Bumper Russia crops lift world grain stocks hopes to record high - UN

08.09.2017

World grain stocks will hit a record high in 2017-18 after all, the United Nations said, flagging the boost to production prospects from bumper Russian barley and wheat harvests – and weight on prices.

The UN food agency, the Food and Agriculture Organization, hiked by 15.0m tonnes to 719.2mn tonnes its forecast for world grain inventories at the close of 2017-18.

The upgrade, which took the forecast above the estimated 705.4m-tonne carried out from 2016-17, reflected increased expectations for global production of both wheat and coarse grains – ideas the FAO flagged had fuelled a 5.4% tumble in cereal prices last month.

"After rising for three consecutive months, cereal prices in August were pressured by large global supplies," the agency said.

The fall in cereal prices last month was the sharpest in more than a year.

'Build-up of inventories'

The raised grain supply prospects reflected in particular higher ideas for Russian production, including in wheat, where upgraded expectations for the country's harvest spurred a lift of 8.9m tonnes to 748.8m tonnes in the forecast for world wheat output in 2017-18.

"The upturn is mainly on account of improved production prospects in the Russian Federation, as beneficial rains have boosted yield expectations even further," and more than offset dryness-inspired downgrades to estimates for Canadian and US crops, the FAO said.

World wheat stocks were now seen ending 2017-18 at an all-time high of 261.9m tonnes, up 6.1m tonnes from the previous estimate, and a gain of 14.6m tonnes year on year.

The FAO flagged "expectations of a build-up of inventories in the Russian Federation" following the country's "bumper" harvest, with many commentators flagging the test the country's infrastructure faces to lift exports substantially and stem a rise in stocks.

Corn, barley harvest upgrades

For coarse grains, the agency raised its global production forecast by 9.0m tonnes to 1.359m tonnes, again down in part to Russian harvest results.

The "upward adjustment reflects higher forecasts for corn and barley outputs, particularly in Brazil and the Russian Federation", the FAO said.

World coarse grain stocks were now seen falling 1.3m tonnes to 286.1m tonnes rather than showing the 10m-tonne drop previously expected, with the agency noting in particular an upgrade to the forecast for Brazilian corn inventories.

Dairy, vegoil market price gains

The grain price falls inspired by the improved supply prospects led to a decline in prices of food overall, with the headline index reading dropped 1.3%, the first fall in four months.

Dairy prices rose 1.4% month on month to their highest in three years, as "butter and whole milk powder prices rose… due to reduced export availabilities resulting from greater domestic demand for butterfat in Europe and North America".

Vegetable oil prices gained 2.5%, thanks to increased values of a range of oils, including palm oil, of which "values strengthened on smaller-than-expected production in South East Asia and steady import demand, which weighed on the replenishment of stocks, especially in Malaysia".

The FAO added that "soyoil prices rose in response to adjustments in the US biodiesel import policies that might spur domestic soy oil uptake", a reference to plans by Washington to impose duties on imports of Argentine biodiesel.

"Rapeseed and sunflower oil values firmed on lower-than-anticipated global availabilities."


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