World grains production is forecast to increase again in 2017-18, with some estimates predicting a new record. Stocks and consumption are predicted to be high, and so is trade.

In a Cereal Supply and Demand Brief published on Oct. 5, the United Nations Food and Agriculture Organization (FAO) said that “the latest indications for the current season point to record cereal production in 2017 at the world level with total inventories hitting a new peak.”

The FAO raised its forecast for total world grains production in 2017 slightly to 2.612 billion tonnes, 6.8 million above the record level produced in 2016.

“This month’s upward adjustment mostly stems from improved production prospects for coarse grains and wheat, more than offsetting a cut in rice production,” the FAO said. The FAO also raised its figure for world wheat production to 750.1 million tonnes, 1.4 million more than it forecast in September.

“The increase is mostly on account of a larger production in the E.U. and an upturn in prospects in the Russian Federation, where continued beneficial weather further boosted prospects for the spring wheat yield,” the FAO said. “This increase more than outweighed a cut in Australia’s output to a more average level following last year’s record harvest.”

The International Grains Council (IGC), which does not include an increase in its grains figures, put total grains production at 2.069 billion tonnes in 2017-18, down from 2.133 billion the year before. Their forecast includes 748 million tonnes of wheat, up from the previous estimate of 742 million but down from 754 million the previous season, and 1.029 billion tonnes of maize, revised up from 1.017 billion the previous month, but down from 1.079 billion the year before.

“Further increases for Russia contribute to upward revisions for global wheat and barley crops,” the IGC said.

The FAO lowered its forecast for global cereal utilization in 2017-18 by 2.3 million tonnes to 2.589 billion, 26 million higher than in 2016-17.

“The month-on-month reduction largely stems from a cut in the forecasts of maize and rice utilization, which more than offset a foreseen increase in wheat consumption,” the FAO said.

The FAO put world wheat utilization in 2017-18 at a record 734 million tonnes, up 3.4 million from its forecast made the previous month and 0.3% above the 2016-17 estimated level. The rise from the previous month, “mostly reflects higher forecasts for industrial use,” the FAO said. “The expansion from 2016-17 is largely attributed to a 1.1% projected growth in the food consumption of wheat.”

World grain stocks by the end of seasons in 2018 are now forecast at a record 720.5 million tonnes, 1.3 million above the FAO’s September forecast and 18 million above the opening level. The FAO put the stocks-to-use ratio for 2017-18 at around 27%, which it pointed out is well above the record low of 20% set in 2007-08.

The FAO put wheat ending stocks at a record of around 261 million tonnes, little changed from its previous estimate but 15 million up on the opening level.

“The sharp increase from the previous season largely reflects significant build-ups in China (+19 million tonnes) and in the Russian Federation (+6.8 million tonnes),” the FAO said. The increase raises stocks-to-use to 34.6%, up sharply from 2016-17 and the highest in over three decades.”

The FAO forecast world grain trade in 2017-18 at “almost” 403 million tonnes, down “marginally” from its forecast in September but still 1.5 million tonnes above the 2016-17 record. The IGC also anticipates record trade.

“World grains trade is projected to reach an unprecedented level, underpinned by the ninth consecutive annual expansion for maize,” the IGC said.

The FAO forecast world trade in wheat in 2017-18 (July/June) at nearly 175 million tonnes, close to the record volume in 2016-17.

“Import demand is seen to remain steady in nearly all regions with the exception of Africa, where total imports could decline slightly mainly on reduced purchases by Algeria and Morocco,” the FAO said. “Export supplies are expected to be more than adequate to meet global demand, especially in view of this year’s bumper crop in the Russian Federation, which is likely to place the country as the world’s largest exporter of wheat in 2017-18.”

In its Agri Commodities Monthly published at the end of September, Rabobank noted, “With global stocks remaining at record levels in 2017-18, expectations are for a steady price trend higher,” adding “in the absence of a serious production shock.”

