Paste your Google Webmaster Tools verification code here
The FAO Food Price Index (FFPI) averaged 165.6 points in August 2016, up 3 points (1.9%) from July and almost 7% above the corresponding period last year. The August value of the Index is the highest since May 2015 and the YoY growth witnessed is the highest since 2011. While agri commodities have been seeing a slight reversal in fortunes, this would be taken as a significant positive in deciphering overall sentiment – how it pans out over the next couple of months would be of keen interest for participants.
Wheat & Rice
As per USDA’s, World Agricultural Supply and Demand Estimates, Global wheat supplies for 2016/17 are raised 0.4 mt on a 1.4-mt production increase that is partially offset by decreased beginning stocks. Production increases for India, Kazakhstan, Australia, Brazil, and Canada are partially offset by reductions for the EU and China. Global exports are raised 2.1 mt led by increases for Australia and Kazakhstan.
Global rice supplies for 2016/17 are raised 1.8 mt on higher beginning stocks and production. Production is raised 0.7 mt and remains record large. India production for 2016/17 is raised 1.5 mt on an increase in projected harvested area. Global consumption for 2016/17 is lowered fractionally. With total supplies rising and total use declining, world ending stocks are raised 1.8 mt to 115.6 m.
The USDA projected farmers this fall will collect a record 15.09 bn bushels of corn and 4.2 bn bushels of soybeans, topping analyst expectations. The record haul is expected to spell trouble for farmers straining to cut costs amid a third straight year of falling prices for some crops.
Soybean production and yields also came in beyond expectation; yields are estimated at a record 50.6 bushels an acre. The estimate for a massive soybean crop comes as farmers face their lowest average income levels since 2009, according to data released last month by the USDA, with net farm income projected to drop 11.5% to USD 71.5 bn this year.
The FAO sugar price index jumped 2.5% MoM in August, reaching its highest level since October 2012 and as much as 75% above the corresponding period last year. The latest surge in sugar prices was largely on account of a continuous strengthening of the Brazilian currency (Real), which appreciated by another 2% against the US dollar in August. Expectations of a significant deficit in global markets in 2016/17 and prospects of reduced inventories in Asia also underpinned international sugar quotations.
A recently released report by the International Cotton Advisory Committee estimates world ending stocks to have fallen by 13% to 19.5 mt in 2015/16 as global demand outpaced production. In 2016/17, world cotton consumption is expected to exceed world cotton production by 1.4 mt, which would bring ending stocks to 18.1 mt, down 7% from 2015/16. Unlike in 2015/16, when an 11% decrease occurred, ending stocks outside of China are forecast to increase by 1% to 8.3 mt, though the stock-to-use ratio would remain unchanged. However, ending stocks in China are expected to decrease by 13% to 9.9 mt in 2016/17 as the government continues to dispose of its reserves.
While world cotton production is projected to increase by 6% to 22.5 mt, world cotton consumption is forecast to remain stable at 23.8 mt. China will likely be the largest consumer in 2016/17 despite an expected decrease in mill use of 3% to 7.1 mt, which would be the seventh consecutive season of contraction. India’s mill use is expected to remain stable at 5.3 mt due to strong domestic cotton prices and competition from competing fibers.