NEW SEASON HARVEST RESULTS AND MARKET EXPECTATIONS

Latest indications continue to point to a reduction in grain output in 2018 and negative prospects for the grain supply outlook for the 2018/19 marketing season. Global wheat production is forecast down 3 percent from last year to the lowest level in 4 years. The largest year-to-year reductions are for the European Union and Russia, USDA reports.  Global consumption is forecast to continue growing and is set to exceed production by 13 million tons in 2018/19. 

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Amid increased uncertainties from recent rising trade disputes, agricultural markets have so far remained relatively stable thanks to generally good supply conditions across most commodities. Nonetheless, in the context of heightened food import bills, food markets remain vulnerable, with weather shocks and external developments always difficult to predict.

According to FAO’s “Food Outlook: Biannual Report on Global Food Markets”, the wheat markets are heading for a modest tightening in the 2018/19 marketing season, as production is forecast to fall below last year’s record level. With world consumption expected to expand beyond production, wheat inventories are predicted to decline.

Latest indications continue to point to a reduction in cereal output in 2018 and negative prospects for the cereal supply outlook for the forthcoming 2018/19 marketing season. FAO’s forecast for world cereal output this year is pegged at 2 billion 586 million tons (including rice in milled terms), 64.5 million tons (2.4 percent) less than the record output in 2017.

The US Department of Agriculture (USDA) estimates that world wheat production will be 732 million tons in 2018 with a 3% decrease compared to the previous year. This figure will be the lowest global output of the last four years. The largest year-to-year reductions are for the European Union and Russia, down by a combined 28 million tons, while U.S. production is forecast higher by nearly 4 million tons. Global consumption is forecast to continue growing and is set to exceed production by 13 million tons in 2018/19.

Rising consumption in the face of falling production should result in a drawdown of world wheat inventories. At the current forecast level of 264 million tons, world wheat stocks by the end of seasons in 2019 would be down 3.3 percent from their record opening levels, with most of the year-on-year reduction concentrated among major exporters, in particular the Russian Federation, the EU and the US. With prices rising, many exporters are expected to ship much of their available wheat and will have more limited supplies left over at the end of their respective marketing seasons. Likewise, with higher prices, importers are expected to maintain tighter stock levels.

UNCERTAINTY IN WHEAT
EXPORT POLICIES INCREASED THE PRICES
Ukraine and Russia may have less milling wheat than previously expected this year after rain during harvesting hurt the quality of crops, potentially accelerating any curbs on exports from the Black Sea exporters, traders and analysts said. Kyiv and Moscow have said there is no need to impose restrictions on wheat exports for now, but their agriculture ministries are closely monitoring activity of the main exporters for the 2018/19 marketing season, as reported by Reuters. There are fears that strong milling wheat exports may help drive up the cost of bread in both countries where weak domestic currencies and poor crops have already inflated food prices. The ministries’ meetings with exporters came under the spotlight in August, causing a jump in global wheat prices as some traders expect curbs on grain exports in some form later in the season, which started on July 1. Traders said in August exports would speed up in September-December as traders bet on restrictions sometime after December.

WORLD CORN PRODUCTION
World corn production is expected to increase slightly compared to last year. According to the latest figures from the US Department of Agriculture, 2018/2019 corn production is projected 1.069 billion metric tons. And global corn trade is at a record, driven by stronger imports for the European Union and higher exports for Serbia, Ukraine, and the United States.

According to the USDA, rice production, which is an important for world food safety, will have a slight decrease compared to last year. Rice production, which was 491 million tons last year, is expected to fall by 4 million tons this season. Consumption is expected to be around 488 million tons, while global rice imports are expected to reach 47 million tons with increasing demand, especially in Venezuela and the Philippines. Strong Asian demand underpinned international prices in the first half of 2018, fueling expectations that world rice trade in 2018 will remain at its second highest level on record.

WHEAT PRODUCTION IN TURKEY
Turkey is a self sufficient country for wheat. But there may be some problems about amount and quality of wheat production because of weather conditions. Shrinking cultivation area, input costs, changes about incentives, natural disasters and wheat diseases affected yield and quality in a negative way this year. According to 2018 report of Turkish Chamber of Agricultural Engineers (TZMO), Turkey had 21,5 million tons wheat crop last year but this year production will shrink by 2 million tons. Turkish wheat consumption usually exceeds domestic production by 1-2 million tons. Turkey has a share of %3 of global wheat production. Its average wheat yield is 276 kg/decare.

Domestic wheat consumption in Turkey during 2016/17 season was 18 million 756 thousand tons. 14 million 490 thousand tons was used as food, 1,381 million tons as feed and 2 million 305 thousand tons as seed. Consumption per capita was 182 kgs.

There is an interesting aspect of Tukey’s wheat trade. Turkey, imports wheat but it also exports a significant amount of wheat flour. Turkish millers flour exports reached 3,5 million tons in 2017 which shows that imported wheat is processed and exported as flour.Iraq has the major share of Turkish flour exports. Around 50% of flour has been exported to this neighbouring country. Last year 51,2% of Turkish flour had exported to Iraq. During the first 6 months of 2018, this share was 49,55%.

Russia, the world’s largest wheat exporter, is the main wheat source for Turkey. In 2017, Russia got 59% share from Turkish wheat imports. During the first 6 months of 2018, this share was 78%.

We also suggest you to read our previous article titled "What happened in grain markets in Turkey following the currency fluctuation?".

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