Coarse Grain

The FAO put world coarse grains production at 1.361 billion tonnes, 2.5 million more than its estimate of a month earlier.

“This increase largely reflects improved production prospects for maize in China and the United States, more than offsetting a cut to the Russian Federation’s maize output due to dry conditions that dampened yield expectations,” the FAO said. “The forecast for global barley production has also been raised this month, driven by higher outputs in the Black Sea region.”

The FAO cut its figure for total utilization of coarse grains in 2017-18 by 2 million tonnes to 1.352 billion, a figure still 19 million above the 2016-17 level.

“The decrease from September reflects some reductions in the forecasts of feed use of maize in Egypt, the Russian Federation and the United States,” the FAO said. “The strong overall expansion from the previous season remains largely driven by a continued brisk feed demand from the livestock sector.”

The FAO has raised its estimate for coarse grain ending stocks to almost 290 million tonnes, up 3.7 million from September and 2.4 million above the opening level. It raises the stocks-to-use ratio to 20.8%, slightly above 2016-17.

“The adjustment since last month largely reflects upward revisions to the size of maize carryovers in Japan, following historical revisions of the country’s supply and demand balance of maize,” the FAO said. “However, the bulk of the projected increase in the level of global stocks of coarse grains in 2017-18 reflects a rise in maize inventories of Brazil and South Africa, as well as a jump in stocks of barley in the Russian Federation.”

World coarse grain trade for 2017-18 (July/June) has been revised down slightly but, at nearly 183 million tonnes, is still 2 million tonnes higher than in 2016-17.

“Much of this expansion would be accounted for by higher world maize trade, which is seen increasing by some 3.3% to 143 million tonnes, largely underpinned by much larger maize imports by China, the E.U. and the Islamic Republic of Iran,” the FAO said. “Argentina and Brazil are likely to become the main beneficiaries of the projected expansion in world coarse grains trade in 2017-18.”

Rabobank added, “Prices will remain choppy in the short term due to variable U.S. yields and weather-driven volatility impacting South American planting. We expect CBOT corn prices to remain somewhat supported at current levels after September surprised somewhat with softer prices, driven by the USDA’s upward revisions to U.S. corn yields.”

Rice

The FAO reduced its estimate of world rice production by 2.7 million tonnes to 500.7 million, only marginally changed from the 2016 record outcome.

“Most of this month’s downward production adjustments concerned countries in the Far East, in particular India, with a combination of floods and drought now expected to prevent output in the sub-region from expanding this season,” the FAO said.

The IGC forecast world rice production at 483 million tonnes, down from its previous estimate of 485 million and down from 485 million last year.

“Output in Asia is expected to hold up well, with production in both China and India seen little changed y/y, while good crops are likely elsewhere, notably in Thailand and Pakistan,” the IGC said.

The FAO’s rice utilization figure was cut by 3.6 million tonnes to 502.9 million since September, “consistent with the lower prospects for global production and following revisions to historical estimates for various countries.” The figure is up by 1% on the year.

World rice ending stocks have been revised down by 1.7 million tonnes to 169.5 million, but the forecast is still 0.5% above the opening level.

“Continued accumulations in China are expected to sustain this modest increase, which should keep the global stocks-to-use ratio little varied at 33.2% in 2017-18,” the FAO said.

The FAO put world trade in rice at 45.2 million tonnes, the second highest on record, “following small upward revisions to export forecasts for China and Myanmar.”

Oilseeds

The IGC predicted a small fall in world soybean production, to 348 million tonnes, up 1 million from its estimate in August, but down from 351 million in 2016-17.

“Led by record plantings in the northern hemisphere, the global area for harvesting in 2017-18 is anticipated to expand by 5% y/y to an all-time peak,” the IGC said. “However, given a potential retreat in yields in many producers, including the U.S., Brazil, Argentina and India, world output could fall fractionally.”

The IGC explained that the crop will still be 40 million tonnes above the prior five-year average.