IGC lifts world grain stocks hopes to 15-year high

World grain stocks are to rise to their highest in 15 years, the International Grains Council said, lifting ideas of corn and wheat production, and forecasting a hike in soybean inventories too.

The intergovernmental group ditched ideas of a drop in global grain inventories over 2014-15, seeing them instead growing by 12m tonnes to 412m tonnes, "the most since the end of 1999-00".

The forecast reflected an upgrade of 12m tonnes, to 1.95bn tonnes in grains production, turning a somewhat balanced supply and demand ratio into one with a clear surplus for a second successive season.

Indeed, world grain inventories are now viewed as jumping by nearly 22% in two seasons.

The stocks-to-use ratio, a key commodity pricing metric, indicating the availability of supplies and therefore the competition needed to secure them, is seen ending 2014-15 at 21.3%, up from 18.6% at the end of 2012-13.

'Mostly favourable weather'

The council attributed its upgrade to improved production hopes, saying that "amid mostly favourable weather for crops, better prospects for wheat and corn led the rise".

The forecast for world wheat output was lifted by 5m tonnes to 699m tones, narrowing to 11m tonnes the decline on last season, and reflecting increased hopes for harvests in China, the European Union and India the three biggest producers.

For corn, the world harvest was upgraded by 8m tonnes to 963m tonnes, largely down to improved expectations for China, although the IGC also flagged "favourable early prospects" for the US crop.

Huge Chinese inventories

World corn stocks are now seen ending 2014-15 at 180m tonnes, up 13m tonnes year on year, and by a whopping 48m tonnes, or 36%, in two seasons.

"Despite expanding demand, world ending stocks are forecast to increase for a fourth consecutive year," the IGC said, highlighting the inordinate amount held in China.

"Inventories in China are growing and may account for almost half of the world total."

China's government was on Wednesday revealed to be planning to boost domestic grain reserves by 25m tonnes this year, in a drive to build inventories sufficient to cover six months of demand.

The plan will be backed by the addition of 50m tonnes of storage capacity over the next two years, papers from a meeting of China's cabinet said.

Trade slowdown

The IGC, in its first forecast for the world soybean balance sheet in 2014-15, also foresaw a sharp rise in inventories of the oilseed, by 7m tonnes to 35m tonnes.

The rise in inventories reflects expectations of a 300m-tonne harvest, a forecast in line with that of the US Department of Agriculture, although the IGC's inventory estimate is far lower.

"Production of soybeans is projected to rise by 6% year on year, to an all-time peak, boosted by expectations for record plantings in the US and Brazil," the council said.

While trade was also likely to rise, it would do so at a "slower pace compared to the recent average".

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