Another A-Maizing Year for Production

Spend Matters welcomes this guest post from Corrina Hutchings, of Mintec.

Grains forecasts for 2016/17 have been released from the USDA this month, giving a heads up on what to expect from the market in the year ahead. Although these early forecasts are subject to a lot of change, they set the tone for the remainder of the season as the markets turn their focus on the new harvest from the Northern Hemisphere. Let’s look at some of the highlights of the forecast.

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Global maize (corn) production is set to rise again. At 1,011 million tonnes, production will be up 4% year-over-year and only 1.8 million tonnes short of the record highs of 2014/15. U.S. production is expected to reach a record high of 366.5 million tonnes, up 6% y-o-y. Production is also set to increase for all major producing countries.

Global ending stocks will remain exceptionally high, at 207 million tonnes, largely unchanged on last year and up 21% compared to the 5-year average.

Global wheat production is forecast to fall slightly from last year’s record, down 1% to 726.9 million tonnes; however, this is still 2% above the 5-year average.
Like maize, the wheat market has generally been well supplied, with record production seen in recent years. Production in the U.S. is forecast to fall 3% y-o-y to 54.3 million tonnes as higher yields will be outweighed by lower harvest area. Production is also forecast to fall in the E.U., Kazakhstan and Ukraine, while higher output is expected from Argentina, Australia, Canada and Russia.

Some of the largest movements reported in the wheat market are for feed consumption, up 21% y-o-y in the U.S. to 4.6 million tonnes. Most wheat production goes toward food and industrial use, with just 20% going towards the feed market. However, global wheat production is still expected by far to outweigh total consumption, with ending stocks set to rise 18% on 5-year average to reach a new record of 257.3 million tonnes.

There are some ongoing concerns in the market about the potential onset of La Niña, the weather phenomenon that tends to follow El Niño. It is now assessed as “likely,” but not until the end of 2016, so will have a limited impact on the 2016/17 crop in the northern hemisphere.

Of course, it is still early days, and these forecasts will be revised. However, providing there are no major unexpected weather events or other substantial production issues, it looks like we are in for another year of good supply and muted price movements.

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