‘Major surge’ in US and China wheat stocks predicted by FAO

Wheat use will be lower than production for the fourth year in a row, said the FAO this week, adding this will bring “major surges​” in stocks in the US and China.

The organization said it expects international prices to remain “broadly stable​” this year as export availability exceeds import demand.

While wheat consumption is set to keep pace with population growth and rise slightly, demand for feed and industrial uses are expected to shrink – with wheat feeding forecast to fall 2.6% year on year.

Increased availability of maize

The decline will be concentrated in China and the EU due to increased local availability of maize. It is an increasingly popular choice in China as the government is lowering grain reserves, said the FAO, adding this could bring a drop in demand for barley and sorghum and ramp up competition among exporters.

Total wheat output in 2016 is set to fall around 1.4% - or 10 million tonnes – from the 2015 record to 724 million tonnes. The decline will be driven by lower output in the EU, US, Morocco and Ukraine.

Based on current production prospects for 2016 and projected use in 2016/17, world wheat stocks will reach 215.5 million tonnes, 2.4% higher than their already above-average opening level.

Inventories grow in China and US

The biggest year-on-year increases are forecast for China and the US, where stocks are set to grow by 8.8 million tonnes and 1.4 million tonnes respectively. Inventory levels are likely to fall in countries facing a decline in production, particularly in Africa.

The FAO said world wheat trade in 2016/17 is set to increase slightly, with a drop in purchases by several countries in Asia and South America partly offset by higher imports by a few countries, in particular Morocco.

Increases in exports are forecast for Argentina, Australia, Canada and the US, while sales will be down from the EU, the Russian Federation and Ukraine.

World cereal production down

Overall world cereal production in 2016 is anticipated to fall slightly below projected demand in 2016/17, which would make global end-of-season inventories in 2017 below their near record 2016 level.

Global trade in cereals is predicted to fall 1.9% year on year to 369 million tonnes, which the FAO said could keep international prices in check.

Meanwhile, the FAO Sugar Price Index has shown an 11.7% month-on-month increase, as deteriorating production prospects in India outweigh a bumper crop in leading producer Brazil.