Record 2016-17 grain crops pushed production to an unprecedented 2,102mmt, stocks to all-time high of 508mmt and prices to a 10 year low. Oilseed production is expected to show a sharp recovery in South America, up 21mmt y-o-y, increasing global stocks to 86mmt (76mmt 2015-16) and resulting in lower prices. The final 2015-16 Global grain crop was 2,006mmt and whilst 42mmt lower y-o-y, the build-up of stocks since 2012-13 resulted in ending stocks increasing to a record 475mmt. World oilseed production was lower than the originally forecasted following disappointing South American soya crops. The big crops / high stocks / low price trend is expected to continue into crop 2017-18 as production estimates for both grains & oilseeds show continued high production, although at 2% lower y-o-y but offset by record high stocks, in the absence of any pre-harvest growing concerns.
Grains – Low grain prices are increasing demand, up 4% y-o-y, and exceeding 2billion tonnes for the first time. Increases are mainly in the feed and energy sectors with US ethanol production currently running at the highest ever levels resulting in increased domestic corn usage. In addition, a resurgence of US corn exports has taken place (+51%y-o-y) due to the competitive prices following the record harvest.
Lower overall EU wheat exports by 10mmt y-o-y has resulted in increases from other origins, particularly the US where exports are running at record levels (+24%y-o-y). As the marketing year ends, the already high world stocks are forecast to increase and prices fall to reflect not just the current high stock levels but also the expected negative price effect this with projected high production again in the coming season. Russian milling wheat for export remains one of the most competitive priced and the discount to other origins now looks to increase as stocks build and sellers chases fewer buyers. Winter wheat plantings for the 2017/18 crop are 10% down in the US, the lowest since 1909, but up 6% in the EU and 10% higher in Russia y-o-y.
Oilseeds – the South American soya harvest forecast, as harvest progresses, is now expected to be up 7% y-o-y, raising 2016-17 global soya production to 340mmt (312mmt last year) with ending stocks up from 76mmt to 83mmt this year. The US crop is projected at 117mmt, up 9% y-o-y, and global oilseed production rises to 558mmt, up 14% y-o-y. Imports to China, the world’s biggest buyer, continue to increase to 86mmt in 2016-17 and to 89mmt next year forecast.
Grains –The 2016/17 crop estimate projects a further production increase to 118mmt, +15% y-o-y and 16mmt above the previous record crop in according to IKAR.The 2015-16 crop produced 104mmt, 1mmt below the record the year previous, but the second ever highest. For crop 2016/17 wheat accounts for 74mmt (+17%), barley 18mmt (+3%) & corn 15mmt (+5%). Exports at end-February (8 months) are near the same as at this time last year (25mmt) despite record January & February volumes and a crop higher by 16mmt implies an increase in end of season stocks of 54% y-o-y to 20mmt from 13mmt last year. Domestic prices remain under pressure from the current disappointing pace of exports relative to increased supply & stocks, absence of end of season consumer buying and ruble appreciation of 21% against the dollar during 2016. Domestic feed grain prices in the Central Black Soil Region have fallen during the year according to Prozerno. Corn is 12% lower in ruble terms and 6% higher in USD’s, feed wheat and barley is down 16% in rubles and 6% in USD’s whilst milling wheat was just 1% lower in ruble terms and 11% higher in USD’s due to the shortage of higher quality wheat this year.
Oilseeds – The sunflower crop has been revised upwards to 11mmt giving a total oilseed production of 15mmt, an increase of 15% y-o-y. Record crushing levels pre the 2016 year-end and the resulting high stock levels of oil & meal is pushing sunflower seed prices lower in the 1st quarter 2017. This coupled with lower oilseed prices internationally is resulting in lack of buying interest from the Russian processors and continuing declining prices. Prices are lower y-o-y by 19% in ruble terms, 9% in USD is, according to ProZerno.
Vegetables – A bigger domestic potato supply again this year depressed prices at the beginning of the season, however, there was a small uplift in price from the New Year holiday, traditionally a period of higher prices but absent for the last 2 years. Price comparison y-o-y (+4% rub & +17% $) and price development from Harvest to March 2017 (+ 34% rub & +48% $).