The United Nations flagged two early tests for 2018 wheat
production prospects, as it trimmed ideas for this season's inventories too –
albeit still seeing them hit a record high.
The UN food agency, the Food and Agriculture Organization,
said that "dry weather in some key growing regions has slowed planting progress"
for crop to be harvested next year.
The comments follow official data earlier this week showing
US winter wheat sowings running, as of the start of this month, at their second
slowest pace on records going back to 1996, thanks largely to dryness in the
Plains and Midwest which has deterred growers from seedings.
'Hope for the best'
In the former Soviet Union too, a lack of rains is raising
concerns, with Tobin Gorey at Commonwealth Bank of Australia on Thursday that "weather
forecasters continue to expect dry weather in dry winter wheat regions in
adjacent areas of Russia, Ukraine and Kazakhstan.
"The worry grows with time because descending temperatures
will mean poor crop establishment."
Earlier this week, SovEcon cautioned that "rains are needed"
in European Russia to support ideas of a bumper 2018 harvest which have been
promoted by a strong pace to seedings.
"Weather conditions were very dry in recent weeks. In many
cases, farmers actually plant seeds in dry soil and hope for the best," the
influential Moscow-based analysis group said.
The FAO also said that in Europe, the top wheat-grower, "expectations
of higher earnings for alternative crops could affect winter wheat plantings".
However, earlier ideas of a switch by many European Union growers
towards rapeseed, which had appeared likely given relatively high Paris futures
prices of rapeseed compared with wheat for the next harvests, have been undermined
by ideas that dry weather in some countries.
Strategie Grains earlier this week forecast a dip in EU
rapeseed sowings for the 2018 harvest.
Last week, the International Grains Council said that EU winter
wheat area "is seen broadly unchanged year on year," while noting that "following
a recent drought, additional rains are needed in several southern member states".
'Indicator of likely
The comments came as the IGC nudged lower, by 700,000
tonnes, its forecast for world wheat inventories at the close of 2017-18
although – at 261.2m tonnes – stocks would be still be a record high.
The downgrade reflected a 3.4m tonnes increase in
consumption prospects, mainly on "higher forecasts for industrial use" of the grain,
a revision which more than offset raised estimates for EU and Russian
As compared with consumption - to form the stocks-to-use ratio,
which the FAO highlighted as "an indicator of likely price direction" - global
wheat inventories will end this season at 34.6% of consumption, up 1.1 points
year on year and "the highest in over three decades".
However, the stocks-to-use ratio for inventories held in exporting
countries, which are particularly important for prices, will drop by 0.8 points
year on year to 18.4%.
Food prices rise
For cereals overall, including also coarse grains and rice, the
inventory figure was upgraded by 1.3m tonnes to a record high of 720.5 tonnes,
reflecting increased expectations for corn stocks in Brazil and South Africa,
and for barley supplies in Russia.
The overall cereals stocks-to-use ratio, at 27.0%, "would be
similar to the ratio for 2016-17 and well above the historical low of 20% registered
exactly a decade ago," the FAO said.
The agency also released monthly data on food prices showing
a rise of 0.8% month on month in September, as appreciation in vegetable oil
and dairy values more than offset a decline in cereals.
In dairy, prices rose 2.1% to their highest since July 2014,
in gains the agency attributed to "continued supply constraints in Australia,
New Zealand and the EU, with growth in the US remaining timid.
"Butter and cheese remain the dairy products in highest
demand, especially in Asia."