UN highlights early tests to 2018 wheat harvest prospects

06.10.2017

The United Nations flagged two early tests for 2018 wheat production prospects, as it trimmed ideas for this season's inventories too – albeit still seeing them hit a record high.

The UN food agency, the Food and Agriculture Organization, said that "dry weather in some key growing regions has slowed planting progress" for crop to be harvested next year.

The comments follow official data earlier this week showing US winter wheat sowings running, as of the start of this month, at their second slowest pace on records going back to 1996, thanks largely to dryness in the Plains and Midwest which has deterred growers from seedings.

'Hope for the best'

In the former Soviet Union too, a lack of rains is raising concerns, with Tobin Gorey at Commonwealth Bank of Australia on Thursday that "weather forecasters continue to expect dry weather in dry winter wheat regions in adjacent areas of Russia, Ukraine and Kazakhstan.

"The worry grows with time because descending temperatures will mean poor crop establishment."

Earlier this week, SovEcon cautioned that "rains are needed" in European Russia to support ideas of a bumper 2018 harvest which have been promoted by a strong pace to seedings.

"Weather conditions were very dry in recent weeks. In many cases, farmers actually plant seeds in dry soil and hope for the best," the influential Moscow-based analysis group said.

Profitability balance

The FAO also said that in Europe, the top wheat-grower, "expectations of higher earnings for alternative crops could affect winter wheat plantings".

However, earlier ideas of a switch by many European Union growers towards rapeseed, which had appeared likely given relatively high Paris futures prices of rapeseed compared with wheat for the next harvests, have been undermined by ideas that dry weather in some countries.

Strategie Grains earlier this week forecast a dip in EU rapeseed sowings for the 2018 harvest.

Last week, the International Grains Council said that EU winter wheat area "is seen broadly unchanged year on year," while noting that "following a recent drought, additional rains are needed in several southern member states".

'Indicator of likely price direction'

The comments came as the IGC nudged lower, by 700,000 tonnes, its forecast for world wheat inventories at the close of 2017-18 although – at 261.2m tonnes – stocks would be still be a record high.

The downgrade reflected a 3.4m tonnes increase in consumption prospects, mainly on "higher forecasts for industrial use" of the grain, a revision which more than offset raised estimates for EU and Russian production.

As compared with consumption - to form the stocks-to-use ratio, which the FAO highlighted as "an indicator of likely price direction" - global wheat inventories will end this season at 34.6% of consumption, up 1.1 points year on year and "the highest in over three decades".

However, the stocks-to-use ratio for inventories held in exporting countries, which are particularly important for prices, will drop by 0.8 points year on year to 18.4%.

Food prices rise

For cereals overall, including also coarse grains and rice, the inventory figure was upgraded by 1.3m tonnes to a record high of 720.5 tonnes, reflecting increased expectations for corn stocks in Brazil and South Africa, and for barley supplies in Russia.

The overall cereals stocks-to-use ratio, at 27.0%, "would be similar to the ratio for 2016-17 and well above the historical low of 20% registered exactly a decade ago," the FAO said.

The agency also released monthly data on food prices showing a rise of 0.8% month on month in September, as appreciation in vegetable oil and dairy values more than offset a decline in cereals.

In dairy, prices rose 2.1% to their highest since July 2014, in gains the agency attributed to "continued supply constraints in Australia, New Zealand and the EU, with growth in the US remaining timid.

"Butter and cheese remain the dairy products in highest demand, especially in Asia."


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