He also provides more information about the latest developments in the agricultural sector.

See PODCAST below 

In this week’s insert, Sihlobo takes a look at this season's global grains and oilseed production.

“The global grains supply constraints concerns, which at the start of the pandemic led some countries to place temporary export restrictions, have dissipated. This is despite the recent price increases which are driven by a combination of factors such as unfavourable weather conditions in the 2020/21 crop in South America, China’s rising demand for agricultural products, and also weather concerns about the current season of 2021/22 in various Northern Hemisphere countries.

“On 24 June 2021, the International Grains Council (IGC) released its monthly update of the global grains and oilseeds production forecasts for the 2021/22 season. The Council’s view is broadly optimistic pointing to an annual uptick in production of all major grains and oilseeds, a view similar to the previous months’ updates. The drier weather conditions in parts of the US and Canada, along with extreme cold in parts of Europe, which had slowed the planting and threatened the 2021/22 season have all subsided. As such, the IGC forecasts the 2021/22 “global maize production at a new peak of 1,2 billion tonnes, up by 6% y/y. This is on the back of an expected large crop in the US, Brazil, Argentina, Ukraine, China, EU, and Russia,” says Sihlobo.

He further adds that it is expected that the stocks will remain unchanged from the previous season, at 267 million tonnes. 

“This is well below the previous seasons when stocks were over 300 million tonnes because of firmer consumption in the global feed industry, primarily supported by China.

These thin stocks are a source of volatility or sensitivity in maize prices, which typically lift on daily weather-related news in major producing countries, even if such news has minimal impact on crop conditions. 

“Notably, while the production forecasts look promising, another important region that we continue to observe is the Southern Hemisphere crop (particularly in South America), which will only be planted in October. The outcome of the crop in this region will have a notable implication on the global harvest estimates.

“Similarly, the global wheat production conditions have improved. The IGC now forecasts the 2021/22 global wheat production at a record 789 million tonnes, up 2% y/y. This is boosted by expected large crops in the EU, the US, Ukraine, Argentina, China, India, and the UK.

Subsequently, the global stocks for the same year are at 283 million tonnes, up by 1% y/y.

These improvements point to a possible softening of global wheat prices in the coming months from the current highs,” adds Sihlobo.

Furthermore, he states that what needs to be taken into account is that global rice supplies and stocks are also at comfortable positions. These stocks and supplies are well above the 2020/21 production season. 

“The IGC forecasts the 2021/22 global rice production at a record 512 million tonnes, up 2% y/y. This is on the back of possible expansions in area plantings in Asia, combined with expected better yields as a result of favourable weather conditions. As such, the 2021/22 global rice stocks will also possibly lift by 1% y/y to 171 million tonnes. The observations are similar in the global soybeans production prospects, with the 2021/22 harvest estimated at 383 million tonnes, up by 6% y/y. 

“The beneficial weather conditions will likely boost the yields in the US, Brazil, Argentina, India, Paraguay, Russia, Ukraine, and Uruguay. The stocks will follow a similar pattern, with the IGC forecast at 53 million tonnes, up by 11% y/y.

“Broadly, these production forecasts suggest that global crop prices from the second half of the year could soften slightly from the recent months' levels. That could also influence the South African consumer food price inflation outlook. However, the price developments in the case of soybeans will be influenced more by Chinese buying decisions and the broader vegetable oils market developments.

“The critical point is that global crop conditions are in a better state than in the past few months which should be reflected in prices in the coming months. In May 2021, the global grains prices were elevated, with the FAO Global Food Price Index averaging 127,1 points, which is the biggest month-on-month gain since October 2010 and about 40% y/y higher.

This trend could possibly change from the second half of the year,” concludes Sihlobo.

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