Comfortable cereal markets in 2018/19, early prospects point to higher wheat production in 2019

FAO’s latest forecast for 2018 pegs world cereal production at 2 611 million tonnes, marginally higher than the estimate of December, reflecting upward revisions made for maize, wheat and rice. Global rice production is seen growing by 1.6 percent to 514 million tonnes, 1.2 million tonnes higher than previously forecast. Yield-driven improvements in China support most of the revision. Also, greater than previously expected plantings have raised production estimates for Pakistan, while losses from Tropical Storm Usman and expectations of dryer weather lead to a production forecast cut for the Philippines. Despite this month’s upward revisions, global cereal production still remains 1.8 percent (47.4 million tonnes) below the record high of 2017¹.

With the bulk of the winter wheat crop in dormancy in the Northern Hemisphere, the early outlook portends a rebound in production, although the output is still expected to fall short of 2017’s record high. Much of the projected growth is associated with expected increases in Europe, where beneficial weather has so far shored up yield prospects while also sowings are forecast to expand, largely driven by attractive prices. The biggest year-on-year production increases are forecast for the EU, the Russian Federation and Ukraine. In North America, excessive wet weather in the leading winter wheat growing regions of the United States is expected to offset the positive impact of firmer prices, resulting in only a marginal expansion in the area sown. However, assuming average yields, production is still forecast to increase this year. In Canada, total wheat production is also projected to rise, resting on a price-induced expansion in spring wheat plantings expected to more than offset reduced winter sowings. In Asia, favourable weather has lifted production prospects in India, with the output foreseen to increase despite a contraction in sowings, while in Pakistan, diminished water availability has dampened the country’s production outlook, further affected by an estimated contraction in the sown area.

In the Southern Hemisphere, harvesting of the 2019 summer cereal crops, predominantly coarse grains, is expected to begin in the coming months. In South America, the production outlook points to increases in Argentina and Brazil, owing to higher plantings and good crop conditions. By contrast, in South Africa, dry weather has adversely affected maize plantings and impaired yield prospects, with the output forecast to decline. In neighbouring Southern African countries, harvests are expected close to average levels.

World cereal utilization in 2018/19 is currently forecast at 2 657 million tonnes, up 45 million tonnes (1.7 percent) from 2017/18 and 8 million tonnes above the December forecast. The increase from December reflects upward adjustments made to the feed use of wheat (mostly in Australia) and the industrial use of coarse grains, predominantly maize and barley.

Global wheat utilization in 2018/19 is forecast to reach almost 743 million tonnes, up 3 million tonnes from December and 5.6 million tonnes (0.8 percent) above the 2017/18 estimated level. The increase is concentrated in more wheat used for animal feed, especially in Australia where dry weather conditions have reduced grazing area and necessitated the use of wheat to feed livestock. Elsewhere, an expected slight increase is the feed use of wheat in the European Union is more than offset by a reduction in the Russian Federation where, reportedly, poultry producers are switching to maize for feed.

FAO’s forecast for total utilization of coarse grains in 2018/19 has been raised to 1 405 million tonnes, 4.7 million higher than in December. At this level, world utilization of coarse grains would be some 34 million tonnes (2.5 percent) above the 2017/18 estimated level, with feed use reaching an all-time high of almost 786 million tonnes, up 2.7 percent from the 2017/18 estimated level, with the largest yearly increases projected for China, Mexico and the United States.

Global rice utilization in 2018/19 is pegged at 509 million tonnes, representing a 1.1 percent annual expansion, sustained primarily by greater levels of food consumption in Asia and Africa.

World cereal stocks are projected to fall by 45 million tonnes (5.6 percent) from their record high opening levels to 772 million tonnes – some 10 million tonnes above the December forecast. At this level, the world stocks-to-use ratio of cereals would remain relatively comfortable at 28.5 percent, albeit down slightly from the 2017/18 level of 30.8 percent, the highest since 2000/01.

This month’s higher forecast for world cereal reserves largely reflects an upward revision (7.2 million tonnes) to global coarse grain stocks, in particular maize inventories which, at the end of seasons in 2019, are now forecast to reach 274.7 million tonnes, albeit still some 38 million tonnes (12.2 percent) below their opening levels. The bulk of the increase since December is foreseen to result from projected buildups in the EU, with further notable increases in Argentina, Nigeria and the United States. 

FAO’s forecast for wheat inventories (ending in 2019) has been revised up by 2.4 million tonnes since December, reflecting upward adjustments in Canada, the Russian Federation and the United States. Wheat stocks are now set to reach almost 267 million tonnes, still down 10 million tonnes from their opening levels, as drawdowns in several countries more than offset further buildups in China.

World rice stocks at the close of 2018/19 are anticipated to reach 178 million tonnes, 2.9 percent higher year-on-year, driven mainly by larger carryovers in China, India, Indonesia, and the Philippines.

International trade in all cereals is forecast to approach 416 million tonnes in 2018/19, a fall of 5.7 million tonnes (1.4 percent) from the previous season’s record volume. Trade in all the major cereals, except for maize, is seen to contract in 2018/19. 

World wheat trade in 2018/19 (July/June) is pegged at 171.8 million tonnes, slightly lower than the December forecast but down 4.4 million tonnes (2.5 percent) from 2017/18. The decline from the previous season reflects expectations of smaller purchases by Algeria, India, Morocco, South Africa, Turkey and the United States, more than offsetting higher imports by the EU and several Asian countries.

Global trade in coarse grains in 2018/19 (July/June) is forecast at 196.4 million tonnes, down marginally from December and now almost unchanged from the previous year’s level with increased exports of maize offsetting slow-downs in the trade of both barley and sorghum. Maize trade in 2018/19 is now forecast at almost 159 million tonnes, 2.3 percent (3.5 million tonnes) higher than in 2017/18, with the year-on-year increase resulting from expected to larger purchases by Iran, Mexico and Saudi Arabia, but above all by the EU as maize prices remain competitive compared to other feed grains. Barley trade in 2018/19 is expected to fall to 28.1 million tonnes and sorghum trade to 5.4 million tonnes – its lowest level since 2006/07 – both on lower import prospects by China.

1 The FAO’s latest forecast has not incorporated historical revisions to area and production of cereals in China published by China’s National Bureau of Statistics in October 2018. The revisions reflect the results of China’s Third National Agricultural Census and cover the period 2007 to 2017. The revisions are very significant in size, especially with regard to maize production. For this reason, FAO is undertaking a detailed review of its supply and demand balances for China with the view to publish the results early this year.
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1/  Production data refer to the calendar year of the first year shown. Rice production is expressed in milled terms.
2/  Production plus opening stocks.
3/  Trade data refer to exports based on a July/June marketing season for wheat and coarse grains and on a January/December marketing season for rice (second year shown).
4/  May not equal the difference between supply and utilization due to differences in individual country marketing years.
5/ Major wheat exporters are Argentina, Australia, Canada, the EU, Kazakhstan, Russian Federation, Ukraine and the United States; major coarse grain exporters are Argentina, Australia, Brazil, Canada, the EU, Russian Federation, Ukraine and the United States; major rice exporters are India, Pakistan, Thailand, the United States, and Viet Nam. Disappearance is defined as domestic utilization plus exports for any given season.

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