GRAIN supplies across the globe continue to grow, as harvest of the record summer crop in South America ramps up and the northern hemisphere winter crop ticks along with few issues at this stage of the spring.
In the past week, we have seen the World Agricultural Supply and Demand Estimates release their latest report and the prognosis was bearish, although largely expected, across all major commodities.
In last week’s WADSE report, the United States Department of Agriculture continued the recent trend by raising Brazilian corn and soybean production estimates for the 2016-17 harvest.
The corn number was up 2 million tonnes month-on-month to 93.5mt and the soybean number was 3mt higher at 111mt.
Conab – Brazil’s agricultural statistics agency – is estimating the corn and soybean crops at 91.5mt and 110.2mt respectively.
Across the border in Argentina, the USDA expects corn production to be 38.5mt – an increase of 1mt on last month, but higher than the Buenos Aires Grain Exchange, whose forecast sits at 37mt.
The up-trend continued in soybeans with the USDA increasing their forecast by 0.5mt to 56mt, but still 0.5mt lower than the latest BAGE appraisal.
There is a feeling of déjà vu in Argentina at the moment, with production of both soybeans and corn being threatened, like last year, by abundant rainfall in the harvest window.
It is reported that up to 1m hectares of summer cropped land is suffering from varying degrees of waterlogging, the final effect of which will depend on future weather events.
On the demand side of the equation, the USDA estimates for world corn trade came in at 154.4mt, an increase of 1.5mt, and world consumption was set at 1042mt – an increase of 3.2mt.
But the telling figure was the world ending stocks forecast, which the USDA pegged at a staggering 223mt, up more than 11mt on last year, despite the aforementioned increased in global consumption.
The USDA’s global soybean consumption number was unchanged despite a 1mt increase in China’s (the world’s biggest soybean consumer) imports to 88mt.
To put this in perspective that is about four times Australia’s forecast wheat exports and is equal to four panamax (60,000t) vessels unloading in China every day of the year.
Wheat didn’t escape the bearish outlook either, with world ending stocks increasing by 2.4mt to 252.3mt.
Global wheat exports for the current season were lowered slightly to 180.7mt.
There were alterations in some of the major exporting nations with Australia, Canada, Russia and Kazakhstan exports all down 0.5mt.
This still leaves Australian wheat exports at 24.5mt, which is achievable if the current export pace is sustained into the second half of 2017.
But 22mt would be a more realistic number as Australian wheat is forced to compete with northern hemisphere exports in the second half of the year.
To complete the bearish outlook, global stocks of barley are forecast to increase by 0.5mt to 24.5mt.
Australian barley exports were left unchanged at 8.1mt, making it the largest global exporter in 2016-17, supplying about a 25 per cent of the world’s export trade.
Meanwhile, north of the equator the spring continues to be relatively kind to the maturing winter crop.
In the US, weather forecasts continue to be favourable for the winter wheat belt and the crop condition rating has increased one percentage point week-on-week to 54pc good to excellent.
Across the Atlantic, the European crop has emerged from the winter in good condition.
But some minor moisture deficit areas have developed in recent weeks across parts of France, Belgium, the United Kingdom and Spain, which will certainly require rainfall in the near term to avoid a downgrading to their yield potential.
As the global futures markets attest, the world supply continues to outweigh demand and market participants soldier on in search of the next market rallying event.
Let’s hope that event is not domestic driven.