switching to corn from wheat and barley, have largely been enacted, the report notes.

Overall, demand from Asia, the Middle East and Africa are expected to continue driving grain and oilseed trade upward in the coming years.

Asia now consumes 43 percent of the world’s grain imports, driven by a 90 percent increase in Chinese imports (60 million tonnes) in the last five years. However, that growth in demand has been slowing.

Despite strong growth in soy, barley, sorghum and oilseed imports, Chinese corn imports have slackened since 2013, due to a hefty oversupply stemming from domestic subsidies. Similar trends could also dampen the country’s appetite for sorghum and feed barley in the near future.

By contrast, India is set to become a net importer of soy, based on increasing poultry consumption. Growth in domestic poultry has meant India’s feed sector now consumes what was a 5 million tonne soy export market in 2011.

Despite the upward trend in global demand, growers in the US, the world’s largest grain and oilseeds exporter, will continue to face challenges in the form of growing competition from South America and the Black Sea Region, at a time when many US farmers are short on operating capital.  Lower grain prices and a global supply glut have challenged growers, pushing down US farmland values in some regions and increasing pressure on the US Farm Credit System as operators increasingly rely on loans to keep afloat.

However, investors in the grain sector have told Agri Investor that rising food demand and low long-term risk, compared to higher margin specialty crops, make the commodity crop sector a strong long-term investment with reliable risk-adjusted returns.