UN ups wheat output hopes - as other analysts mull US, EU downgrades

04.05.2017

The United Nations flagged ideas of "ample" world grain supplies in 2017-18, as it raised its estimate for wheat stocks to a record high – although it was unclear that the data included any allowance for losses to last weekend's US storms.

The UN's food agency, the Food and Agriculture Organization, said that global food prices fell by 1.8% in April to an eight-month low, reflecting largely a slump in sugar values, but also softer grain markets.

"Strong export competition and expectations that global cereal availabilities will remain ample in the 2017-18 season continued to weigh on international prices of most cereals," the FAO said.

Wheat prices "in particular" were affected by the pressure, according to the agency, even as it raised by 1.1m tonnes its estimate for global stocks at the close of 2017-18, meaning an increase of 8.0m tonnes in inventories over the season.

"Global wheat stocks are set to expand by 3.3% to a new high of 247.6m tonnes."

Wheat questions

The revision reflected in part a weaker estimate for wheat consumption for the season, now seen falling year on year thanks to strong competition with coarse grains for feed demand.

However, the FAO also nudged higher its estimate for world wheat output by 500,000 tonnes to 740.4m tonnes.

Although a harvest at that level would still be down nearly 20m tonnes year on year, the upgrade comes at a time of concerns over weather damage to winter wheat crops in the European Union and, in particular, the US, where snows and high winds struck wheat-growing areas last weekend.

Some commentators initially pencilled in losses of up to 4m tonnes in US output, although fears for crop damage have been somewhat assuaged by findings of a much-watched crop tour this week in Kansas, the top wheat-growing state, which has found above-average yield prospects so far.

'Rains uneven'

In the EU, the world's top wheat producer, meanwhile, rains this week have reduced, but not ended, dryness concerns, including in France, the bloc's biggest grower, where official data last Friday revealed a 7-point drop in the proportion of soft wheat rated in "good" or "excellent" condition.

"Rain falls observed in France are certainly beneficial, but still uneven and of varying intensity, notably in the north east of the country," Agritel said.

"Producers are patiently waiting to evaluate the damage caused by frost during the last 10 days of April," the consultancy added.

"Winter barley seems to be the crop that was mostly affected followed by rapeseed and at lesser extent wheat."

Upgrade 'paradox'

Nonetheless, with much growing time yet for northern hemisphere crops before harvest, official commentators have appeared reluctant to lower estimates for grains output, although forecasts for EU rapeseed, an earlier-seeded crop, have been nudged lower.

Agritel noted that "paradoxically", the European Commission on Wednesday raised its forecast for EU barley output this year by 300,000 tonnes to 62.4m tonnes.

While the estimate for soft wheat production was nudged lower, by 300,000 tonnes to 141.9m tonnes, the downgrade reflected changes to area expectations rather than yield.

Inventory upgrade

The FAO raised its estimate for overall global grains output in 2017-18 by 1.9m tonnes to 2.60bn tonnes, reflecting stronger ideas for the corn harvest too.

"An upward revision to Brazil's production forecast, driven by higher-than-previously-anticipated yields, accounts for most of the adjustment," said the agency, whose forecasts imply a drop of some 10m tonnes in world grains output year on year.

The revisions fed through into a 7.6m-tonne increase to 689.1m tonnes in the forecast for world grains inventories at the close of 2017-18, putting them nearly in line with the stocks figure carried into the season.


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