IGC: Change in Chinese wheat raises grain estimations

According to the last report of IGC, the estimations about the total world grains production is updated upward with an amount of 9 million tons. The difference mainly arises from the increase in Chinese wheat production.

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London-based International Grains Council has released its monthly report. According to the report that contains the yearly statistics about grains production, consumption, trade and carryover stocks and which is updated according to the information obtained in October, a 9m t m/m (month-on-month) boost to the estimate for world total grains (wheat and coarse grains) production in 2018/19 and this is mainly for wheat in China. Wheat output is also placed slightly higher than before in the EU, Russia and Algeria, but reduced for Argentina and Australia. A larger projection for consumption absorbs some of this month’s increase in estimated supply and the forecast for world grains stocks at the end of 2018/19 is raised m/m, though this is mainly in China. Global inventories are still seen posting a second consecutive y/y (year-on-year) decline (-57m t), with the drop concentrated in the major exporters (-37m). The figure for grains trade is unchanged m/m, as cuts for wheat, barley and sorghum are balanced by an increase for maize.

The Council forecasts an expansion in world wheat area for the 2019/20 harvest, the first gain in four years, but more rain is needed for planting and crop establishment in some major producing areas, especially in parts of the EU, Russia and Ukraine. Given current conditions, sizeable declines in rapeseed area are likely in the EU.

The Council’s outlook for global soybean output in 2018/19 is broadly unchanged from September, at a peak of 369m t, the 9% y/ y increase stemming from acreage gains and improved yields in major producers. Due to a higher carry-in, supplies are raised by about 2m t m/m and, with total use cut fractionally, world endseason inventories are lifted by 2m, to 54m, a near-30% y/y expansion, mostly in the US. The prediction for trade is maintained at 155m t, a marginal y/y rise and a new peak.

Prospects for rice trade in 2018 are little changed m/m, at a high of 48m t, with volumes underpinned by firm demand from buyers in Far East Asia. At 490m t, the 2018/19 production outlook is pegged fractionally lower than before and matches the previous season’s outcome. The Council’s projection for world trade in 2019 is maintained at a record of 49m t, up by 1% y/y on potentially firmer demand from Near East Asia and sub-Saharan Africa. The IGC Grains and Oilseeds Index (GOI) was virtually unchanged m/m, with increases for wheat and soybeans offset by falls in the other components.

World total grains (wheat and coarse grains) production is expected to decline by 1% in 2018/19, to a three-year low of 2,081m t. A better maize harvest (+26m t y/y) is seen being outweighed by falls for other crops, especially wheat (-38m) and barley (-6m).

Despite this month’s relatively large China-related adjustments, the outlook for global grains supply and demand in 2018/19 is similar to the last GMR. Overall availabilities are seen contracting by about 1% y/y, while demand growth is expected to be sustained, including for food, feed and industrial uses. World carryover stocks are expected to shrink to a four-season low, with the ratio of stocks-to-use the tightest since 2013/14. The biggest projected fall in inventories is for maize (-38m t) and includes reductions for both the major exporters (-9m) and China (-24m). In contrast, the drop for wheat (-11m t) is concentrated in the major exporters, while a further buildup is envisaged for China. A sixth consecutive rise in total grains trade is predicted, to a record, led by a tenth year of expansion for maize. Wheat shipments are expected to stay at a high level, albeit a little lower y/y, while those of barley could be at a new peak. With buying by China potentially halving y/y, the volume of sorghum trade could be the least in seven years.

Linked to area gains and improved productivity in leading producers, global soybean output in 2018/19 is seen advancing to a high of 369m t, a 29m y/y increase. Although the Brazilian planting campaign is progressing swiftly, the southern hemisphere outlook remains tentative at this stage. World use should continue to trend up on demand from global feed, food and industrial sectors, while inventory accumulation in major exporters, chiefly in the US, is anticipated to underpin a near-30% rise in end-season carryovers. China’s imports are expected to fall for the second successive year. However, with bigger shipments to smaller markets in Asia, as well as to the EU and Africa, trade is forecast at a high of 155m t, up by 1% y/y. Although Brazil’s exports may retreat slightly, volumes would still be more than 15m t above average.

Firm demand from Asian importers is expected to underpin a 1% y/y increase in global rice trade in 2018. This comes despite weaker buying interest from China, as well as potentially reduced dispatches to Africa. The 2018/19 production outlook is tentative, but appears positive, with gains in key exporters – including India, Thailand and the US – compensating for a drop in China. With food use set to reach a fresh peak, world stocks may contract, including a small decline in China amid official efforts to counter a build-up of supplies. Trade is predicted at a peak in 2019 on bigger deliveries to Near East Asia and Africa.

MARKET OVERVIEW:
World grains and oilseeds prices were mixed, responding to occasionally divergent fundamental developments. Wheat and soybean values strengthened but, with maize, barley and rice quotations weaker, the IGC GOI was virtually unchanged m/m.
After touching a three-month high in mid-October, the IGC GOI wheat sub-Index eased slightly, but still gained by a net 2% from the last report, with underpinning stemming from a somewhat tighter global supply outlook.

With seasonal harvest pressure and generally light export demand pressuring quotations in Ukraine and Brazil, the IGC GOI maize sub-Index fell by 2% in October, marking the third successive monthly drop.

The IGC GOI rice sub-Index was modestly lower m/m, as seasonal price declines in India and the US more than compensated for gains in Thailand and Vietnam, which firmed on hopes for large sales to the Philippines.

We also suggest you to read our previous article titled "NEWCOMERS CHALLENGING UNITED STATES’S SUPREMACY OF AGRICULTURAL TRADE".

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