Darren Cooper,Senior Economist, IGC
IGC lowered the outlook for world total grains (wheat and coarse grains) production in 2020/21 by 3m t m/m to 2,227m, with a cut for maize partly offset by increases for barley and oats. With upward revisions for wheat, maize and barley, the projection for total grains trade in 2020/21 (Jul/Jun) is boosted by 3m t m/m, to a record 398m. With data showing heavier than anticipated shipments in recent weeks, IGC’s figure for world soybean trade in 2019/20 is raised by 1m t, to a record of 164m. Global milled rice production in 2020/21 is projected to rebound from the prior year’s fractional decline, to a new peak of 504m t.
Nathan Kemp,Senior Economist, IGC
The International Grains Councils (IGC) organized its Market ConditionCommittee on the first week of September in order to discuss the harvest prospective and market outlook for the cereals, oilseeds and rice. The outlook for world total grains (wheat and coarse grains) production in 2020/21 is lowered by 3m t m/m (month-on-month), to 2,227m, with a cut for maize partly offset by increases for barley and oats. The projection for world grains stocks is down by 1m t m/m, as a reduced forecast for US maize inventories (-3m t) is nearly offset by small increases for other grains. With upward revisions for wheat, maize and barley, the projection for total grains trade in 2020/21 (Jul/Jun) is boosted by 3m t m/m, to a record 398m, an increase of 1% y/y (year-on-year). With data showing heavier than anticipated shipments in recent weeks, the Council’s figure for world soybean trade in 2019/20 is raised by 1m t, to a record of 164m, some 8% higher y/y. Fractional adjustments for carry-in stocks and production – seen rebounding to a new peak – result in a reduced projection for total supplies and carryovers in 2020/21. However, at 50m t, stocks would still be slightly larger y/y. The outlook for world import demand is raised slightly, to a record of 165m t, a 1% y/y gain.
Peter Clubb,Market Analyst, IGC
While growing conditions have been less than ideal in some areas, world all-wheat (common wheat and durum) production is expected to reach a record level in 2020/21, at 763m t, albeit only modestly higher than the previous season. Larger harvests than last year are envisaged in Australia, Canada, Russia, Kazakhstan, Brazil, China (a record), India (a record) and Turkey, but poorer results are seen in the EU, the UK, the USA, Ukraine, Argentina, Morocco, Tunisia and Algeria.
The growing season was particularly difficult across Europe, with overly wet weather hindering autumn sowing, followed by adverse dryness in the spring and rain-disrupted harvesting in the summer. All-wheat production in the EU-27, at 121.8m t, is estimated to be the smallest in eight seasons and down by 12% y/y. Harvest results were particularly disappointing in France (four-year low), Romania (eight-year low), Hungary (eight-year low) and Bulgaria (eight-year low), but good outturns were achieved in Poland (a record), Spain and the Baltics. Elsewhere in Europe, production in the United Kingdom is expected to slump to a 40-year low, potentially below 10m t.
Amy Reynolds,Agricultural Economist, IGC
While the growing season in Russia was not ideal, production of 81.5m t is expected to be 11% higher y/y and the second largest in history, behind the 2017/18 crop. Ukraine fared less well weather-wise, with a 9% drop in output, although output of an estimated 26.5m t is only modestly below average.
Amid mostly dry weather, harvesting of spring wheat made good progress across Western Canada, with fieldwork ahead of the pace of recent years in Saskatchewan and Alberta. Although frosts were a concern in some areas, damage was likely limited to late-planted and immature crops. Although hot summer weather negatively affected average yields, forecast output of 34.1m t is up by 6% from the year before and the most in seven seasons.
Farmers in the US devoted a historically low level of area to wheat for the 2020/21 harvest and, together with a dip in average yields, production is seen at a three-season low of 50.0m t, down by 4% year-on-year. With the spring harvest almost finished, producers continued to report mostly good crop quality, but variable yields.
Recent months have seen increasing unease about production potential in Argentina owing to dryness. While early-September showers brought some relief to very dry central cropping regions, additional rainfall was still required. Dry soils were a particular concern in Cordoba province, which typically accounts for around one-fifth of national production. The Council forecasts production at 19.0m t, down by 4% from the year before.
Owing to unusual late-August frosts in southern areas, the output forecast for Brazil has been trimmed from earlier expectations, but at 6.6m t is placed 28% higher than the year before and the most in four years.
Boosted mainly by a potentially bumper harvest in New South Wales, production in Australia is forecast to rise by 87%, to a four-season peak of 28.4m t. With harvesting still a few weeks away, there remains some uncertainty about crop prospects in parts of Western Australia, usually the country's top growing state and exporter, where follow-up rains are needed to avoid yield losses.
