The latest estimates from the USDA puts total global production of wheat and coarse grains for the current year down by over 56m tonne on 2016/17 production, but up by 21m tonne on the five year average. This story of downward movement in world grain production is mirrored for EU barley production, with total production forecast for the current marketing year down by nearly two million tonne.
However, the forecast for the wheat situation in the EU for the current marketing year is somewhat more positive, with Strategie Grains and the USDA estimating wheat production up by about five million tonne compared to last year.
At the national level, France appears to have registered the largest production growth with nearly a nine-million tonne increase over last year, followed by the Baltic countries, the Benelux countries, Poland, Sweden, Denmark and Bulgaria (+0.2 Mt).
Meanwhile, Spain's harvest slumps by almost three Mt year-on-year and production is also expected to be lower than last year in the UK, central EU (Austria, Hungary, Czech Republic, Slovakia), Romania and, of course, Ireland.
The latest USDA WASDE update for September has revised global ending stocks of cereals and consequently had a slight upward effect on prices in the following days.
The biggest development from the latest report was that the forecast for global wheat supplies were revised down by nearly one million tonne due mainly to revisions in opening stocks.
Total carry-out stocks in 2017/18, which is the real decider in terms of price formation, is forecast to decrease by nearly 25 Mt since the 2016/17 marketing year.
But it is important to remember that world ending stocks this year are still 20 million tonne above the five year average for ending stocks.
Based on the global production story and ending stock situation forecast for 2017, it is not surprising that there is not much room for price inflation, albeit prices are trading some bit higher at the moment compared to the same period last year.
In the historic context, current prices remain low due to the ending stock situation. Based on green prices paid to farmers in the last few years, it is clear that current 2017 harvest price forecasts will give farmers nothing to be celebrating about.
For the farmer that is looking to the rest of the year for indications of price movement in deciding whether or not to sell their grain or hold on for another while, unfortunately there are a lot of unknowns at this stage.
In particular, notable bullish factors, which could lift prices later in the year, include the fact that the harvest is now nearing an end which means prices at the moment are probably hitting bottom.
Quality wheat on the international market is in tight supply and EU wheat stocks remain low at present, which are all bullish factors in price determination.
On the more negative bearish side, meaning factors which could pull prices down, most notably include the very heavy supply of corn on the market at the moment and on-going currency concerns with a strong euro, leaving EU cereals less competitive.
Dr Fiona Thorne is an agricultural economist with the Agricultural Economics and Farm Surveys Department, Teagasc
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