Estimated reading time: 5 minutes

The International Grains Council (IGC) released its estimates and provided a generally optimistic view for 2021/22’s key grains and oilseeds production.

Global maize outlook

Starting with maize, the IGC forecasts global production at 1,2 billion tons, which is up by 5% from the 2020/21 production season. This optimism is underpinned by expectations of a large crop in the United States (US), Brazil, Argentina, Ukraine, China, the European Union (EU) and Russia.

The reaction to this data was generally muted. Some market participants are currently more focussed on the near-term issues affecting the crop, such as persistent dryness in Brazil, which negatively affects the country’s 2020/21 second maize crop, also known as ‘safrinha’.

The 2021/22 maize crop will only be planted across the Southern Hemisphere towards the end of the year and is therefore not an immediate priority. Another concern in the market is dryness in parts of the US and Canada, threatening and slowing the 2021/22 maize crop.

Moreover, parts of the EU have also experienced delays in planting because of the cold spell. Nevertheless, the IGC maintains a reasonably positive view of maize production estimates of all the aforementioned countries, as they are evidently among those underpinning the expected 1,2 billion tons of maize in 2021/22, as was previously stated.

The one question that will remain on analysts’ minds after the release of the US Department of Agriculture’s (USDA) data on Wednesday, is whether global maize stocks will recover after an anticipated improvement in production. How the market interprets this data in this respect could have an effect on global maize prices.

These are currently at the highest levels since 2013, because of the dryness in parts of South America, combined with rising maize demand from China. So far, the IGC estimates global maize stocks at the end of 2021/22 to be the lowest in nine years at 264 million tons (down 3% y/y). This is in part due to rising global consumption.

Global wheat estimates

winter cereal

Moving to wheat, the IGC forecasts a 2% y/y increase in 2021/22 production to a record 790 million tons. This is primarily attributed to better outlooks in Europe and North Africa, the US, Ukraine, China, UK and India, among others. There are expectations of better yields compared to the 2020/21 season and an increase in area plantings.

Unlike maize, the 2021/22 global wheat stocks could recover by 3% y/y, partly because of expected large global wheat production. While we are yet to see what the USDA will present, rising production and stocks would ideally lead to a softening in prices. This would be beneficial for importing countries such as South Africa (SA).

Global soya bean outlook

The IGC forecasts a 6% increase in 2021/22 global soya bean production to a record 383 million tons. The current higher global prices are expected to incentivise farmers to lift plantings and there are expectations of better yields, which would also boost the output. The major contributing countries to this IGC forecast are the US, Brazil, Argentina, India, Paraguay, Russia and Ukraine.

For the Southern Hemisphere countries, we will only know if the optimism in plantings holds at the end of this year. At this stage, the focus is on the 2020/21 production season, which is not looking well for Brazil due to dryness, as has been stated. Importantly, if everything were to go as the IGC estimates, the 2021/22 global soya bean stocks would recover by 8% y/y to 50 million tons. Such a recovery would have slight downward pressure on prices which have remained fairly elevated, primarily because of strong Chinese demand.

Global rice outlook

Lastly, we consistently keep an eye on another important grain – rice – mainly as SA imports all of its million tons’ annual consumption. Here, the 2021/22 production outlook is positive; the IGC forecasts a global crop of 509 million tons, which is up by 1% y/y. India, Vietnam, Thailand, Pakistan, Indonesia, Bangladesh and the Philippines are all among the key countries set to contribute positively to a large global rice harvest for the 2021/22 production season.

The planting activity in many of these countries will only begin in June. Still, the weather conditions and soil moisture are reportedly good, which should support cultivation when the season commences. An exogenous negative factor for key producing countries is the ongoing spread of Covid-19 infections, as is the case in India.

We continue to monitor whether these could negatively impact farmers’ activities in the field. Notably, the IGC forecasts a 25 y/y increase in 2021/22 global rise stocks to 176 million tons. Similar to wheat, a recovery in stocks would potentially add downward pressure on prices in the coming months, which is beneficial for importers like SA.

Ultimately, the initial production forecasts for the 2021/22 global grains and oilseeds production paint a slightly better picture than many had feared. If more on-the-ground evidence emerges to support these forecasts, then in the coming months, the global agricultural prices would potentially cool off from the current higher levels as illustrated by the FAO Global Grains Price Index.

We look forward to observing whether the USDA’s estimates will concur with the IGC’s view, or whether there is material deviation. If they agree, then this will bring on some additional optimism to the market and the current spell of elevated commodity prices could be somewhat short-lived. – Wandile Sihlobo, Agbiz