At 1,160m t, the 2020/21 world maize (corn) crop is forecast to be the largest ever recorded, 4% higher compared to the season before and up by 6% versus the five-year average. Among the leading growers, larger harvests are expected in the US, Brazil and Russia, but with declines forecast in Argentina, Ukraine, China and the EU. Production expectations have generally been scaled back in recent months, mostly because of unfavourable weather in parts of the northern hemisphere.
Because of gains in both acreage and yields, forecast US production is placed 9% higher y/y at 376.5m t, potentially the second largest on record. Crop expectations were even more optimistic early on in the season, when official projections were for output to exceed 400m t. However, with survey-based area data falling short of initial predictions and, given more recent spells of unfavourable weather, forecasts have mostly declined in recent months. A sustained deterioration in crop condition ratings was linked to abnormally dry late-summer weather across the western Corn Belt, as well as a severe August derecho storm in Iowa, normally the country's largest state producer, where hurricane-strength winds flattened crops and damaged storage facilities. Harvesting is now underway, with operations reaching 8% complete as at 20 September, slightly slower compared to normal.
Strong winds are also likely to have cut short production prospects in China. While there are contrasting assessments about the full extent of recent typhoon damage to crops across the key northeastern provinces, the heavy rains and wind are expected to cut yields and harvested area. Even after generally good growing conditions up to this point, output is forecast to dip by 1% y/y, to 258.0m t. Following a spike in local maize prices and extremely strong demand at recent auctions of state reserves, there are renewed question marks about the true size of Chinese grain supplies, especially given a recent pickup in overseas buying interest, including from the US. However, the spike in export demand also partly stems from efforts to meet commitments under the Phase One trade deal and the ongoing rebuilding of the country’s decimated pig population following outbreaks of African swine fever.
Crop estimates for Ukraine have also been downgraded in recent months. Relatively strong profitability and buoyant export demand incentivised additional spring plantings, with area rising to a record high. Following a favourably cool, wet start to the season, conditions turned increasingly hot and dry across the summer, capping yield potential. After excellent results in the previous two years, average yields are predicted to drop back below average in 2020/21, with production forecast to decline by 2%, to 35.0m t.
With plantings only just getting started in September, 2020/21 outlooks for the main southern hemisphere exporters are much more tentative. Planting of Brazil’s first (full-season) crop has started, but with progress a little slower than normal due to spells of dry and cold weather in Parana and Rio Grande do Sul. Spurred by very high prices and solid demand, both from domestic and overseas users, total area is projected to rise by 6% y/y, to an all-time peak. Most of the acreage gains are predicted for the second (safrinha) crop, sown directly after soyabeans are harvested, with maize projected to be especially competitive against cotton. Assuming trend yields, output is tentatively seen rising by 10%, to 112.5m t.
Mainly because of strong competition from soybeans, maize acreage in Argentina is forecast to drop by 4% y/y. However, because of recent extremely dry weather and shifting price relationships between crops, there is currently much uncertainty about final acreage mixes. Should unusually dry conditions continue across the traditional soybean planting window, some producers may instead be tempted to plant additional late-season maize varieties, especially if recent price gains are maintained. The Council’s production forecast of 54.3m t (-7% y/y) is therefore quite nominal and may be subject to revision during the coming months.
SOYBEAN HARVEST RESULTS AND MARKET EXPECTATIONS
Following the prior season in which production fell sharply – mainly on a sizeably reduced US harvest – projections for the 2020/21 season point to a much-improved world soybean outturn, seen rising by 10% y/y, to a record of 373m t, some 30m t higher than the five-season average.
The predicted y/y increase mostly stems from expectations for a significant rebound in US output, tied to area gains and improved yields. While bigger harvests are also anticipated in China and India, prospects for small northern hemisphere producers, namely Canada, Russia and Ukraine, are less bright owing to acreage reductions and somewhat difficult weather at times. While the southern hemisphere planting campaign has only recently commenced, the Council tentatively expects bigger or record harvests in leading growers.
US output in 2020/21 is forecast to expand by around one-fifth y/y, to 116.5m t, with the increase linked to larger plantings and improved productivity. Despite prospects for a solid rebound, the outlook has been downgraded from earlier to reflect the impact of dryness on yield potential in core areas of the western Corn Belt – as evidenced by a continued worsening of weekly crop ratings between early August and mid-September, notably in Kansas, Iowa, North Dakota, South Dakota and many other states. Furthermore, as a means of assessing the impact of an August derecho storm on fields in Iowa, USDA surveyed growers, with its findings leaving soybean acreage expectations unchanged from before. In the week ending 20 September, nationwide harvesting was in its early stages, estimated at 6% complete, in line with average.
