IGC increases its forecast for 2019/20 world wheat production

The International Grains Council (IGC) increased its forecast for 2019/20 world wheat production by 1 million tonnes to 764 million tonnes, with upward revisions for crops in France, the United States, Ukraine and Argentina partially offset by diminished prospects in Russia and Kazakhstan.

International Grain Council, an international organization seeking to further international cooperation in grains trade, has published its monthly report on global grain production, trade, and stocks. According to the August report, the forecast for world total grains (wheat and coarse grains) production in 2019/20 is increased by 11 million tonnes month-on-month (m/m), to 2,159 million, mainly because of a boost for US maize. This is raised by 8 million tonnes from before, to 342 million, down by 7% y/y (year-on-year), but with output prospects still uncertain after a less than ideal growing season.

IGC lifted the outlook for global consumption by 2m t m/m, to 2,186m (+1% y/y), as higher numbers for feeding of wheat and sorghum are partly offset by a cut for maize. With larger new crop supply than in the last GMR, and also taking account of bigger opening inventories, the projection for world closing stocks (aggregate of respective local marketing years) is up by 13m t m/m, to 598m, albeit still down by 27m y/y at a four-year low. The trade number is virtually unchanged m/m, at 370m t, as trimmed forecasts for wheat and sorghum are balanced by an upgrade for maize.

With trade data confirming smaller than anticipated shipments to key markets, the Council’s forecast for soyabean trade in 2018/19 is cut by 1m t, to 149m, a 3% y/y fall. The outlook for production in 2019/20 has been downgraded by 4m t from July on diminished prospects in the US, where harvested area is likely to contract by 14% y/y. With only a fractional cut to consumption, the net reduction in supplies is channelled to a lower stocks figure, down by 3m t m/m, to 41m (55m). The projection for global import demand is trimmed to 150m t, a 1% y/y gain.

Reflecting subdued demand from buyers in Africa and Asia, IGC lowered its forecast for rice trade in 2019 by 1m t, to 45m, a slight y/y contraction. On the basis of reductions for leading exporters, global output in 2019/20 is projected 2m t lower m/m, at 501m, fractionally higher y/y. However, due to historical supply and demand adjustments for China, world ending stocks are raised by 16m t m/m, to 178m, a 3% y/y gain and a new peak.

The IGC Grains and Oilseeds Index (GOI) softened by 4% since the last Grain Market Report, including a particularly steep drop in the maize sub-Index, but with wheat and barley also posting solid declines.

WORLD CLOSING STOCKS EXPECTED TO FALL
World total grains production in 2019/20 is forecast to expand by 1% y/y, to 2,159m t, as bumper harvests of wheat and barley are partly countered by a smaller maize crop. The bigger grains outturn nearly compensates for tighter opening inventories, so total supply is placed only a fraction down y/y. However, with increased consumption, world closing stocks are expected to fall for the third successive season, with the pace of drawdown accelerating. At 598m t, down by 27m y/y, the global grains carryover at the end of 2019/20 is placed at a four-year low. This is entirely owing to a decline for maize, with these seen contracting to the least in six seasons, mostly because of anticipated falls in the US and China.

In contrast, wheat stocks could reach a record level and, after dropping to their smallest in six years, inventories of barley are expected to post some recovery. Trade in grains (Jul/Jun) is projected to increase to 370m t, fractionally exceeding the previous peak in 2017/18. Larger shipments of wheat, barley, sorghum and rye are foreseen, but trade in maize is forecast to recede for the first time in 11 seasons, albeit only modestly.

Russia’s VTB plans to enter grain markets in Africa, Middle East and Asia
Russian state-controlled VTB bank, which has been expanding its grain business, plans to enter grain markets in Africa, the Middle East and Asia to increase Russian grain exports, a senior official told reporters. VTB, Russia’s second largest lender, has recently become the largest operator of the country’s grain export infrastructure and is building its own export arm after buying large local grain trader Mirogroup in August. The goal of VTB’s grain project is to gain a significant market share in Russia and abroad, Vitaly Sergeichuk, deputy head of VTB’s client relations department in market regions, said in remarks. Sergeichuk said many intermediaries and trading companies, including international firms, are currently playing a key role in the Russian wheat trade. Two months into the 2019/20 marketing season, VTB’s Mirogroup is the 4th largest grain exporter from Russia’s deep-water ports of the Black and Azov Seas after local traders RIF, Aston and Swiss trader Glencore, he said. The ports exported a combined 6.1 million tonnes of grain between July 1 and Aug. 25, he added. Russia, the world’s largest wheat exporter, has shipped 8.7 million tonnes of grain abroad since the start of the 2019/20 season, 7% less than in the same period a year ago. The figure included 7.3 million tonnes of wheat. VTB also said that it was looking to get access to high-quality services in the area of grain supply to ports in Russia. REUTERS

