The United Nations issued an upbeat forecast for world wheat production this year, even as it trimmed expectations of last year’s harvest, and said that cereals prices had fallen to a near-nine year low.
The UN food agency, the Food and Agriculture Organization, in its first estimate for world wheat output this year at 723m tonnes.
While representing a decline year on year, the figure is well above forecasts from other commentators, including broker INTL FC Stone, which overnight pegged the crop at 708.6m tonnes, while the International Grains Council has pegged the harvest at 711m tonnes.
Canada’s farm ministry, AAFC, forecasts world wheat production of 715m tonnes, while Australia’s Abares commodities bureau has put it at 710m tonnes.
‘More favourable growing conditions’
The FAO acknowledged the setback to prospects from poor autumn sowings conditions in parts of the former Soviet Union, flagging “reductions in winter plantings in Russia and Ukraine, largely driven by dry weather”.
However, the decrease was in part offset by improved expectations for major Asian producers.
“More favourable growing conditions are anticipated to sustain near-record harvests in China and Pakistan, while helping production to recover in India,” the agency said.
And although wheat sowings in the US have been forecast by Washington at their lowest since 1970, “higher yields are expected to make up for reduced winter plantings”.
‘Relatively comfortable supplies’
The comments came even as the FAO trimmed its estimate for 2015-16 wheat output by 3.8m tonnes to 733.0m tonnes, reflecting reduced ideas for the Indian harvest, and downgrades to Iranian output figures.
With small cuts to estimates for world rice and coarse grains harvests too, global cereals stocks at the close of 2015-16 were pegged at 636.2m tonnes – a downgrade of 6.2m tonnes from last month’s forecast, and meaning a marginal decline in stocks year on year.
Still, despite this downgrade, “the FAO cereal stock-to-use ratio, a leading indicator of global world food security, still stands at a relatively comfortable level of 24.7%, only slightly below the previous season”, the agency said.
Lowest since 2007
Indeed, it flagged continued pressure on world cereals prices, which as measured by an FAO index, fell by 0.6% last month to 148.3, the weakest level since May 2007.
“Among the major cereals, wheat prices fell most, subsiding 1.5%, influenced by slow trade activity and expectations of continued large export supplies for the remainder of the marketing season,” the FAO said.
Dairy prices fell by 2.1%, as “lacklustre import demand, especially by China, and ample availability of supplies for export resulted in milk product prices falling across the board”.
‘Poor production prospects’
However, food prices overall nudged 0.1% higher from last month’s near-seven-year low, led by an 8.0% rebound in values of vegetable oils.
“The upswing was led by palm oil, which appreciated by 13% on reports of falling inventories in South East Asia, combined with poor prospects for production in the coming months,” the FAO said.
“Soyoil prices also firmed, on the expectation that poor supplies of palm and other vegetable oils would boost global demand for soyoil.”