Global grains picture brightens

Wednesday, 19 October 2011 00:00 - - {{hitsCtrl.values.hits}}

World grain supplies will be much healthier next year than previously forecast, the US government said in a report that could put further pressure on crop prices that have already tumbled from their peaks.

Apart from an unexpectedly deep cut to its forecast of US soybean stockpiles, the US Agriculture Department’s monthly report made surprisingly large upward revisions to global inventories of nearly every type of grain -- a welcome respite for consumers after over a year of steadily thinning supplies.

A record rice crop in India, higher wheat supplies from Kazakhstan and a record corn harvest in China all contributed to an overall more upbeat assessment of world supplies, although traders warned that conditions may yet tighten.

‘Global grain stocks are incredibly high relative to the previous month -- that’s the most bearish thing,’ said Terry Reilly, analyst for Citigroup.

China’s corn output this year is likely to rise 3.93 percent from last year to a record 184.5 million tonnes, according to the latest estimate published by the China National Grain and Oils Information Centre (CNGOIC).

It revised up its estimate for corn output by 2 million tonnes from its earlier forecast due to an expanded planting area and favourable weather in most parts of the country. Expectations for a record corn harvest could help ease the country’s food inflation. Corn prices have hit records recently, pushing up domestic prices of meat and eggs to record highs as well. The bumper harvest may be enough to meet robust demand mainly from the country’s animal feed production, but may not be enough to meet overall demand as the government diverts some of the supply to replenish its state reserves, which have fallen far below comfortable levels, analysts said. China is the world’s largest importer of soybeans and cotton and is expected to become a major corn buyer. The US Grains Council, a trade group, says the China corn crop is smaller than USDA projects, so China will need up to 10 million tonnes of imports.

US corn and soybean crops were shaved by 1 percent, as expected by traders, but market players were surprised by a tight outlook for soybeans. Supplies would be thin for the fifth year in a row with ending stocks cut by 3 percent. Near-perfect summer weather boosted Kazakhstan’s wheat crop to 19 million tonnes, up 19 percent from the month-ago estimate, said USDA, and double last year’s drought-cut harvest.

With the harvest in full swing, USDA forecast the US corn crop would be the fourth-largest on record, down 1 percent from its September estimate due to a smaller harvest area. In a survey, traders had expected the corn estimate to drop by 1 percent. - Reuters