FAO Lifts World Grain Production Forecast

As food prices fall to their lowest point in six years, the UN Food and Agriculture Organization (FAO) has lifted its forecast for 2015/16 global grain production to within 26 million tons of last year’s record output, raising its estimate by 14.9 million tons to 2.52 billion tons. This forecast includes an upward revision of world wheat output by 4.3 million tons to 723.4 million tons.

This will result in inventories declining throughout the season at half the pace originally expected – falling by 12.2 million tons to land at 634.3 million tons. These high stocks combined with high harvest expectations are causing grain buyers to postpone orders causing grain prices to fall by 3.8% in the month of May.

The FAO lifted its estimate for global coarse grain production including barley, corn, and sorghum by 10.3 million tons to 1.3 billion tons based on higher than expected corn output in China and Mexico, and higher sorghum output in the U.S. Despite these increases, coarse grain output for 2015/16 will remain 2% lower than 2014 output because of lower barley output and lower corn output in some markets.

After reaching a high in February of last year, dairy prices also fell by 2.9% in May to bring their total decline to 39%, due to high inventories in New Zealand and increased output in the EU following the lifting of production quotas.