IGC expects world total grains (wheat and coarse grains) production to show a second consecutive annual decline in 2018/19, to 2,063m t (-1% y/y). Led by reduced outturns in Europe and the CIS, the global wheat harvest is seen falling (-42m t) for the first time in six years, while barley output could be the lowest since 2012/13. Record use amid smaller availabilities will see a second successive drawdown of grains stocks, with the speed of contraction accelerating to 66m t, from 15m in the season before. Inventories in the major exporters could recede by 40m t, to a five-year low of 134m, while a 20m fall is envisaged in China.
International Grains Council raised the outlook for world total grains (wheat and coarse grains) production in 2018/19 by 4 metric tons (mt) m/m (month-on-month), to 2,063m. Because of adverse weather, there are further cuts to crop estimates in the EU (-9m t m/m) and Australia (-3m), but these are outweighed by gains elsewhere, including for the US (+12m), Ukraine (+2m) and Argentina (+2m).
Grains consumption is edged up m/m, mainly on higher feeding, as an increase for maize outweighs reductions for wheat and barley. With a larger estimate for world opening inventories, the projected end-2018/19 carryover is raised by 6m t, to 538m, still a steep y/y (year-on-year) contraction of 66m, IGC notes in its last Grain Market Report.
Here is the detail of the report:
As a cut in anticipated wheat shipments is balanced by increases for maize and barley, the forecast for total grains trade is unchanged, at an alltime peak of 370m t. Due to offsetting adjustments, the outlook for world soyabean supply and demand in 2017/18 is little-changed from July, with stocks seen contracting by 12% y/y. Reflecting an upgraded outlook for US yields, global production in 2018/19 is predicted 7m t bigger m/m, at a record of 366m, an 8% y/y gain.
With consumption placed only marginally higher than previously, this results in an upward revision to stocks of 7m t, to 51m, with the increase of more than one-fifth y/y largely stemming from heavy accumulation in the US. The Council’s prediction for world import demand is kept at a new high of 154m t, up by 1% y/y. The projection for world rice output in 2018/19 is maintained at a record of 491m t, a 1% y/y increase.
However, due to a higher figure for carry-in stocks – mainly owing to adjustments for India – and a small reduction to total use, aggregate inventories are raised by 2m t, to 123m, modestly tighter y/y. The outlook for trade in 2019 is broadly unchanged from before, at a record of about 48m t. After a period of two-sided activity, the IGC Grains and Oilseeds Index (GOI) was almost unchanged m/m, as declines for soyabeans and maize were balanced by net gains for wheat, barley and rice.
World total grains (wheat and coarse grains) production is expected to show a second consecutive annual decline in 2018/19, to 2,063m t (-1% y/y). Led by reduced outturns in Europe and the CIS, the global wheat harvest is seen falling (-42m t) for the first time in six years, while barley output could be the lowest since 2012/13. After a drop in the previous year, the maize crop is predicted to rebound, although this is mainly on potential improvements in South America where planting for 2018/19 is only just beginning. A projected 22m t y/y increase in grains consumption includes gains for food, feed and industrial uses, taking world total usage to an all-time high of 2,129m. Because of tighter supplies, use of wheat (-1m t) and barley (-4m) are seen falling, likely transferring some demand to maize (+28m), particularly in the livestock sector. Record use amid smaller availabilities will see a second successive drawdown of grains stocks, with the speed of contraction accelerating to 66m t, from 15m in the season before. Inventories in the major exporters could recede by 40m t, to a five-year low of 134m, while a 20m fall is envisaged in China. A new peak for trade, at 370m t, includes record shipments of maize and barley, but declines for wheat and sorghum.
As heavy shipments to Europe, Argentina and other destinations more than offset a fall in China’s purchases, world soyabean trade in 2017/18 is forecast to rise by 3% y/y. Global output in 2018/19 is predicted to expand by 8% y/y, to a record of 366m t, on bigger harvests in major producers. Although total use could grow further, aggregate carryovers are seen up by more than one-fifth y/y, to a high of about 51m t, almost entirely tied to accumulation in the US. A retreat in deliveries to Argentina and China is expected, but increased shipments to the EU and elsewhere should push up global trade to a high in 2018/19, albeit with y/y growth of 1% substantially below past averages. Underpinned by potentially bigger sales to China, Brazil’s exports are expected to edge up to a new peak as US dispatches fall slightly.
