FBA Issue 16: September / October 2007
Global grain trading amid rising meat consumption and growing biofuel use
by Jared HENG & Eric J. BROOKS
MOVING grain between countries brings with it challenges such as fluctuating freight train rates, transcontinental shipping tariffs, trade flows that change direction in response to reversals in grain production or demand, transport bottlenecks and the ascendancy of biofuels. Held at the strategic port city of Singapore, Grain Shipping 2007 analysed the factors affecting grain transportation and how they relate to the grain and shipping sectors.
Brazil in ascendancy, Australia in decline?
Unsurprisingly, it was reported that the greatest growth in global grain demand comes from Asia. As incomes in Asia's large developing nations rise rapidly, demand for meat, and with it, feed grains, increases disproportionately fast. Hence, at the very least, we can expect Asia's booming demand foranimal protein to cause geometric rises in grain imports. This challenges the capacity of ports to handle rising import volumes while necessitating a profound expansion of Asia's port handling and shipping infrastructures.
In particular, USDA data indicates that due to population increases, fast rising incomes, rapidly growing demand for animal protein, flood and drought, China's domestic corn, wheat and soybean supplies have fallen ever further behind aggregate national demand since 2000. Consequently, due to its transformation into a large grain importer, China's grain logistics are increasingly dominated by international shipping markets and less so by its internal freight rail network.
Similarly, in Southeast Asia, rising demand for livestock products outpaces the region's ability to expand feed grain production. As a result, Southeast Asian corn imports are expected to total over 1 million tonnes during the next 10 years. On the supply side, Brazil's soy acreage is rapidly growing, allowing it to export more soybeans and soymeal. Hence, the trend is one of widening grain flows from Brazil's fields to the livestock markets of China and Southeast Asia. However, the increase in Brazilian soymeal exports, while greatly appreciated by Asia's large importers is mitigated by the rapid growth of Brazil's domestic pork and poultry demand.
Moreover, even as grain exports from Brazil increase, those from other countries are diminishing in importance. Australia, a major grain market player, is being closely watched as a severe, long lasting drought has greatly reduced its grain shipments to Asia.
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