Concerning prospects in relatively small, northern hemisphere producers, soybean output in Canada in 2020/21 is seen little-changed y/y, at 6.1m t, as a contraction in acreage – a continuation of the trend of recent years – is likely more than offset by better yields, with mid-September reports indicating good potential in parts of Ontario, the largest growing province. However, this contrasted with concerns about the impact of cold weather on some later-maturing crops in Manitoba, where threshing was behind average.
In the Black Sea region, where cutting of soybean crops is underway, 2020/21 production in Ukraine is forecast at 3.6m t, slightly lower y/y but almost one-fifth below the 2018/19 all-time peak. In the current season, less than optimal (hot and dry) weather and uncertainties surrounding export demand and profitability led to a sizeable reduction in plantings, with average yields also likely to fall. In Russia, output is seen steady y/y, at 4.4m t, with area underpinned in recent seasons by growing domestic demand, coupled with increased export sales to China.
With the end of India's summer (kharif) season approaching, 2020/21 soybean harvested area is expected to be larger y/y amid generally beneficial conditions and good monsoon rains in core growing areas. While heavy precipitation was a concern at times, yields are still expected to rise y/y as output rebounds by 16% y/y, to 13.0m t.
With the expiration of the soybean-free period on 10 September, Brazil’s farmers were officially permitted to seed 2020/21 soybean acres in the state of Parana, with Mato Grosso and other states following shortly after. However, early progress was reportedly thin due to limited soil moisture. Nevertheless, against the backdrop of high local prices, largely stemming from domestic currency weakness, and prospects for growth in international demand, farmers are predicted to boost acreage by 3% y/y. With trend productivity assumed, output is projected at a record of 133.5m t, a 5% y/y gain.
Ahead of the start of the growing season in Argentina in mid-October, prospects for soybean seeding in 2020/21 are highly tentative. Nevertheless, given a challenging economic backdrop, growers may elect to plant additional acres owing to relatively lower input costs, also encouraged by potentially firmer global demand for soyabean products. Based on a modest expansion of plantings, output is predicted to increase by 8% y/y, to 53.0m t.
RICE PRODUCTION PROSPECTS
Global milled rice production in 2020/21 is projected to rebound from the prior year’s fractional decline, to a new peak of 504m t (497m) as generally firm international prices encourage planting amid broadly favourable conditions.
Prospects for global rice supply are largely shaped by outcomes in the world’s two largest producers, India and China, who together account for more than half the world’s output. In China, full-season production is seen expanding marginally y/y to 147.6m t, despite damage from heavy rains in the Yangtze River Basin, a key growing area, during the summer. While the flooding negatively impacted yields for the early-season rice crop, the government had encouraged farmers to plant more in response to the COVID-19 pandemic, which more than offset productivity losses. Furthermore, conditions for the middle- to late-season crops, which account for the bulk of production, are expected to tick higher y/y amid generally positive conditions.
India’s production is also expected to increase, to a new peak of 120m t (118.4m), as further gains in minimum support prices encouraged larger plantings. Weather conditions for the summer-sown (kharif) crop, which accounts for more than 80% of total Indian output, has also been supported by ample monsoon rains, with seasonal precipitation as at end-September around 8% above average. Among other leading exporters, firm prices are likely to have encouraged Thai farmers to plant more crops following a below-average outturn in 2019/20, while conditions are expected to recover from the prior year’s drought. However, water supplies in the country’s main dams remain low and availabilities for irrigated crops, particularly during the off-season, will likely be constrained. Overall output is expected to be higher y/y, yet remain below recent peaks and 19.1m t (18.0m). Drought conditions and salinity may also contain Vietnam’s productivity, albeit as high prices throughout 2020 encourage planting, with 2020/21 output seen mildly higher y/y, while Pakistan could also cut a larger crop as planting progressed during favourable conditions. US harvesting was well underway by end-September, with crop conditions seen at above average and planted area significantly higher than a year ago. Consequently, total output is set to rebound by more than 20% y/y to 7.1m t.
Elsewhere, flooding and pests were likely to negatively affect output in parts of sub-Saharan Africa, including in Nigeria where flash floods reportedly damaged or destroyed up to 2.0m t of paddy (rice) in Kebbi State, while locusts continued to affect crops in East Africa. Production in Australia was expected to partially recover from two years of extremely dry conditions, although output is set to remain below recent peaks as rice competes with alternative crops for water allocations. In S America, the regional outturn is shaped by prospects for Brazil, where rice production has declined over recent years as farmers switch a portion of area towards alternative crops such as soybeans. Although firm prices may encourage planting, Brazil’s 2020/21 output is tentatively seen declining slightly to 7.5m t.