Population growth, economic expansion and changing diets in developing countries continue to drive the consumption of grain worldwide, which is now reaching record levels.
In February, the United States Department of Agriculture (USDA) released their 2018/19 world grain data summary, which shows for the first time in five years world grain and oilseeds consumption is exceeding production.
The USDA states that overall, the world has seen a small increase in production from 2455 million metric tonnes (mmt) last season to 2465mmt this year, however, this is outweighed by consumption increasing to its highest ever level of 2500mmt, drawing down stocks.
Drought in countries such as Australia and the European Baltic regions (Germany, Poland, Lithuania, Latvia and Estonia) is contributing to stabilised production numbers and a five per cent decrease in world stocks from last year.
While world stock-to-use ratios are comfortable at the moment, if there is another drought year as forecast for Europe, these levels could change quickly.
Corn and soybean production reached record levels this season, while there has been a decrease in all other commodity production.
However, modern farming practices, management techniques and new varieties being grown through advances in plant breeding has increased the quality of commodities in some regions.
Wheat
As predicted by the USDA in 2018, world wheat production fell by four per cent from last season’s 763mmt to 735mmt, a more modest level after five consecutive years of records. It is the first time since 2012/13 that world wheat consumption has topped production.
Wheat consumption has increased slightly by around one per cent year on year and is at its highest level ever of 747mmt. A growing population and changing diets in developing countries has contributed to this increase with wheat the second most consumed grain after corn.
Overall, most countries have produced an average wheat crop this season. Australia, Brazil and Argentina have all produced better than expected high quality wheat. On the back of the record Argentine wheat crop, better than expected quality has resulted in this origin displacing demand in Australia’s usual export markets as Australia has outpriced itself as a result of strong domestic demand due to drought impacted production volumes.
Many of the large wheat producers – Europe, Russia, Australia and China – have seen a decline in production compared to the previous year, due to poor conditions and drought. Europe in particular was well below the original estimate by the USDA of 150mmt, coming in at around 138mmt.
But it’s not all bad news for wheat production this season, with Canada, Argentina, India, Brazil, the Middle East and North Africa producing more in 2018/19 than the previous season. Canada, Argentina, India and North Africa all experienced record wheat production years.
Russia’s record crop in 2017/18 enabled the country to ship larger volumes than usual in 2018/19 as a result of the large carry over, however, with stocks near ports now exhausted, domestic prices are rising – leading to a slowing of exports.
Whilst total world wheat stocks are near record at 267mmt, stocks outside of China (who has 140mmt), are at five year lows of 127mmt. Any negative production outlook for a major producer in 2019/20 should be supportive of wheat prices.
Barley
Total world barley production came to a figure of 141mmt for the 2018/19 season. This is only slightly lower than the previous season’s total of approximately 144mmt.
World barley consumption has also reduced from last year with figures down five per cent year on year from approximately 148mmt to a total of 142mmt this year due to high prices pushing demand to cheaper substitutes.
Three of the major exporters; Europe, the Black Sea and Australia all had below average barley production in 2018/19 due to dry conditions, especially in Australia and the Baltic region of Europe.
While the barley stock-to-use ratio is at the lower end at 13 per cent, this is not alarming as the number of cheap feed grain substitutes, such as corn, in lower producing years is higher than less elastic commodities such as milling wheat.
Oilseeds
Just over 70mmt of canola was produced globally this season, about five per cent higher than the 10 year average. Canada is the largest producer of canola, with total crop production of 21mmt, their second best year on record. China, the world’s second biggest producer of canola, had a below average year with a total production of 13mmt. While global production has dropped by 3mmt to 70mmt, consumption has plateaued at 71mmt globally.
It has been a record-breaking year for world soybean production with a total of 361mmt produced, up six and a half per cent year on year. The world’s two largest soybean producers, the United States and Brazil have both had record breaking years, coming in at a total of 124mmt and 117mmt respectively. Argentina was also up 17mmt year on year to a more normal 55mmt. This is thanks to excellent yields and planted acres and good weather conditions throughout the season. World consumption has also increased this year, up 11mmt year on year to 349mmt.
2019/20 outlook
At this stage, the outlook for next season is not looking positive – Europe and Canada have both had a dry start to their seasons, however, these are still early forecasts and with any luck the weather conditions will improve.