World wheat stocks to hit record high at close of 2017-18, says IGC


The International Grains Council lifted its forecast for world wheat stocks to a record high as it reversed a downgrade to its global grains harvest estimate, flagging an "increasingly favourable outlook" for Black Sea output.

The intergovernmental group lifted by 7m tonnes to 248m tonnes its forecast for world wheat inventories at the close of 2017-18, ditching expectations of a decline from the all-time high of 244m tonnes recorded for the end of last season.

"For wheat, record opening stocks [to 2017-18] will more than compensate for the smaller harvest, boosting overall supplies to a new peak," the council said.

While strong stocks typically signal weak prices, meaning less competition for supplies, the IGC offered some solace to wheat bulls in estimating stocks in major exporters at 69m tonnes at the close of 2017-18, an upgrade of 4m tonnes, but down 8m tonnes year on year.

Inventories in major exporting countries, in being readily available to the market, are more influential in setting world prices than stocks in the likes of China.

"China's wheat inventories are set to post another strong gain," the IGC noted.

Black Sea hopes

The upgrade to the wheat harvest estimate reflected increased estimates for crops in the Black Sea, with the IGC flagging in particular raised hopes for Russia, where wheat and barley harvest results have "continued to exceed expectations".

Indeed, for grains as a whole, the IGC forecast that "exports from the Black Sea region could surpass 90m tonnes for the first time, accounting for one-quarter of global trade".

One potential sticking point is whether infrastucture in the likes of Russia is capable of coping with the huge volumes, with the council noting "speculation among market participants about possible logistical constraints".

Corn prospects

The increased wheat harvest hopes fuelled an upgrade to 11m tonnes to 2.049bn tonnes in the estimate for world production of grains overall in 2017-18, with the IGC reversing a downgrade made last month.

However, the improved output hopes disguised a downgrade of 3m tonnes to 1.017bn tonnes in the forecast for world corn production, reflecting diminished ideas for Chinese and European Union crops.

The estimate for global corn stocks at the close of 2017-18 was trimmed by 1m tonnes to 196m tonnes, representing a 38m-tonne drawdown year on year.


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