Annual trade in maize of about 80Mt accounts for three quarters of world coarse grain trade (Graph 1). Although trade in the others is significant in particular situations, it does not generally compete very directly with maize in a general context. Of about 15Mt of barley traded internationally about 5Mt is typically traded as, or for, malt with much of the balance being absorbed by the Arab world where, because of the traditional nature of livestock husbandry, barley is a preferred feed grain (Table 1).

Sorghum has a niche position in the market place relating to its drought tolerance as a crop. The US dominates international sorghum trade with more than half of it being with neighbouring Mexico. Only about 2Mt of oats is traded internationally with about two thirds of this trade being for milling and much of the balance being for horse feed. The US also dominates this market, but as an importer. Even the very limited past commercial importance of rye has declined very significantly in recent years as it no longer qualifies for EU intervention. International rye trade has declined to about 0.5Mt. Further adding to international trade of feed grain is feed wheat. But the quantity involved, if intra-EU trade is excluded, is usually quite limited and is usually a function of supplies of off grade milling wheat, following poor quality harvests.

Just as maize dominates world feed grain trade, US exports dominate world maize trade. US exports over the last five years have averaged almost 50Mt per year about 60% of world maize trade (Graph 2). The only other maize exporters of significance are Argentina and China which have contributed about 15 and 10%, respectively, to world trade over the last five years. In terms of regional maize trade destinations East and Southeast Asia account for more than 40% of world maize trade with the balance going rather equally to North Africa and the Middle East, the Americas, and other destinations including the EU (Table 2, see above).

The east Asia market is a particularly vibrant one for feed grain as many of the countries are seeing rapid economic growth resulting in increasing demand for meat. Further many of these countries have very limited land resources to devote to feed production. Japan has traditionally typified this group of countries, importing about 20Mt of coarse grains a year, almost 20% of total world trade.

In recent years, however, US domestic demand and particularly that for fuel ethanol production has threatened to limit supplies of US maize available for export. But a succession of large US maize crops (and further potential output increases, as US farmers are expected to switch more land from soyabeans to maize) has enabled the US to sustain traditional levels of exports. The USDA forecasts US maize exports for the current crop year at 57.2Mt, 5% above last year and 15% above the previous five-year average. US ending stocks of maize will, however, be reduced to 19.1Mt, just 6% of total US supply for the crop year, compared to 17% two years ago.

With global production of grain-dependent pork and poultry meat projected by the USDA to increase by 3.6 and 1.8%, respectively, in 2007, trade demand for feed grain is understandably firm. Further with alternate sources of maize supplies limited prior to the harvesting of southern hemisphere crops, the US is virtually the only source for importers.

Short crops in Europe appear to have tightened up supplies and are generally restricting exportable supplies of feed grain. The other major northern hemisphere source of feed grains and in this case specifically maize, China, appears to have adequate supplies and is projected to have ending stocks this season exceeding those of the US. But these stocks do not seem to be available to the international market. Further with the very strong economic growth of China, domestic demand for meat has also been expanding with growth in pork production expected to increase 5% in 2007.

US maize export sales have continued to exceed the rate needed to reach the 5% increase in exports predicted by the USDA (Graph 2). After about five months of the crop year, they are running 23% above year-ago levels and have reached 63% of total projected sales. This is in contrast to wheat where export sales are currently lagging the pace needed to meet USDA export projections for the crop year, as US wheat is generally perceived to not have been competitive with alternate sources.

This does not appear to have been the case with maize as there have been no significant alternate sources. The USDA suggests that the rapid pace of maize sales is a consequence of importers tying up supplies earlier than usual. Beyond the reality of the market fundamentals, there may be some concern over the continued availability of US maize in a political context, with increased ethanol production and domestic use of maize being a security issue for the US. The US has in the past embargoed grain exports for political purpose.

Global production of both wheat and coarse grain have declined by about 5% over the last two years, with crop development generally not being as favourable as in 2004. In the case of wheat higher prices are expected to result in a small reduction in global consumption, with the USDA projecting wheat consumption for the current crop year at 618Mt, 1% below last year, but still 4% above production. In contrast for coarse grain the USDA projects global use at 1,014Mt, 2.5% above last year, and almost 5% above global production, despite close to record maize prices. Market outlook for coarse grains generally and maize specifically appear favourable for at least the medium-term.

David Walker 001 780 434 7615