World wheat production in 2016 is expected to exceed the 2015 record by 1.2%, underpinned by output increases in India, the Russian Federation and the U.S.

“A positive outlook for global cereal production in 2016, together with abundant stocks, points to a generally comfortable supply and demand balance in 2016-17,” the Food and Agriculture Organization (FAO) said in a Cereal Supply and Demand Brief issued Oct. 6.





“In 2016, world cereal production is set to increase by 1.5%, or 38 million tonnes, to hit a new record of 2.569 billion tonnes, topping by at least 5.5 million tonnes the preceding peak of 2014,” it said. “The current FAO forecast is over 3 million tonnes higher than projected in September, with most of the upward revisions concerning wheat and rice.”





World wheat production in 2016 is expected to exceed the 2015 record by 1.2%, underpinned by output increases in India, the Russian Federation and the United States, it said.





“Similarly, global rice production is forecast to grow by 1.3%, to an all-time high, driven by recoveries in Asia, as well as by gains in Africa and North America,” the FAO said. “Global production of coarse grains is set to rebound by 1.8% from last year’s reduced level, mostly reflecting prospects for record maize crops in the United States, Argentina and India.”





The FAO expects global grain utilization in 2016-17 to rise by 1.6% to 2.560 billion tonnes, with feed usage up by 2.7% in a market with large supplies of maize and low quality wheat.





“In spite of the projected year-on-year growth in total cereal utilization, the rise in world cereal production in 2016 would still result in an increase in the level of global cereal inventories,” the FAO said. “All would be in the form of wheat, as ending inventories of coarse grains and rice are anticipated to slide below their opening levels.”





Although the world stocks-to-use ratios for wheat, coarse grains and rice are all estimated to decline somewhat in 2016-17, export availabilities are predicted to remain ample, the FAO said.





“This is particularly the case for coarse grains, which are likely to face a decline in import demand in 2016-17,” the agency noted.





The CBOT wheat price outlook is maintained as U.S. markets trade through seasonal lows and trend toward $4.30 per bushel ($158 per tonne) in late 2016, Rabobank said in its Agri Commodities Monthly at the end of September.





“Our slightly bullish forecast for MATIF wheat also stays at €165 per tonne in fourth quarter 2016, as the end of the harvest and beginning of new crop plantings skew market risks to the upside,” Rabobank said. “Looking to the new E.U. season, a lack of soil moisture and little meaningful rainfall in the two-week forecast poses short-term risks for winter planting in key areas of France, as well as in parts of Germany. In the U.S., plantings are under way as normal, with excellent soil moisture profiles across the Southern Plains.





“Big expectations for the 2016-17 Australian harvest provide no relief for current price levels, with output pegged at 28 million tonnes by ABARES (Australian Bureau of Agricultural and Resource Economics and Sciences) — a five-year high if realized, resulting in a further 20 million tonnes of available exports globally.”





The bank did, however, raise the prospect of quality concerns in Australia.





“This now extends global quality concerns from the E.U., the U.S. and Canada to Australia, driving opportunities for producers of high-quality milling grain,” Rabobank said.





The International Grains Council (IGC) puts total grains production at 2.069 billion tonnes in 2016-17, up from 2.002 billion the year before. Its forecast includes 747 million tonnes of wheat, up from 736 million the previous season, and 1.027 billion tonnes of maize, up from 970 million.





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World grains production will break records again this year. Although usage also is expected to rise, ending stocks will be higher and export availabilities will be ample.

COARSE GRAINS

FAO’s full Food Outlook report predicted a tightening of the supply and demand outlook for coarse grains in 2016-17, despite higher production.

“However, with large export availabilities and weak import demand prospects, international coarse grain prices could remain subdued,” the FAO said. “World production of coarse grains in 2016 is forecast to rise by 1.8% from the reduced 2015 harvest. Record maize outputs in the United States and Argentina, along with gains in a number of other major producing countries, are likely to boost world maize production in 2016, despite expected sharp declines in Brazil, China and South Africa.”

Global utilization of coarse grains is anticipated to grow by 1.5% in 2016-17, driven largely by higher uptakes of coarse grains for animal feeding and industrial use, the FAO said.

“The most significant expansion concerns maize, which could see much greater volumes fed to animals in the United States and China, supported by larger domestic supplies and more competitive prices than in the previous season,” the FAO said. “Relatively low prices are also likely to stimulate industrial uses, in particular of maize for the production of starch and biofuels.”

Upside potential for corn prices will continue to be driven from the supply side, as global corn stocks increase by a further 1% in 2016-17, Rabobank said, noting that stocks of maize are historically high.

“We expect global stocks to use to remain above 20% for the 2016-17 season, with U.S. corn stocks at a 30-year high,” Rabobank said.

As well as the maize, the IGC puts the 2016 barley crop at 144.5 million tonnes, down from 147.7 million the year before.

Ample rains boosted yields, but caused some quality problems, the IGC said. Barley consumption is put at 144.7 million tonnes, up from 144.4 million.

“Linked to reduced imports by Saudi Arabia and China, world trade is forecast to contract from the high levels of the past two years,” the IGC said.



“Japonica quotations tended to hold firmer ground, finding some support in rekindling demand in the Far East,” the FAO said.

RICE

The IGC cut its projection for global rice output in 2016-17 by 2 million tonnes to 482 million “due to slight downward adjustments for some producers, notably Thailand,” but explained that the figure is still 2% up year on year and an all-time high.

“Amid record supplies, world carryovers are anticipated to expand to 114 million tonnes, as increases in China and other countries more than offset a contraction in the major exporters,” the IGC said. “Trade in 2017 is predicted broadly unchanged from previously, at about 40 million tonnes, a marginal decline year on year, but in line with the prior five-year average.”

The FAO said in its Rice Update that its All Rice Price Index (2002-04=100) averaged 190 points in September 2016, down 5.5 points (3%) from its August value. The decline was driven lower by Indica quotations, it said.

“Japonica quotations tended to hold firmer ground, finding some support in rekindling demand in the Far East,” the FAO said.



The bank wondered if Argentina would reduce its soybean export tax, noting that if an expected cut from 30% to 25% does not happen, then soybean area might be switched to maize.

OILSEEDS

The IGC raised its estimate for world soybean production in its end-September report.

“Largely reflecting a further improvement in the outlook for U.S. yields, 2016-17 world soybean output is projected 4 million tonnes higher month on month, at a record of 329 million, up by 4% year on year,” the IGC said. “Raised by a similar amount, consumption is seen expanding by 10 million tonnes on growing demand for high-protein meals in feed sectors.”

Domestic U.S. basis has started to weaken slightly in anticipation of a record large U.S. soybean crop, and seasonal lows are forecast to be reached in the coming weeks, Rabobank said. It noted that a weather premium is built into South American soybean prices.

The bank wondered if Argentina would reduce its soybean export tax, noting that if an expected cut from 30% to 25% does not happen, then soybean area might be switched to maize. After Rabobank’s report was published, the country duly dropped the plan.

“Argentina will not reduce soy export taxes this year or in 2017 as previously announced and will instead reduce the tax by 0.5 percentage points per month from January 2018 to December 2019,” President Mauricio Macri told the Reuters news agency.