Record world wheat stocks to offset South American drought

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World wheat stocks will swell to a record this year and corn supplies will be larger than expected despite a crop-withering drought in South America, the U.S. government forecast Feb. 9.

India will post a record rice crop of 102 million tonnes, up two million tonnes from a January estimate, due to beneficial monsoons and growing weather, the U.S. Department of Agriculture forecast, as the global grain outlook improves slightly after years of tight stocks and rising prices.

Further signs of replenished global grain bins may help keep a lid on grain prices globally. Corn, for instance, has slid by more than $1 a bushel from late last year to about $6.40 a bushel.

Wheat stocks will rise to 213.1 million tonnes at the end of the marketing year, up six per cent from the record set last year of 200.7 million tonnes, the largest stocks in 12 years. USDA cited larger crops in India, Kazakhstan and Morocco. Russia and its neighbours harvested bountiful crops last summer, bouncing back from drought.

Corn stocks were forecast at 125.35 million tonnes, over average trade estimates of 124.9 million tonnes, and soybeans at 60.28 million tonnes, below estimates of 61.4 million tonnes.

U.S. traders said this report was largely neutral for corn and soybeans, because the drought in Brazil and Argentina was not as bad as feared by the market leading up to the release of the report.

“The focus is on production in South America,” said Don Roose, president of U.S. Commodities. “The big, feared shocker is not there … The drought is basically over. The bean numbers could grow.”

For the second month in a row, USDA lowered its forecast of the soybean harvest in Brazil and Argentina, and cut Argentine corn for the second time since January. But the cuts were largely in line with what traders had expected as drought continues to ravage agriculture output. Argentina’s corn crop was forecast at 22 million tonnes, down four million tonnes from the January estimate. Soybeans were forecast at 48 million tonnes, down 2.5 million tonnes in a month.

“High temperatures and extensive dryness… resulted in irreversible damage to early corn,” said USDA. Traders had expected a lower corn figure and a slightly higher soybean estimate for Argentina.

In Brazil, the world’s largest soybean exporter, the crop will total 72 million tonnes, down two million tonnes from January’s estimate, said USDA.

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