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Bumper harvest boosts world grain forecasts

13 March 2017

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Further increases in world grain production and stocks have been forecast for 2016/17 by the United States Department of Agriculture (USDA) in their latest January 2017 update. Yield increases in the world’s three largest commodities – wheat, corn and soybeans – will lead to record grain supplies, with Australia well-placed to take advantage of higher export demand across South Asia, the Middle East and Africa. For the fourth consecutive year global wheat production is forecast to outstrip consumption, rising by two per cent from last year to a record of 748mmt. This has been largely driven by a huge wheat crop in Australia which USDA predicts will top 33mmt. USDA has also lifted its export figures for Australian wheat, estimating about 25mmt will be exported. This is an increase of 8mmt from last year and if achieved, will be our largest export figure ever and giving a great boost to the Australian grain industry. Globally, estimates for wheat consumption increased slightly to 740mmt but ending stocks are also expected to be a record 248mmt. Notwithstanding two of the largest consumers India and China make up half of the total stocks estimate, there is still a lot of wheat around the world at the moment. Corn crops are also expected to grow a further eight per cent from last year to 1040mmt – marking the second time corn has ever surpassed the billion tonne milestone. This growth comes off the back of strong production in South America and China. Similarly, corn consumption is tipped to reach record levels of 1033mmt, which is the first time it has ever gone over a billion tonnes. When taking into account carrying stocks of about 218mmt, this will still more than outstrip usage. For soybean, production forecasts have only risen marginally but they are still at record levels of around 337mmt, driven by potential large crops in South America and the United States. Global consumption sits at a record 330mmt with China’s huge demand for soybean imports (100mmt) to feed their poultry and pig industries providing an ever increasing market for soybean and soymeal. World canola production is forecast to be down by three per cent from last year to 67mmt, largely due to smaller EU production. Consumption is also estimated to be down by similar amount being influenced by crude oil prices and biofuel in Europe and the preference for other oilseeds use in China. With both canola production and consumption down year on year, it is a well-balanced farm-to-fork commodity with low stocks of only 5mmt. Global barley production and consumption has remained unchanged at around 144mmt and 146mmt respectively. Australian barley crops are up by 23 per cent from last year though, predicted to reach 10.6mmt (versus ABARES 13.4mmt). Quality is also strong this year, with an excellent spring producing more malting barley than normal. Australian barley exports are tipped to reach 7mmt, with ongoing strong feed barley demand into Saudi Arabia. Sorghum production has strengthened to 63mmt worldwide, driven by large growth in African production which more than offsets a drop in the United States. Consumption is also up to 63mmt and follows a tough season for sorghum last year as the large Chinese stockpile of corn impacted buying activity. When looking at a snapshot over the past decade, world grain production and consumption have increased by an average of three per cent year on year. When we look at where the consumption is occurring, the gaps have helped trigger a six per cent increase in exports. With this trend likely to continue into the future, Australia is in a prime position to help meet export demand for many key markets and offset the large grain surpluses.