Record Grain Supplies Pressure Prices Lower

Global corn production in 2016/17 is projected up sharply from last year, driven by larger crops for the United States, Argentina, South Africa, and the EU. Global consumption is expected to rise to a record, reflecting growth in feed use for China and the EU. Global import demand is expected marginally lower, driven by the EU and China. Global ending stocks are forecast down slightly as a drawdown in China more than offsets a build-up in the United States.

Global wheat production is forecast lower than last year's record, but continues to outpace consumption for the fourth consecutive year. The EU, Morocco, Turkey, and Ukraine have sizeable production cuts, but these are partly offset by larger crops in Argentina and Russia. Global consumption is projected up fractionally as steady growth in food use more than offsets lower wheat feeding. Global trade is down very slightly from the 2015/16 record. The EU is forecast to be the world's largest exporter for the fourth straight year. Global stocks are projected to an all-time high, driven primarily by China.

Rice production is projected at a new record, with significant increases for South and Southeast Asia and the United States. Consumption is forecast to rise moderately. Trade is projected lower as improved crops in importing countries reduce demand. U.S. exports are projected higher on ample supplies and improved price competitiveness. Declines in exporter stocks are offset by increases in China.

WHEAT: WORLD MARKETS AND TRADE

HIGHLIGHTS FOR 2016/17

Global wheat production is projected at 727 million metric tons (MMT) down 7.1 MMT, and slightly below the 2015/16 record. Production among the major exporting countries of Argentina, Australia, Canada, EU, Kazakhstan, Russia, Ukraine, and the United States is down a net 2.4 MMT. Projected gains in Argentina, Australia, Canada, and Russia's wheat production are not enough to offset declines in the EU, Kazakhstan, Ukraine, and the United States. In the EU, although area harvested is projected to rise, yields are expected to dip. Farmers in Argentina are projected to produce more wheat as elimination of export policy restrictions incentivizes increased planting. Production in Canada is expected to rise marginally as increased winter wheat offsets reduced spring wheat area. Russia's wheat crop is expected to be the second largest on record. Production in Ukraine is expected to drop from last year, but recent favorable weather conditions have boosted crop potential. U.S. production is projected lower than last year as a sharp reduction in area more than offsets above-average yields. Ethiopia and South Africa's production is projected to significantly recover from last year's drought affected crop. China's wheat production is nearly unchanged from 2015/16, adding to the country's already burdensome supplies. Morocco, on the other hand, is suffering from a drought and its crop is projected at a 9-year low.

Global consumption is up 0.5 percent as greater food, seed and industrial use (FSI), up 1.1 percent, is more than offset by a 2.3 percent drop in feed use. Population, urbanization, and income growth, particularly in Sub-Saharan Africa and Southeast Asia, are driving the growth in food consumption. Wheat used as a component in animal feed rations is projected to decline slightly due to greater utilization of coarse grains, particularly in China, EU, and Thailand.

2016/17 global ending stocks are projected to reach a new record of 257 million tons, up 14.4 million tons from last year. China's burgeoning stocks now account for a whopping 46 percent of global stocks and are expected up 21.7 million tons from last year. Projected ending stocks, less China, are actually down year-toyear.

Ending stocks in the eight major exporting countries as a whole are projected up slightly year-to-year. However, stocks in the EU and the United States account for nearly twothirds of this total. Stocks in Argentina, Kazakhstan, and Ukraine, are expected to be lower than in 2015/16.

Selected Importers 2016/17

Global trade is forecast down nearly 2 percent from the 2015/16 record, but remains sizeable at 163.5 million tons. The EU and Thailand are expected to reduce imports of feed-quality wheat as global exportable supplies of feed-quality wheat tighten and relatively lower-priced domestic coarse grains replace imported wheat in feed rations. The Philippines, on the other hand, is projected to import more feed-quality wheat as domestic corn supplies tighten. Ethiopia, Iran, Mexico, and Tunisia will likely lower imports due to improved domestic production. The United States is projected to increase imports as a result of a smaller expected crop.

