The durum wheat planted in Europe has been reduced due to low price and the increase in almond and olive productions has lead to a decreased production of cereals in the region. “The world population today stands at 7,700 million inhabitants, with an annual growth of 80 million people, with food being the main problem facing the world”, explained the co-founder of Northstar Brokerage, Philip Werle. Improvements in agricultural production processes “have led to significant increases in yields per hectare, although this revolution has left thousands of farmers unable to keep up with the pace,” says Werle.
To fight hunger with artificial intelligence
The reflections presented today in the ACE indicate that new technologies, such as artificial intelligence and the use of robots are changing the rules on which the sector has been based so far, changes that will accelerate much more in the coming years. Given this situation, Luigi Vascello, co-founder of Northstar Brokerage, points out that “it is becoming increasingly necessary to combine the increase in food with the care of the environment, which presents problems as urgent as melting and deforestation. And in this scenario, intelligence systems will perform more accurate calculations on estimated production and how to manage the business,” concludes Vascello.
In addition, during the conference there were four presentations by executives of multinationals of raw materials that have dealt with the global situation of the markets for durum wheat, vegetable oils, barley and vegetable proteins. On the other hand, Juan Pablo Rossi, global commercial director of Cargill, has given the keys on the global barley market; while Stephane Saint Jean and Nicolas Prevost of Durum SAS have offered a global vision of durum wheat. Peter Fakla, director of Emea at Bunge Geneva, has been in charge of the situation of the vegetable oil market, and finally, Antonio Ramallat, senior Trader of Cofco Spain, has exposed the situation of the international vegetable protein market.
The battle for farm land becomes tougher
The trend at a European level follows a pattern very similar to Spain, given that the main producers have less cultivated area to produce on. Greece has sown 30% less, France, between 12-15%, and Italy between 10-12% less. On this side of the Atlantic, Kazakhstan is the only country to have maintained stable planting. Mexico has also cut its sowing by 5-7%, while Canada and the US have just started theirs and it is difficult at this time to quantify it. The fall in production worldwide has been 3 million tons which causes a global imbalance of supply and demand and different flows. The EU will need to import 2.5 million tons to balance supply and demand. If the prices to the farmer are still as low as they are now, between 20 and 25% of the current production area will be lost, which will further strain this situation of imbalance.
The main brewing multinationals invest in barley production to ensure the continuation of the beer cereal.75% of the volume of alcoholic beverages consumed in the world is beer, but beer barley accounts for only 1% of cereal and grain production worldwide. That is why the main brewers, AB InBev with 26% of the market and HEINEKEN with 14%, are coming into direct contact with the producers trying to increase the volume of production. The main investments to generate interest in the production of barley are being made in two regions mainly: Africa and Southeast Asia. The breweries are aware of the tendencies that the consumer sets and this will also dictate the production of barley, for example in recent years the craft beer has increased in consumption 5 times more than the rest, and this will mark the production of barley into more sustainable, organic barley and organic hops that will influence farmers.
US is the biggest corn producer
The corn harvest in Spain is estimated at around 4 million metric tonnes (mt), so the domestic market will continue to depend on imports, since it needs between 6-7 million mts to satisfy its needs. Another harvest will be from Ukraine, Spain’s main supplier, a country in which a second record harvest is expected, which would bring stable prices. In Spain, corn is being paid at 170 euros/mt, that is, almost 13 euros above the EU intervention price, at 157.3 euros/mt.
It is expected that the world production of corn will reach 1.110 million tons in this campaign, with the United States being the main producer, representing one third of the crop and with upward sowings. In the Southern Hemisphere the production will be huge, with an additional 150 million mts added between Brazil and Argentina (main producers in the area). The stocks of Ukraine will also be added to this, so it is expected there will be a wide availability of this cereal.
Record harvest of sunflower in Ukraine
This year there has been a record crop of sunflower in Ukraine and it has also been good for the rest of the main producers such as Russia, Europe and Argentina. Ukraine has seen some 3 million tons more than last year and this figure could increase next year. For now, the trend is stable, but if it increases much more the harvest could create a slight deviation to the downside.
The global supply of soybeans increased by 20 million mts last season due to good weather conditions, which has resulted in purchases at competitive prices in relation to other proteins and are at around 320 euros/mt. In the 42 weeks of commercial exercise, imports of soybeans to the EU have increased by 9%, while soybean oil has increased by 47%.
Even though the trend is bearish for soybeans, there is an abundant supply around the world, the margins in origin are good, there are good stocks and freight rates are relatively cheap this year. This last variable will change by 2020, which can cause a change in this case from one day to the next.
Swine flu increases meat prices
Internationally, Asia is seeing a particularly bearish market. As a further destabilizing element, African Swine Flu stands out, affecting up to half of the pigs in China and 20% of Vietnamese swine, a circumstance that leads to a significant decline in feed consumption. The effect of this is double with the commercial war between the United States and China, which keeps the feed market trade on temporary standby, waiting for both countries to negotiate and stabilize the situation.