Cereal killer: Weird weather drives global wheat production to five-year low

By Gill Hyslop

- Last updated on GMT

Hot and dry weather conditions are playing havoc with wheat production. Pic: ©GettyImages/Anest
Hot and dry weather conditions are playing havoc with wheat production. Pic: ©GettyImages/Anest

Related tags Cereal Wheat prices Production Grains European union Government Farmers Corn Soybean

The International Grains Council (IGC) has warned global wheat production is likely to fall to its lowest since the 2013/14 season following exceptional weather across the European Union and Russia.

The dry and hot weather conditions in several key producing countries has damaged crops, prompting the inter-governmental body to cut its forecast for world wheat production in 2018/19 by 16 million tons (MT).

In a nutshell

Wheat accounts for about 35% of world grain production, with maize representing just over half of global grain volume and the remainder made up mainly by rice, followed by other less significant grains.

IGC estimates global total grains production to decline by 2% year-on-year, to a three-year low of 2,059MT.

World grain consumption is estimated at 2.128bn tons, 69MT higher than production.

The IGC kept its forecast for world corn (maize) production in 2018/19 at 1,052bn tons, slightly above the prior season’s 1,044bn, but a second successive global deficit was expected with consumption seen at 1,098bn.

World soybean production in 2018/19 was put at 359MT, marginally up from a previous projection of 358MT. A small global surplus was anticipated with consumption projected at 356MT.

Production < consumption

The IGC’s recently released quarterly grain market report puts world wheat output at 721MT, versus last year’s 758MT output.

For the second year in a row, the world will consume more grain than it produces, with consumption in 2018/19 expected at 739MT.

The council placed EU’s wheat crop at 139.9MT, down from a previous projection of 147.3MT.

Russia’s wheat crop is forecast at 66MT, down from IGC’s 70.9MT estimate, and far below the prior season’s 84.9MT.

IGC has also cautioned that there is the potential for further downgrades.

“With disappointing results being reported from ongoing harvesting, there is potential for further output cuts in future grain market reports,”​ it said.

Futures in wheat have been trading at a five-year high. The price index for wheat has ticked up 8% up month-on-month.

Government aid for beleaguered farmers

Governments across the world are coming to the aid of farmers hardest hit by droughts and heatwave.

According to Germany’s Commerzbank, the Australian government and US administration have announced support for affected farmers.

“Australia is experiencing one of its driest winters in history, and the government has approved financial aid for the transport of feed and water to regions particularly hard hit,”​ it said.

German farming association DBV has also called on that country’s government to assist farmers with special aid of around €1bn ($1.17bn).

Clive Black, director and head of Research at Shore Capital added analysts expect upward pricing pressure of food prices over the coming months.

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