  • Algeria is down 600,000 tons from 8.1 million to 7.5 million. The government continues to build domestic stocks in order to take advantage of low international prices.
  • Egypt is unchanged at 12.0 million tons.
  • Ethiopia is down 1.1 million tons from 3.1 million to 2.0 million.
  • EU is down 1.0 million tons from 6.5 million to 5.5 million.
  • Iran is down 1.8 million tons from 3.3 million to 1.5 million based on a larger crop and the implementation of an import duty which is likely to restrict imports.
  • Mexico is down 200,000 tons from 4.4 million to 4.2 million.
  • Morocco is up 1.5 million tons from 4.0 million to a record 5.5 million. Morocco's wheat crop suffered from a drought, raising import demand to a record.
  • Philippines is up 500,000 tons from 4.3 million to 4.8 million.
  • Saudi Arabia is up 500,000 tons from 3.0 million to 3.5 million. Saudi Arabia is projected to import a larger quantity in order to meet growing food consumption. Its domestic wheat production was phased out and the country depends solely on imports to meet growing demand.
  • Thailand is down 900,000 tons from 4.5 million to 3.6 million.
  • Tunisia is down 300,000 tons from 2.0 million to 1.7 million tons.
  • The United States is up 300,000 tons from 3.2 million to 3.5 million as a result of lower expected domestic production.

Selected Exporters 2016/17

With global trade declining fractionally and global supplies projected at a record in 2016/17, competition for global market share is expected to intensify. U.S. exports are expected to rebound slightly from their 44-year low. Canada and Argentina's supplies are expected to tighten during the Northern Hemisphere summer and fall months until new crops come to market. This will give the United States an opportunity to increase market share.

  • Argentina is unchanged at 8.5 million tons, although new supplies are not expected to hit the market until the second half of the trade year.
  • Australia is up 500,000 tons from 16.5 million to 17.0 million tons due to a slightly larger expected crop.
  • Canada is down 2.5 million tons from 22.5 million to 20.0 million tons. Although the crop is projected slightly higher, tight carry-in stocks will limit export volume.
  • EU is up 2.0 million tons from 32.5 million to 34.5 million. An appreciable upturn in exports to a near record is projected, supported by a large supplies and a sizeable crop.
  • Kazakhstan is down 500,000 tons from 7.5 million to 7.0 million tons because of a smaller expected crop.
  • Russia is unchanged at a record 24.5 million tons.
  • Ukraine is down 4.0 million tons from 15.5 million to 11.5 million tons because of a smaller crop.
  • The United States is up 2.7 million tons from 21.3 million to 24.0 million tons.

2015/16 OVERVIEW

Global trade is up significantly month-to-month to a record 166.6 million tons. Egypt, Ethiopia, Thailand, Indonesia, Morocco, and Turkey imports are all raised. Partly offsetting are cuts in Iraq and Saudi Arabia. Argentina, Canada, EU, Kazakhstan, Russia, and Turkey exports are all raised. U.S. exports, imports, and the season-average farm price are all unchanged. Season-average farm prices in 2016/17 are projected in the range of $3.70 to $4.50/bushel, down from $4.90/bushel in 2015/16.

US PRICES:

Wheat prices experienced mostly modest fluctuations in April. Hard Red Winter (HRW) fell $5/ton to $200. Soft Red Winter (SRW) and Soft White Winter (SWW) also settled at $200/ton, rising $3 and $9, respectively. Hard Red Spring (HRS) rose marginally by $3/ton to $230.

TRADE CHANGES IN 2015/16

Selected Importers

  • Egypt is up 1.0 million tons to 12.0 million due to the robust pace of shipments to date.
  • Ethiopia is raised 700,000 tons to 3.1 million on account of continued government purchases combined with food aid shipments.
  • Indonesia is boosted 500,000 tons to 8.6 million as demand for feed-quality wheat surges, resulting from government-imposed limitations on corn imports.
  • Iraq is lowered 300,000 tons to 2.4 million due to sluggish trade.
  • Morocco is up 1.0 million tons to 4.0 million as industry boosts purchases in anticipation of tight domestic supplies caused by a drought-ravaged crop.
  • Saudi Arabia is down 300,000 tons to 3.0 million as a result of higher-thananticipated domestic procurement of the 2014/15 crop.
  • Thailand is raised 700,000 tons to 4.5 million due to strong demand for feed-quality wheat. Drought is forcing the domestic corn crop to be planted later than normal affecting supplies of feed grains.
  • Turkey is up 500,000 tons to 4.3 million on account of larger-than-expected exports of flour and products. Turkey has an inward processing mechanism in which wheat can be imported duty-free as long as it is exported in the form of flour or products.

Selected Exporters

  • Argentina is raised 1.0 million tons to 8.5 million on a higher-than-expected pace of shipments.
  • Canada is up 500,000 tons to 22.5 million as stronger trade persists despite tightening stocks.
  • EU is boosted 500,000 tons to 32.5 million as the issuance of voluminous export licenses continues.
  • Kazakhstan is up 500,000 tons to 7.5 million on account of the strong pace of trade.
  • Russia is raised 1.5 million tons to a record 24.5 million based on trade data.
  • Turkey is up 300,000 tons to 5.3 million due to the robust trade of flour and products.