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Global cereal markets tighten as demand remains strong in 2020/21

07.05.2021 13:22 "Agro Perspectiva" (Kyiv) FAOs forecast for global cereal production in 2020 has been raised by 1.7 million tonnes this month to 2 767 million tonnes, 2.1 percent above the 2019 output. The month-on-month increase almost entirely reflects upward revisions to coarse grain output forecasts in several countries in Africa. As for rice, officials in the Democratic Peoples Republic of Korea and Guinea indicated lower production turnouts than previously foreseen by FAO, outweighing an upgrade for Madagascar and resulting in a slight downward revision to the 2020 global rice production forecast, which nonetheless remains set at an all-time record high.

The forecast for world cereal utilization for 2020/21 has been raised by 6.0 million tonnes from the April figure to 2 783 million tonnes, an increase of 2.7 percent from the 2019/20 level. This months increase stems mainly from a 4.2-million-tonne upward revision to the 2020/21 maize utilization forecast, largely reflecting greater than earlier anticipated feed uses in China and the United States of America (USA). This upward revision brings the forecast for total utilization of coarse grains to 3.4 percent above the 2019/20 level. China is expected to account for nearly 60 percent of the year-on-year anticipated growth in the feed use of coarse grains. Nearly unchanged this month, total wheat utilization in 2020/21 is forecast to exceed the previous seasons level by 1.7 percent, with an expected rise in feed use as the primary driver, for the first time since 2011/12 and almost entirely occurring in China. FAOs forecast for world rice utilization in 2020/21 is changed only fractionally from Aprils expectations, now pointing to a 1.9 percent annual expansion and a record high level, underpinned by an anticipated expansion in food uses and a recovery in feed uptake.

FAOs forecast for world cereal stocks by the close of the 2021 seasons has been revised downwards by 2.8 million tonnes to 805 million tonnes, representing a decline of 2.3 percent from their opening levels. As a result of this downward revision, on top of the higher utilization expectations, the global cereals stocks-to-use ratio would stand at 28.3 percent, down from 29.6 percent in 2019/20 and a hitting a seven-year low. The forecast for global coarse grain stocks has been cut by 4.1 million tonnes from last months report, now falling 7.4 percent below opening levels largely on a likely drawdown of maize inventories in the USA and China. A slight upward revision to world wheat inventories since last month has lifted the forecast to 2.8 percent above the opening level, with over 40 percent of the year-on-year increase foreseen to occur in China. Following a 400 000 tonne upward revision, world rice stocks at the close of 2020/21 are seen on-par with their opening levels, as anticipated drawdowns in Bangladesh, China and Indonesia, primarily, will likely be compensated by expected buildups in India, Thailand and the USA.

World trade in cereals in 2020/21 is forecast to reach 467 million tonnes, up only marginally from April but representing a year-on-year expansion of 5.9 percent. The forecast for global coarse grains trade in 2020/21 (July/June) is largely unchanged since last month and still points to a robust increase of 9.2 percent above the 2019/20 level, mostly due to likely record purchases of maize and barley by China. Global wheat trade in 2020/21 (July/June) is forecast to increase by 2.0 percent from the 2019/20 estimated level, supported by year-on-year expected increases in imports by China, Morocco, and Pakistan. FAOs forecast for world rice trade in 2021 (calendar year) is essentially unchanged since April but 6.4 percent above the 2020 level.

FAOs first supply and demand outlook for wheat in 2021/22

Global wheat production prospects in 2021 have been lowered this month, and FAOs latest forecast now stands at 778.8 million tonnes, albeit still 4 million tonnes (0.5 percent) more than the 2020 production estimate. The cut to the global production forecast is mostly related to the European Union (EU), where a smaller than previously expected planted area resulted in a 4-million-tonne decrease to the earlier forecast. Nevertheless, the EUs output is still anticipated to increase by 6 percent on a yearly basis to 133.3 million tonnes and, along with favourable outlooks in the United Kingdom, USA, and Ukraine, is underpinning the overall positive global production outlook for this year.

Global wheat utilization in the 2021/22 marketing season is foreseen to rise by 0.9 percent to 770 million tonnes on anticipated year-on-year growth in food consumption and industrial use. Food consumption is forecast to increase mostly in line with population growth, while India and the United Kingdom are forecast to lead the way in increasing industrial use of wheat in 2021/22. By contrast, feed use of wheat is likely to contract from its estimated record level in 2020/21 primarily on expectations of less feed use of wheat in China, where potentially more attractive prices of maize and other coarse grains could encourage substitution away from wheat for feed.

Based on the 2021 production prospects and the 2021/22 utilization forecast, FAOs preliminary forecast for world wheat stocks by the close of seasons in 2022 is pegged at a record level of 293 million tonnes, up 3.0 percent above their opening levels. Wheat inventories in China are forecast to rise further in 2021/22, accounting for the bulk of the anticipated increase in global stocks, along with anticipated rebounds in the EUs and Ukraines stocks following consecutive years of tight supplies. By contrast, wheat inventories in the USA, the Russian Federation, as well as several countries in Africa and Asia, are expected to drop below their opening levels. At the regional level, wheat stocks are set to decline in Asia (excluding China) and Africa, where stocks are expected to reach their lowest levels since 2012/13.

Following the 2020/21 (July/June) expected trade expansion to a record level, wheat trade in 2021/22 could contract by 1.8 percent, to 185 million tonnes. Early indications point to smaller purchases by China as well as Morocco and Pakistan, following a year of high imports and good domestic supply prospects. On the export side, larger shipments anticipated from Argentina and the EU, supported by increased harvest expectations, are seen to be offset by reduced sales from Australia, Canada and the Russian Federation, on lower production prospects, as well as from the USA due to tighter supplies from low carry-over stocks and greater expected feed use. The Russian Federation, nevertheless, is expected to remain the worlds leading wheat exporter in 2021/22.

Prospects for 2021 Coarse Grains Production

Early prospects for global coarse grains production in 2021 indicate a third consecutive year of growth, mostly related to maize. Driving the expected increase is the USA where, despite some recent unconducive weather that has impeded planting operations, a price-induced acreage expansion is expected to support a substantial production upturn in 2021. Larger year-on-year outputs are also foreseen in Brazil, China and the Ukraine, on account of increases in planted areas, and in the EU, reflecting a likely recovery in yields in several countries. Sizeable production increases are also forecast in South Africa and neighbouring countries, further reinforcing the positive global growth prospects for coarse grains.

Agro Perspectiva

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07.05.2021
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