World coarse grains stocks will shrink to their tightest in nine years – but wheat inventories are heading for a record high, the United Nations said, in a briefing which reported the longest fall in food prices this century.

The United Nations food agency, the Food and Agriculture Organization (FAO), cut by 2.9m tonnes to 352m tonnes its forecast for world production of coarse grains, such as barley, corn, oats and sorghum, at the close of 2022-23, a drop of 20.0m tonnes year on year.

Inventories at that level would match the weakest since 2013-14, and when compared with consumption to form the stocks-to-use ratio, an important pricing metric, would slide by 2.1 points from last season to 22.9% – a clear nine-year low.

The downgrade reflected weaker expectations for corn (maize) production, notably in the US where “deficient rainfall resulted in further cuts to maize yield estimates”, as well as Brazil and the European Union.

Indeed, the FAO said that world corn stocks “in particular are seen headed toward a sharp contraction of 5.3%… led by large maize inventory drawdowns anticipated in the EU and the US due to falls in production, as well as in China on account of higher expected domestic feed use”.

‘Better-than-expected results’

By contrast, the agency raised by 3.6m tonnes to a record 302.7m tonnes its forecast for world wheat inventories at the close of 2022-23, as it hiked by 10.2m tonnes, to an all-time high of 787.2m tonnes, its production estimate.

“Better-than-expected harvest results in the EU, predominantly related to improved yields of the soft wheat crop, and in Russia, owing to conducive weather, represent the largest proportion” of the upgrade, the FAO said.

Furthermore, “good soil moisture at planting time and a favourable rainfall outlook have also bolstered Australia’s production outlook, pointing to a potential second largest wheat output on record in 2022, following the all-time high in 2021”.

On a stocks-to-use basis, world wheat supplies stand to finish the season at 38.4% of consumption, the highest ratio since 2017-18.

‘Sharply higher farmer sales’

The comments came as the FAO unveiled the September reading of its much-watched food price index, which showed a sixth successive month-month decline – matching the longest run of declines since 1999.

The 1.1% dip for August took to 14.6% the total dip in prices from the record high reached in March, with vegetable oils leading the latest leg of decline.

Indeed, vegetable oil prices fell by 6.6% last month to a 19-month low, as palm oil values felt pressure from “lingering heavy inventories that coincided with seasonally rising production in South East Asia.

Soyoil prices “dropped moderately… in response to elevated export availabilities in Argentina, owing to sharply higher farmer sales” of soybeans, which were encouraged by a government concession to growers on the peso exchange rate.

“As for sunflower oil, international prices declined to a 14-month low due to increased export supplies from the Black Sea region amid subdued import demand.”

‘Heightened uncertainty’

Other food groups saw more modest declines, including sugar, for which values fell by 0.7% last month, as pressure from “good production prospects in Brazil” was offset somewhat by support from “prevailing overall tight global sugar supplies”.

Dairy prices eased by 0.6%, weighed by factors including “bleak global economic growth prospects”, but buoyed by “robust… demand for spot supplies… especially from Asia”.

Grain prices actually rose month on month, by 1.5% to a three-month high, with wheat prices adding 2.2% to outperform a marginal gain in values of coarse grains.

Wheat prices were “underpinned by heightened uncertainty about the Black Sea Grain Initiative’s continuation beyond November and the potential impact on Ukraine’s exports,” the FAO said, referring to the agreement with Russia to allow safe passage for vessels from three ports.

“Moreover, concerns regarding dry conditions in Argentina and the US, as well as a fast pace of exports from the EU on top of the bloc’s higher internal demand for wheat amid tighter maize supplies, provided further support.”