Global Grains Tight Despite Improved 2010 Crops: FAO

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Global grain supplies remain tight this and next crop season despite better-than-expected world cereals output because demand has also risen, the United Nations’ Food and Agriculture Organization said Dec. 22.

The FAO raised its projection of world wheat output to 653 million tonnes this year from a previous estimate of 648 million tonnes after better-than-expected crops in Australia, Russia and other countries and increased its overall cereals output view.

In an update of its key Crop Prospects and Food Situation report, the Rome-based agency cut its view of the growth of the EU winter wheat sown areas to one per cent from an earlier estimate of three per cent as bad weather hit major east European producers.

“We have also increased the utilization numbers. It (the output increase) is not going to give us more supplies, especially from exporting countries,” FAO’s economist Abdolreza Abbasssian told Reuters.

“I don’t see in these latest numbers anything significantly different to suggest that we are going to be in a more comfortable situation,” Abbassian said.

The FAO’s upward revision of global grain crop this year was largely driven by improved outlook for wheat crops in Australia, but wheat quality there could be downgraded because of bad weather, Abbassian said. Australia is headed for a record wheat crop of 26.8 million tonnes in 2010/11 but heavy rains have hit the crop quality, said the Australian Bureau of Agricultural and Resource Economics and Sciences.

Surging prices

The FAO said tightening of the cereal market in the 2010/11 crop year had already led to a sharp rise in world prices of all major cereals in recent months.

“The corn market remains tight and it is going to be quite a market driver into the spring, pulling prices of wheat and other crops as well,” Abbassian said.

The U.S. winter wheat plantings rose by two to three million hectares but crop condition in early December was “far from ideal,” the FAO said, confirming its earlier view. The International Grains Council (IGC) has forecast a four per cent rise in global wheat area in the 2010/11 crop to about 224 million hectares.

“Any significant deterioration in crop prospects would add new impetus to the price spiral,” the agency said. Russia, where the 2010 grain crop fell 34 per cent to 63.7 million tonnes due to a severe summer drought, could return to a normal cereal crop in 2011 if a projected 30 million ha were sown in spring, adding to 15.3 million ha of winter wheat, and if weather was favourable, the FAO said.

It raised its estimate of Russia’s 2010 wheat output to 43 million tonnes from a previous one of 42 million, still a large drop from 62 million tonnes in 2009. Winter plantings outlook in Ukraine was favourable with 90 per cent of crop reported in satisfactory condition, it said.

In the second half of the 2010/11 crop season market attention would shift from grain production to demand and to indications of supply in the next season, Abbassian said.

La Nina-driven weather, caused by temperature changes in the Pacific Ocean, may put at risk maize and soybean crops in Brazil and Argentina and the U.S. wheat and cotton, the FAO said.

Cereals output in poor countries rose in 2010 by more than expected and the early outlook for 2011 was promising, but still many countries needed aid, the FAO said.

“Despite record or bumper 2010 cereal harvests in most regions, 29 countries around the world face food difficulties and are in need of external food assistance,” the agency said.



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