One of the most eagerly awaited communications in the global agricultural market is the International Grains Council's (IGC) monthly report. In the last week of February 2018, IGC reaffirmed its view that the world has large grain and oilseed supplies, particularly maize, soybeans and wheat, albeit having declined marginally from the 2016/17 production season - Wandile Sihlobo, Agbiz economist
One of the most eagerly awaited communications in the global agricultural market is the International Grains Council's (IGC) monthly report. In the last week of February 2018, IGC reaffirmed its view that the world has large grain and oilseed supplies, particularly maize, soybeans and wheat, albeit having declined marginally from the 2016/17 production season.
Global maize production is estimated at just over billion tonnes, down by 4% from the 2016/17 production season owing to the anticipation of a lower harvest in the United States, Brazil, Argentina, Ukraine, China, India, Russia and South Africa. In almost all these countries, the expected decline in production is mainly underpinned by unfavourable weather conditions experienced earlier in the season, which then led to a reduction in area planted to maize
A closer look at the data shows that South Africa, Russia, Ukraine, Brazil and Argentina registered the most notable annual percentage decline in production.
IGC forecasts South Africa’s 2017/18 maize production at 11.8 million tonnes, down by 32% from the previous season. This can be explained by a reduction in area planted in the western sections of the Free State and North West provinces. Fortunately, the weather conditions have since improved and the crop is in good condition across the country. It is worth noting that local maize prices could remain depressed, regardless of the decline in production. The large carryover stocks from the 2016/17 production season, will boost local supplies and somewhat compensate for a decline in the current season’s production.
Russia and Ukraine’s 2017/18 maize production are set to respectively decline by 15% and 14% from the previous season to 13 million and 24 million tonnes. At the same time, Brazil and Argentina’s maize crop could decline by 11% and 6% from the 2016/17 production season to 88 million and 47 million tonnes, respectively.
While the United States, China, Canada and Russia had one of the best soybean production seasons this year, the global soybean output is set to decline by 1% from the 2016/17 production season and ease at 347 million tonnes. This is a result of the expected lower crop in South American countries, particularly Argentina, Brazil and Uruguay. This follows persistent dryness in the past few weeks in these countries, as well as a reduction in area planted. Similarly to maize, there are large carryover stocks from the 2016/17 production season which will boost global supplies in the 2017/18 season.
Unlike maize and soybeans, the 2017/18 global wheat productions registered a 0.4% uptick from the previous season to 757 million tonnes. The key contributors to this expected production uptick are the European Union countries, Russia, Ukraine, China and India with production estimated at 151 million tonnes (+5% y/y), 85 million tonnes (+85% y/y), 27 million tonnes (+1%), 130 million tonnes (+1% y/y) and 98 million tonnes (+14% y/y), respectively. Moreover, the 2017/18 global ending stocks are estimated at 254 million tonnes, which is 6% higher than the previous season.
Overall, the aforementioned production dynamics suggest that global grain and oilseed prices could level out in the short to medium term. With South Africa being a net importer of soybean products and wheat, these developments could also add bearish pressure to the domestic market and therefore negatively influence farmers’ profitability.
*This article first appeared in Farmers Weekly magazine, 09 March 2018 issue.
Agbiz Head: Agribusiness Research
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