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'Overly dry weather' to prompt hefty drop in world grains harvest

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"Overly dry weather" has left the world on track for its steepest drop in grains output in at least a decade, the International Grains Council said, flagging "particular concerns" over supplies of high-quality wheat.

The intergovernmental group cut by 11m tonnes to 2.04bn tonnes its forecast for world grains production in 2017-18, downgrading its harvest estimate for a third successive month.

The revision reflected setbacks from dryness in many major producing areas, concerns over which sent the IGC's grain and oilseed price index up 5% in July to a one-year high.

"Because of overly dry weather, including in North America, the European Union and Australia, the outlooks for global maize (corn), wheat and barley harvests are revised lower," the council said.

Lower area, yields

The downgrade took to 88m tonnes, or 4.1%, the drop in world grains production expected in 2017-18 - the largest decline in at least a decade, beating a 3.0% drop in 2012-13.

"Both harvested areas and average yields [are] expected to be lower year on year."

While the impact on the inventory estimate was less dramatic - with a higher figure for carry-in stocks and reduced demand forecast offsetting somewhat the impact of the weaker harvest estimate – the estimate for world inventories at the close of the season was still downgraded by 2m tonnes to 478m tonnes.

"Although record opening stocks will help to cushion the fall in output, overall availabilities are expected to shrink by about 2% year on year," the council said.

The estimate for inventory held in major exporting countries, which being readily available to the world market is particularly important for prices, was downgraded by 6m tonnes to a four-year low of 150m tonnes.

'Tightening outlook'

The council flagged in particular the setback to supplies of high protein wheat, prospects for which have been undermined by dryness in the northern US Plains, a major growing area, and to some extent in Canada's Prairies too.

"In the wheat sector, there are particular concerns about a tightening outlook for supplies of premium grade milling wheats," it said.

However, the grains production and stocks downgrades related more to coarse grains, with the IGC flagging that corn accounts for 34m tonnes of the drop expected in overall grain inventories, "as carryovers are drawn down in the US and China".

The IGC added that "barley is expected to see a relatively large reduction as well, to the least in five seasons, while wheat inventories in the major exporters could be the smallest for four years".

By Mike Verdin

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