The International Grains Council raised, again, its estimate for world grains output this season, citing improved ideas on the US harvest, while seeing demand mop up only part of the extra supplies.
The council pegged at 2.079bn global grains output in 2017-18, an upgrade of 4m tonnes from its previous estimate, although still representing a drop of 55m tonnes year on year.
The revision reflected in the main improved expectations for world corn output, which was put at 1.04bn bushels, a 6m-tonne upgrade, “including an upward revision for the US crop”.
Demand hopes, however, saw a smaller upgrade, of 3m tonnes to 2.107bn tonnes for world grains overall, albeit representing a record high.
‘Inventories second largest ever’
The dynamics fed through into a 3m-tonne upgrade to 496m tonnes in the forecast for world grain inventories at the close of 2017-18, a 28m-tonne decline year on year.
“While this would be the first contraction in five years, inventories are expected to be the second largest ever,” the council said.
Corn was still expected to account for the bulk of the decline, with a 20m-tonne drop in stocks year on year, with barley inventories see falling by some 3m tonnes.
However, wheat inventories, up 7m tonnes year on year at 249m tonnes, “are expected to expand to a new high”, albeit that the rise “is mostly owing to accumulation in China, with aggregate carryovers in the major exporters contracting”.
‘Gains in South America’
Inventory levels are viewed by investors as a key guide to price prospects, especially when compared with consumption to form the so-called stocks-to-use ratio.
Grain prices, as measured by the IGC’s index rose by 1.0% this month, after trading “in a narrow range during November, with supply and demand fundamentals mostly already factored into market”.
Corn prices outperformed in adding 1.6%, “buoyed by gains in South America… linked to slow producer selling in Argentina and buoyant export demand in Brazil”.
Wheat prices showed “little movement… amid few fresh fundamental developments”.