Amid record production and relatively modest growth in usage, global soyabean carryovers in 2018/19 could rise by one-quarter y/y, to a fresh high. World output is expected to fall markedly in 2019/20 as a plunge in US production – tied to a heavy reduction in acreage and below-trend yields – is only partly offset by increases elsewhere. And with an expansion of uptake, inventories are predicted to tighten, albeit remaining above average. Much of the drawdown will be due to the US, where stocks are set to drop by about 9m t y/y. Traded volumes are forecast to edge up to 150m t, although demand and policy uncertainties persist.

Despite historical revisions to consumption and stocks for China, the broader fundamental backdrop for rice in 2018/19 is little-changed from before, with production, consumption and stocks set to scale fresh highs. However, amid weak demand from buyers in Asia, world trade could decline by 3% y/y in 2019; smaller dispatches by India and Thailand contrast with bigger exports by China and Vietnam. Output could grow in 2019/20, but with main crop harvests some way off, prospects are highly provisional. Further gains in use and inventories are anticipated, while trade may advance on larger shipments to Africa.

Led by a sharp decline in maize values, which fell steeply following the mid-month WASDE report, the IGC GOI slipped to a three-month low, down by 4% compared to late-July. Against a background of comfortable global supplies and generally slack export demand, the IGC GOI wheat sub-Index dropped by 4% m/m, to levels last seen in June 2017. And the IGC GOI maize sub-Index plummeted by 16% in the five weeks since the last GMR, as speculative funds liquidated long positions in reaction to USDA’s larger than expected area and yield estimates.

Strategie Grains raises forecasts for EU wheat harvest and exports
Strategie Grains has made a sharp increase to its forecasts for European Union production and exports of soft wheat this season, citing strong harvest expectations in France and Britain together with increasingly competitive EU export prices. The French consultancy now sees 2019/20 soft wheat production in the EU at 142.9 million tonnes, up from 140.6 million tonnes projected in July and 12% above last year’s drought-hit crop, it said in a monthly grain report. The upward revision, which reversed a similar-sized cut last month, was in keeping with rising market expectations for a large EU wheat crop despite record-breaking heatwaves this summer. “Production is lower than expected in Bulgaria, but very good results in France and an uplift compared with expectations for the UK harvest have more than outstripped the losses in the southeastern EU,” Strategie Grains said in its report. Its monthly EU estimates incorporated increases it has made in the past month to its harvest outlook for France, where it expects soft wheat production to rise to about 39 million tonnes. For barley, the Strategie Grains analysts raised their EU production forecast to 60.5 million tonnes from 59.3 million tonnes, now 9% above last year’s level, again citing large French and British crops. A 500,000 tonne increase to Strategie Grains’ projection for 2019/20 EU maize output, now pegged at 63.2 million tonnes, reflected excellent conditions in southeast Europe, which offset heatwave damage to maize in France and to a lesser extent in Germany and Poland, it said. For exports, forecast EU soft wheat shipments were put at 24.8 million tonnes, up from 21.9 million tonnes estimated by Strategie Grains a month ago and also well above the 21 million tonnes exported in 2018/19. A fall in west European prices had improved their competitiveness against Black Sea suppliers such as Russia, it said. “This has produced two important consequences: Ukrainian wheat is no longer competitive for import into the EU, and EU wheat is in the process of attracting international export demand away from Russian wheat,” Strategie Grains said. Official EU data shows soft wheat exports in the 2019/20 season, which started on July 1, are running 30% below last season’s pace. But analysts say volumes for the new season are underestimated because of delays in receiving customs data from EU member states. Increasing competitiveness of wheat for use in livestock feed could also absorb more of the harvest and help to push down EU wheat stocks by the end of the season, Strategie Grains added.

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