October 29, 2010

 

Global grains markets expected to tighten

 

 

As demand outpaces supply for the first time in four years, world grains markets are expected to tighten in the 2010-11 season, the International Grain Council said Thursday (Oct 28).

 

While the IGC said wheat production is expected to hit 644 million tonnes in 2010-11 - leaving its previous estimate unchanged - worsening prospects for corn crops in the US and China are expected to lower world production.

 

While still a record crop, the IGC cut its estimates for 2010-11 world corn output to 814 million tonnes from a previous forecast of 824 million tonnes.

 

Corn output from the world's largest producer, the US, is expected to total 323 million tonnes this season, said the IGC, cutting its previous forecast by 11 million tonnes. China is expected to produce 162 million tonnes this year, three million less than the IGC's September estimate.

 

Declining prospects for the US corn crop has triggered a jump in prices in recent weeks. A sharp downgrade in government yield estimates caused a mid-month surge in futures, with CBOT March corn now trading at around US$5.77 1/4 a bushel.

 

Analysts remain bullish on the prospect for corn markets.

 

"Despite the aggressive cut in US corn yields in the last WASDE report, further declines in yield estimates are likely," said Sudakshina Unnikrishnan at Barclays Capital.

 

Still, demand is expected to remain robust. The IGC increased its corn consumption forecast for by three million tonnes to 840 million tonnes, up 3% from 2009-10, and said it expects this season's ending stocks to fall to a four-year low of 125 million tonnes.

 

"Despite the recent spike in prices, corn remains competitive for livestock use, and feed demand is forecast to rise by 20 million tonnes to 490 million tonnes," the IGC said.

 

World grain consumption is expected to total 1.79 billion tonnes, 1.5% higher than in 2009-10, mainly because of increased feed forecasts for the EU and US, the IGC said.

 

World end-of-season stocks are expected to fall by 54 million tonnes to 345 million tonnes this season. Though still nearly 25% above the 2006-2007 low of 281 million tonnes, this would put them at their lowest point since 2007-8.