As the northern hemisphere harvest gets underway, the forecasts for global grain output should become more accurate. The International Grains Council (IGC) released an updated forecast at the start of July which is summarised in the table below.
It can be seen that wheat stocks are expected to decline for the first time in a number of years, falling according to the IGC by 5 million tonnes. Curiously, the US Department of Agriculture (USDA), whose figures were published more recently, have taken 8.5 million tonnes off their equivalent figure this month from last, (largely because of dry conditions) in; Australia (2mt), the EU (4.5mt), China (1m), Ukraine (1m) and Russia (1.5mt). Many analysts from each respective nation made greater reductions than the USDA. Note the USDA and IGC tend to implement gradual changes to avoid over adjusting and having to go ‘back’, so future months are likely to see more reductions. This now leaves global wheat production 6 million tonnes below consumption according to USDA and IGC, a bullish thing. Of the major producers, only the USA saw wheat crop expectations rise in July.
The drop is not as great as that forecast by the IGC when the first predictions for the season were made four months ago in March. This might seem surprising given the weather conditions, but we should remember that it was very early in the season then with much spring wheat still only just drilled (more or less the whole of Russia and Canada for example). Even so, the rest of Europe and even parts of the US have also continued to experience dry conditions through July, so the next set of figures may see output revised down once again, presumably carving an even greater reduction in carry-over stocks .
World Grain Supply and Demand – source: IGC |
Marketing Year –
UK harvest – |
15/16
2015
|
16/17
2016 |
17/18
2017 |
18/19 (2018)
May July
|
m tonnes |
WHEAT
|
Production
|
737 |
752 |
758 |
742 |
737
|
Usage |
719
|
737 |
738 |
746 |
743
|
End Stocks
|
226 |
242 |
261 |
258 |
256
|
Stocks/Use Ratio |
31.4%
|
32.8% |
35.4% |
34.6% |
34.5%
|
Stocks: Main Exporters# |
67
|
78 |
81 |
75 |
70
|
m tonnes |
MAIZE (CORN)
|
Production |
983
|
1,087 |
1,043 |
1,055 |
1,052
|
Usage |
975
|
1,045 |
1,077 |
1,098 |
1,096
|
End Stocks |
288
|
330 |
297 |
257 |
253
|
Stocks/Use Ratio |
29.5%
|
31.6% |
27.6% |
23.4% |
23.1%
|
Stocks: Main Exporters* |
56
|
80 |
67 |
53 |
49
|
m tonnes |
SOYABEANS
|
Production |
315
|
349 |
337 |
356 |
358
|
Usage |
317
|
334 |
345 |
356 |
358
|
End Stocks |
32
|
48 |
40 |
40 |
41
|
Stocks/Use Ratio |
10.1%
|
14.4% |
11.6% |
11.2% |
11.5%
|
Stocks: Main Exporters~ |
16
|
23 |
20 |
20 |
22
|
17/18 figures forecast; 18/19 estimates # Argentina, Australia, Canada, EU, Kazakhstan, Russia, Ukraine, US * Argentina, Brazil, Ukraine, US ~ Argentina, Brazil, US
But it is with maize that we see a larger, more dramatic, change to production and stock figures, with a 44 million tonne reduction of stocks. Whist this represents only 4% of total production (and therefore a reduction of total availability of 2.6%), it represents a stock decline of 15%, a level the market would take note of. The IGC and USDA make similar projections for maize; even though their stock levels differ by 100 million tonnes, their change in stocks is comparable, which is probably more important. This potential tightening of markets has helped propel maize prices higher, which, in turn, has lifted other grains as well.
Soya stocks show little year-on-year change, although it should be noted that both production and usage show upwards trends, indicating the continued rise of this crop in global importance. Whilst the market balance may not be altering much, trade flows could be significantly different with soya being one of the key commodities caught in the US-Chinese trade war. This is perhaps why the USDA has a slightly different take on the commodity. They see production estimates rising by 4 million tonnes, not a huge change at this time of year, but the biggest adjustment was their expectation of Chinese bean imports, falling 8 million tonnes from a previous 103 million to 95 million; a bearish factor in the oilseeds and protein complexes.