Wednesday, July 6, 2022

World grain production bounces back

A large recovery in wheat and maize production is forecast to boost global cereal supplies in the season ahead.

The Food and Agriculture Organisation’s monthly report points to a 7.2% increase in world cereal production this year to a record 2479 million tonnes.

The organisation puts world wheat output this year at 704m tonnes, an increase of 6.8%, which would imply recovery after last year’s reduction and bring world production to its highest level in history.

Most of the increase this year is expected from Europe, especially the big producers in the former Soviet states now comprising the Commonwealth of Independent States, which are forecast to rebound sharply from drought-reduced levels last year.

WELL BALANCED: The current market presents opportunities for buyers and growers, Federated Farmers South Island grains chairman David Clark says.

The outlook is also positive in Canada, Australia and Argentina, and in most other wheat-producing countries.

The main exception is the United States, where wheat crop growth has been hindered by adverse weather conditions, in particular drought, this season.

World cereal production is forecast to increase about 7% this year, helping to replenish global inventories and raise expectations for more stable markets this year and next.

International wheat prices declined slightly last month with the onset of harvests in the northern hemisphere.

By contrast, maize prices increased, a result of continued tight global supplies.

In New Zealand prices for feed wheat and barley have largely stopped rising, with the winter period typically a quiet time for grain sales. However, there appears good demand for spring delivery, which is not being met yet.

Grain supplies are tighter in the North Island, which is resulting in movement of grain north from the South Island.

The market appeared well balanced between supply and demand, which presented opportunities for buyers and growers but from an “in-silo” point of view the Arable Industry Marketing Initiative (AIMI) could make an interesting read, Federated Farmers South Island grains chairman David Clark said.

“My gut feeling is there is not a huge excess of unsold grain and still a few buyers not covered off on their purchasing requirements,” Clark said.

Australian cereal prices have been underpinned by increased demand from China, which has offset a large corn crop..

That has made import prices between NZ and Australian feed wheat much closer this season, which is expected to result in more NZ grain being used in compound feed systems.

“We did see a downward pressure on NZ grain prices when the dollar was into the high 80s. A falling dollar will at least support prices at current levels and as a NZ grain grower I look forward to NZ grain companies actively marketing our products and the advantages they offer to the NZ dairy industry,” Clark said.

NZ wheat is sitting about $20-25 a tonne above import parity, but Australian prices are still relatively high on the global market and it is not expected there will be a large supply available before the next harvest.

“We have heard of some firms that have dropped prices to pinch business off other NZ firms and simply look to slash grower profitability in order to grow their own business.

David Clark

Federated Farmers South Island grains chairman

Clark said the AIMI figures to be released next month would be interesting when it came to planting.

“Certainly they will give a good steer for farmers to make sound strategic decisions for their businesses and help decide whether to plant spring feed or milling wheat, feed or malting barley, or stay out of the cereal market and plant kale.”

Small seed multiplication had appreciated 10% against the US dollar and 15% against the Euro since last winter, so there was no justification for multiplication contracts to have a grower price lower than last year, he said.

“We have heard of some firms that have dropped prices to pinch business off other NZ firms and simply look to slash grower profitability in order to grow their own business.

“The clear message to arable growers is that if prices offered are less than last year farmers should not sign up. Send them back out the gate.”

AIMI survey results for maize released last month showed there was a decrease in maize harvested for grain in NZ of about 3000ha (16%) and silage 7000ha (14%) from last year to this year.

Planting intentions for maize grain for harvest next year indicate the area sown could be slightly down (11%), while the forecasted area to be sown in maize silage could be slightly up (9%).

Prospects for this year’s Australian wheat crop are favourable and have improved in recent weeks, with good rainfall in eastern states and South Australia after a dry start to the season in autumn.

The autumn rainfall in Western Australia was average to above average. 

Latest figures put the wheat area planted in Australia at 13.7m hectares, 3% up from the previous year, while barley is estimated to be 2% up at 3.8m hectares.

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