The Grain News
Grain News: June 2010
- Category: Grain News
- Published on Wednesday, 28 July 2010 14:47
China Corn Imports Give Markets, Analysts Something to Think About
News of China’s purchase of U.S. corn in late April quickly got market analysts buzzing. While corn futures reacted, the information was digested and markets moved on, returning their focus to large U.S. and global corn stocks, anticipated 2010 production estimates and typical seasonal weather.
Gary Blumenthal of World Perspectives Inc., a consulting firm based in Washington, D.C., said that China’s purchase, however, remains a wild card in the marketplace.
He noted that the country may have booked up to 1 million tons by late May, assuming that several shipments listed as unknown destination are indeed headed to China. He added that some analysts believe the country could import 2-4 million tons in calendar year 2010, with both old (2009-10) and new (2010-11) crop corn involved.
“In terms of simple corn volume, new demand of that nature does not change the supply and demand numbers all that much,” Blumenthal said. “Still, the unexpected Chinese corn buying and the unanswered questions it raises have certainly affected the corn market’s mood.”
The U.S. Department of Agriculture projects that the 2009-10 carry out for U.S. corn will be 1.74 billion bushels (44.2 million tons) and the 2010-11 figure to be 1.82 billion bushels (46.2 million tons), based on current production and use expectations. Both of those figures are “comfortable though not burdensome,” Blumenthal said, adding that global ending stocks will also be comfortable but not burdensome at 18.6 percent of demand.
Total U.S. corn exports for the current and upcoming marketing years are estimated at 2 billion bushels (5.1 million tons). According to University of Illinois Agricultural Economist Darrel Good, that’s right at the average for the last decade.
While Good acknowledged a recent quickening pace of exports, ethanol processing and domestic feed usage, has not resulted in sustained price strength for corn.
“In addition to continued slow economic recovery, corn prices have been kept in check by expectations for another very large U.S. crop in 2010,” he said.
Imports by China are something the corn markets have “to chew on and speculate about” that other markets, notably wheat and soybeans, don’t have, Blumenthal said.
That doesn’t, however, mean pricing will follow suit, and, as Blumenthal noted, the recent demand from China does not significantly alter the overall supply and demand picture.
Blumenthal said some commercial buyers believe estimates from last year’s Chinese corn crop were overstated, which is partly behind China’s domestic corn price increases, which, in turn, added to an unacceptable level of food price inflation. “Periodic auctions of corn from the government’s reserve stocks failed to cool off the market, so the Chinese government is allowing imports of U.S. corn into Southern China,” Blumenthal said.
Should China’s production figures increase this year or domestic corn prices fall, imports could stop just as quickly as they started.
Credit Program Aims to Help Grow Iraqi Agriculture Industry
As the Iraqi agriculture sector continues to rebound, a revolving credit guarantee program organized by the U.S. Grains Council is available to help Iraqi poultry producers finance the purchase of feed ingredients, day-old chicks and veterinary supplies from global suppliers.
After the second Gulf War, agriculture and food production in Iraq was in shambles. In-country agriculture organizations no longer existed and agriculture production-related imports were hampered by a lack of security, regulatory requirements and structure.
Over time, efforts by a multitude of organizations, including the Council, helped to get Iraqi agriculture on its feet again. In fact, the Council helped organize the Iraq Poultry Producers Association, which provides market and other information to its members. It also works with the Iraqi government to develop policies that would help the poultry industry expand and grow.
“We quickly identified poultry production because poultry meat is a relatively low cost food, the sector would provide good jobs and would stimulate the ag economy while providing food for consumers,” said the Council’s Erick Erickson.
The poultry sector began to grow, but despite these efforts, difficulties remained.
“While Iraqi farmers were trying to produce more poultry and meet demands of consumers, they had a very difficult time financing necessary feed ingredients,” Erickson said.
There was simply a lack of bank financing in Iraq – and importers in the country are not eligible for GSM-102 funds. Instead, a private financing option was necessary to encourage Iraqi banks to do business with Iraqi agribusinesses who could then buy inputs in the global marketplace.
“In 2005, the U.S. Grains Council established a Food for Progress credit guarantee program to help alleviate this problem and reduce the cost of importing poultry feed ingredients,” Erickson explained.
Soon after, the scope of the credit guarantees expanded to include other production inputs poultry producers may need, including day old chicks and veterinary supplies.
The Food for Progress guarantee program was intended to quicken the growth of privately financed trade – financing through private banks on commercial terms. It works by having the credit fund and bank jointly share the risk of any unpaid loans that are qualified and approved.
While two Iraqi banks qualified for the program and guaranteed four transactions, the program stalled because portions of Iraq essentially remained a war zone and border inspection regulations made it prohibitively expensive to bring large quantities of grain and feed ingredients into the country. Iraq’s banking sector faced additional challenges.
A fresh start
Earlier this year, Erickson and the Council’s Chris Corry traveled to Amman, Jordan, to meet with poultry producers and banks to discuss ways to re-energize the credit guarantee program, which has $3.15 million available for credit guarantees.
