World corn output to fall in 2017-18, allowing drawdown in stocks

27.02.2017

World corn output will fall next season, undermined by weaker Chinese and US sowings, the International Grains Council said - flagging the prospect of some decline in inventories of the grain,

The intergovernmental group, in its first forecasts for global corn production in 2017-18, pegged it at 1.023bn tonnes – a drop of 26m tonnes year on year, although still the second highest harvest on record.

The estimate reflects expectations of a 1.8m-hectare decline in world sowings of the grain, to 181.2m acres, as declined in China, South America and the US offset increases expected in the European Union and the former Soviet Union, where improved seed quality is encouraging expansion.

"The upswing in the US is likely to continue, with increased seedings expected in Ukraine and Russia," the IGC said.

Corn vs soybeans

In China, area was forecast falling by 2.1% to 36.0m hectares, on a harvested basis, as subsidy changes enacted by a government faced with huge state corn inventories encourage growers to switch to other crops.

"The removal of the minimum purchase price support policy and official efforts to switch marginal corn farmland area into alternative crops will result in a second successive annual decline in plantings," the IGC said.

For the US, the decline in sowings was pegged at "around 3%", given that soybeans are "potentially a more profitable option" for growers, with harvested area seen dropping by some 4% to 33.6m hectares (83.0m acres).

Still, that forecast is higher than the 82.4m acres at which the US Department of Agriculture last week pegged US corn area this year, on a harvested basis.

The IGC flagged that "input costs are slightly lower this year", a particularly important factor for corn, a nutrient-hungry crop, while "plentiful land is likely to be available in winter wheat states" after a steep drop in winter wheat sowings.

'Tighter inventories'

The fall in output will be met by rising consumption, albeit with demand expected to "edge upwards" rather than show strong growth.

"Partly because of smaller crops and reduced on-farm use, overall advances [in consumption] are expected to be comparatively smaller than in recent years," the IGC said.

Still, the dynamic will allow inventory drawdown in China, and in major exporting countries, whose stocks, being freely available to the world market, have a particular impact on pricing.

"Cumulative inventories are projected to tighten, but with stocks still larger than average."

The council forecasts world corn stocks ending this season at a record 224m tonnes, up 15m tonnes year on year, with inventories in major exporting countries see rising by 18m tonnes to 75m tonnes.


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