Global wheat production will fall in 2016-17 for the first time in four years – but not by enough to drag world inventories of the grain far below this season’s record high, the International Grains Council said.
The IGC, in its first forecast for world wheat production next season, pegged it at 706m tonnes – a three-year low, and down 25m tonnes year on year, but still a historically high level.
“While conditions for 2016-17 winter wheat have not been entirely ideal in some regions, global harvest prospects remain mostly favourable,” the council said.
“With only a small drop in all wheat area and average yields predicted, world production is tentatively projected 3% down year on year.”
Fall in demand too
Although the drop in output, fostered by poor autumn sowings condition in Ukraine, will facilitate some reduction in world wheat stocks from the record high of 213m tonnes expected at the close of this season, the decline may only be modest.
“Because of lower anticipated feed demand, a marginal decline in consumption is expected,” the IGC said.
“Some contraction is possible in end-2016-17 stocks, but inventories could still be the second highest ever.”
‘Strong competition’
The comments would appear to undermine hopes of a revival for now in wheat prices, which are determined largely by assessments of inventories, with ample stocks meaning that buyers do not have to compete hard and pay up to secure supplies.
Wheat prices, as measured by an IGC index, fell by 3% last month to take their losses over 2015 to 24%.
“While concerns about 2016-17 winter crops occasionally underpinned [values], prices were mostly pressured by ample availabilities and strong export competition,” the council said.
Wheat’s price decline over 2015 was matched by barley, but soybean values fell by a more modest 15.5%, finding some support from late-year worries about dry Brazilian growing conditions, while the IGC’s corn index dropped by 8.3%.
‘Bear-record supply’
The IGC comments came as it edged higher its estimate for stocks of grains – comprising wheat and coarse grains – at the close of 2015-16 by 1m tonnes to a 29-year high of 454m tonnes, despite a trim of 4m tonnes to 1.992bn tonnes in its production forecast.
The reduced output figure reflected expectations of “poorer [corn] harvests in South Africa and India”, where dryness has hurt prospects, although estimates for world barley and wheat output were increased.
“Large” stocks of grains carried in to 2015-16 “are seen keeping total supply at a near-record level”, the council said.
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