February 16, 2011

Global grain inventories may tighten further

World grain inventories, already in contraction, are in danger of tightening further in 2011-12 amid the poor condition of winter crops and an incomplete rebound in fertiliser sales, according to Yara International.

The nitrogen giant said that a rise of some 5%, to nearly 2.3 billion tonnes, in world grain production was necessary to match it to demand.

"A substantial harvest increase in the 2011-12 season is needed merely to avoid a further decline in inventories," Yara said, forecasting that consumption would rise by about 2%.

Furthermore, Yara, the top nitrogen producer, highlighted a reluctance among farmers to apply as much of the nutrient as they did in 2007-08, when crop prices last soared, implying less support to yields.

"Season-to-date nitrogen fertiliser deliveries in Western Europe are 13% ahead of last season, but still 4% behind the 2007-08 season, when farmers also had strong incentives to increase fertiliser application," Yara said.

"To match the 2007-08 season, deliveries in the second half of this season would need to be 20% higher than last year."

In the US, nitrogen deliveries were also running 4% behind 2007-08 rates.