Sorghum: Grain provides additional options (from page 2)“We found that the restructured banks have a whole new and active approach to seeking business with Iraqi agribusiness companies,” Erickson said. “They seem ready now to promote themselves to agriculture and include the poultry credit guarantee fund as one of the many banking services they provide.”
The business climate in Iraq has also improved considerably, Erickson said. “The poultry industry seems poised for rapid growth,” he said.
One area being explored is feed mills contracting with poultry farmers who grow the birds. In essence, the feed mills would work with a bank to help finance the input needs of those smaller producers, and seek a credit guarantee to help get that financing.
Those who use the program can buy agriculture inputs from the open market. “There is no requirement to buy U.S. goods,” Erickson said, “That is the nature of the Food for Progress program – it is unrestrictive.”
Sorghum Adds Value, Options as Ingredient
Sorghum is an outstanding feed ingredient and new research shows some potential feeding methods that will make using sorghum easier and more effective, especially for poultry and swine.
While in the Philippines at a meeting hosted by the U.S. Grains Council, Dr. Scott Beyer from Kansas State University presented research findings that included a look at particle size, pelleting and the opportunity to include whole sorghum berries in rations and more. Beyer also addressed some myths about sorghum during his presentation to nutritionists, feed manufacturers and swine and poultry end-users.
“Some people believe you need to grind sorghum to a very small particle size for it to have good feed value,” Beyer said. “That is not true with poultry, which have a gizzard to grind it down. All you need to do in the feedmill is do what it takes to make sorghum work in the pellet. Beyond that, there is no need to worry about making it more available to the bird.” Smaller than necessary grinding sizes are excessive and costly.
Processing sorghum should be no different than processing corn. “It’s whatever works for the pellet quality you desire,” Beyer said. “There’s no need to worry much about particle size.”
Additional research shows that including small amounts of sorghum – a 5 percent to 8 percent inclusion rate – works well without any processing at all. “Basically, you can take a load of sorghum and move it directly into a feed ration,” Beyer said. “There wouldn’t be any need to store the berries or go through any extensive processing. Just include it and go. It’s an easy way to add the nutritional benefits of sorghum to a ration.”
As for that nutritional value, the old standard that sorghum has 90 percent of the feed value of corn simply doesn’t hold true anymore.
Beyer said sorghum is “very close” to corn’s feeding value, especially the newer sorghum varieties that have a more consistent nutrient profile. Sorghum is high in protein. While it is important to test a shipment’s overall nutritional value at a lab, due to the various nutrient values, there is no reason to put a false limit on sorghum in a ration.
Crude protein, amino acid digestibility and true metabolizable energy are very similar between new sorghum varieties and corn. Animal performance, including average daily gains, should also be the same, provided the ration is balanced properly, said Beyer.
In fact, sorghum substitutes for corn quite well in swine and poultry rations. While it isn’t exactly a one-to- one replacement, Beyer said there would only need to be a slight adjustment in the ration on energy and digestible amino acids. It is also an option to mix the two feed grains – should one grain be of lower quality and the other higher, a mix would limit the negative.
Beyer also discussed tannin. This, perhaps, is one of the biggest sorghum misconceptions out there. “Tannin can affect the absorption of protein in birds, but nobody in the United States plants sorghum varieties that have tannin in them,” he said. “It’s something we simply don’t have to deal with or worry about.”
After all, he said, U.S. sorghum is also fed to U.S. poultry and swine, and is considered a valuable ingredient to those operations who are best equipped to take advantage of the feed grain.
Beyer also noted the importance to have an understanding of feedstuffs beyond corn and soybean meal. “Livestock and poultry producers who can look at and use feed ingredients, and they haven’t in the past, will profit in the long run because global grain markets are changing,” he said.
“Flexibility and know-how create opportunities.”
Council Names Latner Director for China
The U.S. Grains Council has named Kevin Latner as the new director for its China office, located in Beijing.
Latner has 14 years of experience working with the U.S. Department of Agriculture’s Foreign Agricultural Service, specifically 10 years in Asia and five in China. As director, Latner will oversee all the Council’s programs in China.
The Council’s previous director in China, Cary Sifferath, became director of the Council’s Mediterranean and Africa office in Tunis, Tunisia, last year.
“Kevin’s background will be a tremendous benefit to the Council’s work in China,” said Alan Tiemann, chairman of the Nebraska Corn Board and board liaison to the Council’s Asia programs. Tiemann is a farmer from Seward, Nebraska.
“We are happy to have him with us as his business leadership and trade promotion experience will be incredibly valuable to the Council’s work in this important market,” he said.
Having previously served as a director of one of USDA’s Agricultural Trade Offices in China, Latner’s track record includes business development and trade facilitation in Japan and China. He has worked to identify international market expansion and new market opportunities for U.S. agricultural interests by specializing in trade negotiation and analysis as well as market assessment and government network development.
“U.S. farmers look to the U.S. Grains Council to support their export efforts, and I am honored to be able to do this,” Latner said of his new role with the Council.