SIMIC

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vents in the past few months have darkened the outlook for many seaborne dry bulk commodity trades in 2020 and later. Uncertainty about future global trends, both in the near and longer term, has been greatly intensified by the economic recession resulting from the coronavirus pandemic. Yet grain and soya trade looks well placed to continue growing solidly.

Attempts to predict commodity movements have become more hazardous. The sudden, exceptionally severe downturn in the world economy, caused by government measures needed to control the pandemic, is having devastating effects in most countries. Restrained consumer and investment spending is a prominent feature. Negative effects on dry bulk commodity import demand have followed. Signs point to an extended period of especially difficult economic problems, which could limit recovery in industrial activity and trade.

Grain and soya trade is not completely insulated from these overshadowing influences. But food supplies are usually accorded top priority, and cereals and oilseeds for human or livestock consumption are a crucial component. In the longer term, further population growth is likely around the world. Together with improving living standards and changing diets for many people – even if this process is held back by slower economic progress than previously envisaged – one implication is rising global demand for, and imports of, grain and soya.

How the trend has evolved
Grain and soya trade comprises about one-tenth of all global seaborne dry bulk commodity trade, and is the third largest segment. Annual volumes, although substantial, are not as large as those of iron ore or coal. World trade in the four main grain and soya components – wheat, coarse grains (mainly corn), soyabeans and soyameal – during the past decade are shown in the graph.

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Clarifying the data, these US Department of Agriculture statistics are based on marketing years reflecting the pattern of world harvests and new crop supplies. An October to September marketing year is used for two-thirds of the total, comprising coarse grains (corn plus barley, sorghum, oats, and rye), soyabeans and meal. Wheat trade, the remainder, is based on a July to June year. Trade includes all international movements (but not internal trade within the European Union), and is mostly seaborne.

An upwards trend during the past decade is evident. The world grains and soya trade volume totalled around 400 million tonnes annually at the start of this period, rising to an estimated 613.5mt in the current 2019/20 marketing year ending September 2020. Over the entire decade, growth based on these calculations was 212mt or 53 percent. Within this incremental 212mt, coarse grains contributed 43 percent of the extra volume, wheat 23 percent, and soyabeans/meal 35 percent.

In the past ten years from 2009/10 to 2019/20 coarse grains trade saw the fastest expansion, a 76 percent growth rate, compared with a much lower 35 percent growth rate for wheat. Soyabeans recorded the second highest rise, 69 percent while soyameal grew by 20 percent.

Perceptions of brisk expansion through the past decade are modified by evidence of a sharp deceleration in recent years, followed by growth regaining momentum in the current 2019/20 period. After two consecutive years when annual growth exceeded 5 percent (2014/15 and 2015/16), global grain and soya trade increases slowed to 3.9 percent, 2.6 percent and 0.6 percent respectively in the next three years. Within the current period a return closer to previously achieved performance, 3.1 percent, is estimated.

Changes among importers
What propelled this upwards trend? One particularly strong influence was expansion of China’s purchases. Grain and soya imports into China more than doubled, from 55.6mt in 2009/10 to an estimated 113.0mt in 2019/20, contributing a quarter of the global increment. Within that overall rise soyabeans rose by 82 percent from 50.3mt to an expected 92.0mt in the current year, two-thirds of China’s total increase, boosted by soya use in rising animal feed output.

Elsewhere around the world there was a pattern of solid expansion in the use of imported grain and soya in the manufacture of livestock feed in many countries. Population growth coupled with urbanisation – a rising proportion of people living in towns and cities – amid improving living standards and changing diets all supported grain and soya consumption, and import demand. The trend was reinforced by preferences for additional meat and dairy products in diets, resulting in expanding animal herds and associated livestock feed production.

These influences were seen in varying degrees in several especially significant areas. North Africa, some sub-Saharan African countries, the Middle East area, Mexico, and numerous countries in south-east Asia added large additional volumes to annual grains and soya imports during the past decade.

An overview of future growth
When prospects for the future world trend in grain and soya trade are assessed, a question immediately arises. How much has the outlook been affected by the economic upheaval caused by the coronavirus pandemic, and its unclear but probably extended aftermath? At present, signs point to limited adverse effects in the short term, the next twelve months, while the longer term impact over years ahead may not be especially negative either.

As an illustration of a view which still seems valid, in February this year (just before the full impact of the pandemic had become visible) the US Department of Agriculture published its regular annual long-term projections for the global agricultural commodity market, including cereals and oilseeds. These, arguably, offer a plausible view of a possible outcome. The projections reflect stated assumptions about a wide variety of general and specific influences, and it is emphasised that the view is not presented as a firm USDA forecast; instead it is a “conditional, long-term scenario about what would be expected to happen” in stated circumstances.

The graph below shows a summary of the projections for world grain and soya trade over the decade ahead. Calculations suggest that an upwards trend in the total volume could continue through the period. But, compared with the past ten years’ average, a markedly lower average annual growth rate for these trades together is envisaged by USDA analysts.

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During the ten years from the current 2019/20 marketing year to 2029/30, the figures suggest a cumulative rise amounting to just over a fifth (22 percent) in annual grain and soya trade volumes. The 2029/30 volume could reach 732mt, a 134mt increase. Growth rates indicated for the segments vary within a range of 18 to 26 percent. Soyabeans trade may grow at the fastest pace, 26 percent, followed by coarse grains at 23 percent. For wheat, a 20 percent growth rate seems achievable, and 18 percent for soyameal.

This pattern implies annual growth in the entire grain and soya category averaging 2 percent through the period, a notable deceleration compared with 4.4 percent average for the previous decade. The assessment appears to reflect slower expansion in the past few years, and clear signs that some of the positive influences which have propelled trade advances during the 2010s may be distinctly less powerful in future.