UN lowers bar further on EU wheat export hopes


The European Union will lose top rank in world wheat exports in even more dramatic style than had been expected, the United Nations said, in a report which pegged cereals prices at a nine-year low, but flagged a watershed in dairy markets.

The European Union will see its overall wheat exports tumble by roughly one-quarter to a four-year low of 25.5m tonnes in 2016-17, the UN's food agency, the Food and Agriculture Organization, said.

The estimate is even lower than forecasts from many other commentators, with the US Department of Agriculture seeing shipments at 27.0m tonnes, and the International Grains Council at 27.3m tonnes.

The European Commission itself pegs total EU wheat exports in 2016-17 at 26.3m tonnes, including 1.3m tonnes of durum wheat, the type used to make pasta.

Harvest hopes

The FAO forecast reflects "a significant cutback in the EU wheat crop forecast, mostly due to wet weather in France", the EU's top wheat-producing country.

And it will allow Russia "to emerge as the world's biggest wheat exporter for the first time", with shipments of 29.5m tonnes, in line with forecasts from many other commentators, bar the USDA's Moscow bureau, which puts the figure at 28.0m tonnes, as Agrimoney.com reported on Wednesday.

Russia has enjoyed a bumper harvest, a result which - along with upgrades to estimates for production in Australia, Canada, India, Ukraine and the US too – prompted the FAO to lift by 8.6m tonnes, to a record 740.7m tonnes, its estimate for world wheat output this season.

The estimate for global coarse grains output was lifted too, by 12.5m tonnes to 1.33bn tonnes.

"The bulk of this increase rests on a significant, 18m-tonne, upward revision to the corn crop in the US, where beneficial weather conditions are expected to boost yields," the agency said.

Nine-year price low

Strong world grain supplies – expected over 2016-17 "to be even more comfortable than predicted at the start of the season" – helped keep downward pressure on prices, with values falling last month by 3.0% to their lowest since April 2007, according to an FAO index.

The organisation highlighted "abundant export availabilities of wheat and coarse grains".

However, food prices overall rose by 1.9% last month, with gains in vegetable oil, sugar and, especially, dairy values more than offsetting the impact of the drop in cereals prices.

'Notable change in sentiment'

Dairy values proved particularly strong, soaring 8.6% month on month, to take to 21% their rebound since hitting a 10-year low in April.

"Prices rose for all the dairy commodities that compose the [FAO dairy] index, in particular for cheese, whole milk powder and butter," the agency said, flagging a sea-change in investor thinking.

"The latest  increase confirmed a notable change in market sentiment, as falling milk production in the EU, coupled with an unexceptional opening to the dairy year in Oceania, pointed to tighter export supply prospects than had been earlier anticipated."

The revival in dairy prices tallies with that at much-watched GlobalDairyTrade auctions, which have seen a 29% rebound in two months.


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