The United Nations, cutting 15m tonnes from its forecast for
the world wheat harvest, warned that world cereal supplies are set to tighten
in 2012-13 – but not by enough to prevent drops in grain prices.
The UN's food agency, the Food and Agriculture Organization
(FAO), sliced its estimate for world wheat production in the forthcoming season
to 675.1m tonnes – a drop of 25m tonnes year on year - citing the impact of
cold weather on winter crops in Europe and Ukraine.
"Persisting drought also slashed prospects in Morocco, while
the outlook for spring crop planting in Central Asia", an area which includes
Kazakhstan, "worsened due to prolonged dryness," the FAO said.
Prospects for the world coarse grains harvest look better
thanks to the "anticipated sharp rise in [corn] plantings in the US", where
seedings are expected to hit their highest in 75 years.
World coarse grains output in 2012-13 will soar 43.4m tonnes
to 1.21bn tonnes.
Nonetheless, the impact on overall cereals supplies of the rising
harvest of coarse grains, which also include barley and sorghum, will be
limited by rising consumption.
Indeed, on a stocks-to-use basis, cereals stocks will end
2012-13 at 21.7% of use, down 0.2 points on 2011-12.
The stocks-to-use ratio is a key pricing metric, with a
lower value typically expected to support higher prices.
'Prices are likely to average lower'
However, the better balance of supplies next season between
wheat, which has been in ample supply, and coarse grains, which have been at
historically tight levels, looks set to see prices weaken nonetheless.
"In spite of the forecast decline in world wheat production
this year, the expectation of continued ample stocks, combined with the anticipated
strong recovery in corn supplies, is likely to keep wheat prices under downward
pressure," the FAO said.
|UN FAO forecasts for world cereals, 2012-13 and (year-on-year change)|
Production: 2.37bn tonnes, (+1.1%)
Trade: 295.5m tonnes, (+0.8%)
Food use: 1.085bn tonnes, (+1.1%)
Feed use: 806.6m tonnes, (+2.1%)
Total use (includes others): 2.357bn tonnes, (+1.4%)
Year-end stocks: 524.0m tonnes, (+1.7%)
Stocks-to-use ratio: 21.7%, (-0.2 points)
"Barring any major unexpected supply shocks, international
prices are likely to average lower than in 2011-12."
In corn, the FAO, noting that market were already "anticipating
a rebound in supply after major 2012 harvests are complete", also flagged
weaker values ahead.
"Although prices will be influenced by weather conditions during
critical periods of the growing season, especially in July when pollination is
required [in the key US crop], the trend in December [futures] values
underscores the possibility of a decline in prices."
'Much more rain needed'
The FAO's forecasts included an estimate of 345m tonnes, or
13.6bn bushels, for the US corn crop, a record, but a figure nonetheless below estimates
above 14bn bushels many other analysts are factoring in.
Allendale, the Chicago-based broker, on Thursday pegged the US corn harvest at 14.65bn bushels.
|UN FAO forecasts for world wheat, 2012-13 and (year-on-year change)|
Production: 675.1m tonnes, (-3.6%)
Trade: 135.0m tonnes, (-1.7%)
Food use: 475.5m tonnes, (+0.4%)
Feed use: 133.8m tonnes, (-3.7%)
Total use (includes others): 686.5m tonnes, (-0.6%)
Year-end stocks: 182.7m tonnes, (-6.5%)
Stocks-to-use ratio: 26.3%, (-2.1 points)
The Chinese corn crop, the world's second biggest, was
pegged at 190m tonnes, in line with last year's.
"Even assuming yields return to average levels after last
year's highs, this could be largely offset by an increase in area, as farmers
are expected to plant more corn in response to ﬁrm price prospects."
In wheat, the FAO pegged the European Union harvest, the
world's biggest, at 135m tonnes, in line with estimates from other commentators
last month, warning that recent rains had not been enough to rescue crops in all
"In the driest areas, much more rain will be needed during
the growing season to avoid signiﬁcant loss of yield potential."