The recent World Agricultural Supply and Demand Estimates report by the United States Department of Agriculture (USDA) provides further evidence that the world will have good maize, soybean, and rice supplies in the 2018/2019 season. Meanwhile, wheat production could decline from levels seen in the 2017/2018 season.

The USDA lifted its estimate for 2018/2019 global maize production marginally from last month to 1.1 billion tons, 2% higher than the previous season. The increases are mainly in South America and the Black Sea region. The agency placed its 2018/2019 global rice production at 501 million tons, up by a percentage point from levels observed in January this year, and the 2017/2018 production season.

The 2018/2019 global soya bean production estimate was roughly unchanged from this January’s levels at 360 million tons. But this is 6% higher than the 2018/2019 production season. The uptick is mainly on the back of expected large harvests in the United States, China, and Argentina. The data for 2018/2019 global wheat production shows a marginal decline from January this year, with production set to reach 735 million tons. This is a 4% decline from the 2017/2018 production season.

Overall, while production of most commodities is expected to increase in the 2018/2019 season, prices might not decline, or stabilise, due to expectations of a rise in global consumption of grains and oilseeds, among other factors. This is already evident in the Food and Agricultural Organisation’s (FAO) Cereal Price Index which averaged 169 points in February, up by 4% from the corresponding period last year. We suspect there will not be a significant uptick in overall global food prices, as slowing meat and dairy product prices could overshadow the increases in grains and sugar product prices. In fact, the FAO Food Price Index, which comprises grains (cereals), vegetable oils, meat, dairy and sugar products, averaged 167 points in February, down by 2% from the same period last year.

For South Africa, this is relevant through a number of channels, the most direct one being that the country is a net importer of rice and wheat. From a rice perspective, prices could remain stable to downwards in the near term, as stocks could increase by 5% year-on-year boosted by large supplies, despite the anticipation of an increase in global consumption. This will be beneficial for South African importers, and ultimately consumers. However, wheat presents the opposite effect. –Wandile Sihlobo

Wandile Sihlobo, head of economic and agribusiness intelligence at Agbiz, shares highlights in his update on agricultural commodity markets. Click here for the full report on agri markets for the major commodities.

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