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Ukrainian Grain & Oilseed Market

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Global cereal production and trade forecast to fall to three-year lows

04.12.2022 17:09 "Agro Perspectiva" (Kyiv) — FAO’s forecast for world cereal production in 2022 has been cut by 7.2 million tonnes this month and is now pegged at 2 756 tonnes, 2.0 percent (57 million tonnes) lower year-on-year. By comparison, world cereal production grew by an average of 56 million tonnes per year in the last three years. This month’s downgrade mainly concerns maize and, albeit by a smaller amount, wheat production.

Global coarse grain production in 2022 is pegged at 1 462 million tonnes following an almost 5-million-tonne cut to the forecast and is now seen to decline by 3.1 percent compared to the 2021 outturn. The recent reduction principally reflects lower maize harvest prospects in Ukraine, where the impact of the war has made post-harvesting operations prohibitively expensive, compelling many farmers to leave planted areas unharvested. Latest official data also confirm a smaller-than-previously-predicted crop in Serbia, where drought has sharply curtailed yields. Conversely, small upward revisions are made to production estimates in Türkiye and Paraguay. Global wheat production in 2022 has been lowered by 2.7 million tonnes this month down to 781.2 million tonnes, nevertheless, it remains a record high. The month-on-month cutback almost entirely concerns Argentina, where prolonged dry weather conditions are impairing yields, which have dragged down production prospects. Partly offsetting this decline, production estimates are raised for the United Kingdom of Great Britain and Northern Ireland and Kazakhstan, resting on higher-than-expected yields. Global rice production in 2022 remains forecast to fall 2.4 percent below the 2021 all-time record to an overall volume of 512.8 million tonnes (milled basis). This level is slightly higher than the November expectations, largely due to a better-than-earlier-anticipated outcome in Madagascar and historical output revisions, namely for the Democratic Republic of the Congo, Malaysia and the Bolivarian Republic of Venezuela.

Planting of the 2023 winter wheat crop is ongoing in the northern hemisphere countries. Concerns over the affordability of inputs have raised uncertainty over global planting expectations, although the elevated crop prices could help to maintain an above-average area. In the United States of America, winter wheat plantings proceeded at a quick pace and were almost complete as of mid-November. Drought is currently affecting about three-quarters of the winter wheat area and the drier conditions are forecast to persist in the southern Great Plains until early next year, although some improvements are expected elsewhere. In the European Union, winter wheat sowings are ongoing under broadly conducive weather conditions, supporting crop emergence. However, increased precipitation is needed in some areas that experienced rainfall deficits earlier in the year, including parts of northern Italy. In Ukraine, a 40-percent decrease in wheat plantings from the five-year average is forecast, as the war continues to constrain access to fields and cause severe input shortages. In the Russian Federation, abundant rains that hindered land preparation and relatively lower domestic prices are expected to cause an area contraction, with winter wheat plantings forecast to decline from last year to a near-average level. In Asia, high domestic prices are seen supporting above-average wheat plantings in China (mainland) as well as in India, where the government raised the minimum support price of wheat. The effects of extensive flooding in Pakistan between June and August could result in a decrease in the wheat area, with plantings normally completed by December.

The 2023 coarse grain crops are being sown in the southern hemisphere countries. In Brazil, official forecasts point to a record-high maize area, underpinned by remunerative domestic prices and generally beneficial weather at the start of the season. In South Africa, provisional planting intentions point to a likely moderate decline in the maize acreage from last year, but are expected to remain at an above-average level. Weather conditions in South Africa and neighbouring countries have so far been favourable, supporting early crop development.

World cereal utilization in 2022/23 is forecast at 2 777 million tonnes, nearly unchanged from the previous month and pointing to a 0.7 percent (21 million tonnes) decline from 2021/22. The forecast for total utilization of coarse grains in 2022/23 has been lowered marginally (1.2 million tonnes) from the previous forecast in November to 1 484 million tonnes, marking a likely 1.3 percent fall from the previous season. The foreseen decline is driven mostly by an expected contraction in the feed use especially of maize, but also of barley and sorghum, as well as industrial use of maize. The forecast for global wheat utilization in 2022/23 is unchanged from last month at 775 million tonnes, suggesting a fractional increase (0.2 percent) from the 2021/22 level, with a rise in the use of wheat for food predicted to counter an expected fall in feed use and, to a much lesser extent, in other uses. World rice utilization in 2022/23 is now forecast at 519.0 million tonnes, some 600 000 tonnes more than in November but still down 0.6 percent from the 2021/22 historical peak.

The forecast for world cereal stocks by the close of seasons in 2023 has been scaled down by 1.1 million tonnes since the previous month to 839 million tonnes, representing a 2.2 percent (18.5 million tonnes) decline from the previous season and the lowest level in three years. At this level, the global cereal stock-to-use ratio would drop from 30.9 percent in 2021/22 to 29.3 percent in 2022/23, marking the lowest level since 2013/14 but still representing a relatively comfortable supply situation. Total coarse grain inventories are seen lower than earlier anticipated by 2.1 million tonnes, primarily stemming from downward revisions made for maize inventories in Ukraine on account of a lower production estimate. This month’s revision brings the forecast for total coarse grain inventories down to 345 million tonnes, representing a 6.1 percent fall below opening levels, largely attributed to a 6.8 percent forecast fall in the global stocks of maize. The forecast for world wheat inventories remains near the previous month’s forecast of 300 million tonnes, representing a 2.4 percent rise above opening levels. The bulk of the increase is anticipated to be concentrated in China (mainland) and the Russian Federation, outweighing anticipated drawdowns in several other countries, in particular India, the European Union, Ukraine and the United States of America. Following a 500 000-tonne aggregate upward revision to forecasts of reserves held by rice importers, FAO now anticipates world rice stocks at the close of the 2022/23 marketing years at 194.0 million tonnes, down 1.6 percent from the 2021/22 peak, but still the second highest level on record.

World trade in cereals in 2022/23 is forecast at 472 million tonnes, up 2.7 million tonnes from last month but still pointing to a likely 1.9-percent (9.2 million tonnes) contraction from the 2021/22 record level. Despite a 2.3-million-tonne upward revision this month, world trade in coarse grains in 2022/23 (July/June) is still forecast to decline by 2.6 percent from the 2021/22 level, down to 225 million tonnes. This month’s increase is the result of a 2.1-million-tonne upward adjustment to global maize trade, primarily reflecting a continued strong export pace from Brazil and higher import demand anticipated for the European Union to compensate for reduced domestic production. Forecast at 194 million tonnes, world trade in wheat in 2022/23 (July/June) is predicted to fall by 0.8 percent from the 2021/22 level. While the latest global forecast is close to last month’s, revisions have been made to the export forecasts of some countries. Expected shipments from Australia and the Russian Federation have been revised upwards mostly on account of good supplies and high import demand, while downward adjustments have been made for exports from Argentina, following a reduction to the domestic production estimate, and the European Union, based on higher competition. FAO’s forecast for international trade in rice in 2023 (January-December) remains pegged at 52.9 million tonnes, down from a revised level of 54.5 million tonnes for 2022, with the forecast 2.9 percent annual reduction largely reflecting predicted reduced shipments by India, as well as by Brazil, Pakistan, Uruguay and the United States of America.

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