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Top exporters' grain stocks to fall to 17-year low

Grain stocks held by major exporters are to fall to the tightest since the season that corn broke above $5 a bushel for the first time, and wheat above $7 a bushel, the International Grains Council, cutting further its supply forecasts.

The intergovernmental group, in the latest of a series of cuts to production forecasts, lowered its estimate for world grains production in 2012-13 by 6m tonnes to 1.76m tonnes.

While the estimate for consumption was trimmed too, seen falling for the first time in 14 years, the harvest downgrade meant a further cut of 4m tonnes to the estimate for inventories at the close of the season.

This included a 3m tonne-drop to 96m tonnes in the forecast for stocks held by major exporters, such as Canada, the European Union and the US, whose supplies are viewed with particular importance given their availability to the world market.

Inventories in many countries, such as China, are viewed as less relevant to world grain pricing considerations, in being in essence unavailable for exports.

'Even tighter stocks'

"Inventories for the major exporters will be even tighter and the smallest for 17 years," the IGC said.

IGC corn, wheat forecasts, 2012-13, change on last and (on year)

World corn production: 830m tonnes, -3m tonnes, (-5.3%)

Corn end-stocks: 117m tonnes, -3m tonnes, (-13.3%)

Stocks held by major exporters: 29m tonnes, -3m tonnes, (-24%)

World wheat output: 655m tonnes, -2m tonnes, (-5.6%)

Wheat year-end stocks: 172m tonnes, -3m tonnes, (-12.2%)

Stocks held by major exporters: 50m tonnes, -1m tonnes, (-28%)

Source: IGC

The last time stocks were so tight was the season that Chicago corn futures set a then-record of $5.54 a bushel, in July 1996, before harvest began on a US crop which turned out 25% bigger than that a year before, allowing stocks to double.

Wheat in March 1996 spiked to a then record of $7.50 a bushel, returning above $7 a bushel the next month.

In fact, IGC analysts saw India, not normally considered a major exporter, playing a bigger role in wheat shipments than they had previously expected, raising their estimate for Russia too, but cutting hopes for Australian and US shipments.

'Production prospects have mostly worsened'

The downgrade to grain crop hopes reflected lower ideas of both the world corn and wheat harvests.

For wheat, "lower yields in the European Union and Kazakhstan, as well as deteriorating crop prospects in Argentina and Australia, reduce the forecast for world production to 655m tonnes," the IGC said.

The estimate is, nonetheless, some 2m tonnes above the forecast from the US Department of Agriculture, whose data are viewed by many observers as setting world benchmarks.

For corn, the production estimate was trimmed by 3m tonnes,  to a figure well below the USDA figure, with the council noting that "northern hemisphere production prospects have mostly worsened".

Soybean upgrade

However, the IGC was upbeat on hopes for soybean production, raising their world production estimate by 8m tonnes to 264m tonnes.

"The forecast recovery in world production depends on favourable weather for key South American crops," the council cautioned.

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