Following the previous year’s heavy expansion, world rice trade is set to grow further in 2018 on demand from buyers in Far East Asia in particular. Tentative prospects for 2018/19 place global rice output at a new peak as a drop in production in China is more than offset by bigger outturns elsewhere in the region. Carryovers may fall slightly on a modest tightening of China’s reserves, but major exporters’ inventories are likely to hold steady after the steep declines of the past. As trade stays high, India should maintain its position as the leading exporter.
The IGC GOI was unchanged m/m, as net gains in wheat and barley export prices were countered by late-month declines in soyabeans. Price weakness during the second half of August was mainly tied to bearishly interpreted elements of USDA’s WASDE report, outside market influences and excellent US rowcrop yield prospects.
2018/19 GLOBAL WHEAT PRODUCTION
TO FALL FOR FIRST TIME IN 5 YEARS
The United States Department of Agriculture (USDA) updated its monthly World Agricultural Supply and Demand Estimates (WASDE) on August 10 and expects the global wheat supply and demand situation to be more favorable for U.S. farmers this year due to shrinking global wheat production. USDA lowered its global wheat production estimate by 6.63 million metric tons (MMT) to 730 MMT, down 4 percent year over year and the lowest level since 2014/15, if realized.
DROUGHT CUTS ESTIMATED PRODUCTION
BY 7.5 MILLION TONS IN EU
Widespread drought across Germany and northern Europe is one reason why USDA dropped its production forecast. USDA expects European Union total wheat production to fall to 138 MMT, 9 percent below both the 5-year average and 2017/18 production. With smaller EU wheat production, USDA lowered marketing year 2018/19 (June 1 to May 31) EU wheat exports to 23.0 MMT. If realized, that would be 2 percent below the year prior, and 25 percent below the 5-year average.
Specifically, wheat production is estimated down 3.0 million tons in Germany due to very poor conditions in the north. Estimated wheat production in France is down 1.75 million tons based on harvest reports. Meanwhile in Spain, estimated production increased 1.1 million tons due to beneficial rainfall. Estimated production in Romania and Bulgaria were lowered due to excessive rain.
DROUGHT RECOVERY CAUSES
YIELD REBOUND IN RUSSIA
At the same time, USDA also expects Russian wheat production to fall 20 percent year over year to 68.0 MMT due to unfavorable winter wheat planting and growing conditions. With Russian wheat supplies shrinking, the 2018/19 Russian wheat export forecast is down 7.00 MMT from 2017/18 to 35.0 MMT.
With lower exportable wheat supplies (production plus beginning stocks minus domestic consumption) in Russia and the EU, USDA expects the United States to have the largest exportable supply of wheat in the world in 2018/19 at 49.7 MMT.
Consequently, USDA expects 2018/19 U.S. wheat exports to reach 27.9 MMT, up 14 percent from 2017/18 and 7 percent above the 5-year average, if realized. Still, U.S. wheat export sales pace will need to increase to meet this goal, as year-to-date U.S. wheat export sales total just 7.53 MMT or 27 percent of USDA’s anticipated total.
Kazakhstan wheat production for 2018/19 is estimated at 14.5 million metric tons (mmt), up 0.5 mmt from last month but down 0.3 mmt from last year. The month-to-month increase is based on continued favorable conditions for spring crops in most areas of north-central Kazakhstan, which is the main production zone for wheat. Yield is forecast at 1.26 metric tons per hectare, up 4 percent from last month, up 1 percent from last year, and 9 percent above the 5-year average. Spring wheat accounts for about 95 percent of the country’s wheat output, and 85 percent of the spring wheat is grown in three territories in north-central Kazakhstan: Akmola, Kostanai, and North Kazakhstan.
RECORD CORN YIELD FORECAST FOR UKRAINE USDA forecasts Ukraine corn production for 2018/19 at a record 31.0 million metric tons (mmt), up 1.0 mmt from last month, up 6.9 mmt from last year, and 0.1 mmt above the previous record crop which was harvested in 2013. Yield is forecast at 6.89 metric tons per hectare, 6 percent above last month, 27 percent above last year, and surpassing the 2016/17 record by 5 percent.The estimated harvest area was reduced slightly to 4.5 million hectares, based on final sown area data released by the State Statistical Service of Ukraine. This year’s crop has benefited from outstanding weather in central Ukraine, the main corn production region..