Droughts, Ukraine war push global grain stocks toward worrying decade low

Univar Solutions

26/09/2022 11:00

By Tom Polansek
       CHICAGO, Sept 26 (Reuters) - The world is heading toward
the tightest grain inventories in years despite the resumption
of exports from Ukraine, as the shipments are too few and
harvests from other major crop producers are smaller than
initially expected, according to grain supply and crop forecast
data.
    Poor weather in key agricultural regions from the United
States to France and China is shrinking grain harvests and
cutting inventories, heightening the risk of famine in some of
the world's poorest nations. 
    Importers, food manufacturers and livestock producers had
hoped crop availability would improve after war-torn Ukraine
resumed shipments from Black Sea ports this summer and U.S.
farmers planted large crops. But the United States, the world's
top corn producer, is now expected to harvest its smallest corn
crop in three years. Drought also punished European harvests and
is threatening South America's upcoming planting season. 
    By the end of the 2022/23 crop year, the world's buffer
stocks of corn will be enough for just 80 days' worth of
consumption, down 28% from five years ago and the lowest level
since 2010/11, according to figures compiled for Reuters by the
International Grains Council, an intergovernmental organization.
    That would be fewer days of corn stocks than the world had
in 2012, when the last global food crisis spurred riots.
    Policymakers are worried.
    The World Bank has earmarked $30 billion to help offset food
shortages worsened by war, and U.S. President Joe Biden last
week announced nearly $3 billion in additional funding to combat
global food insecurity.  
    Half a million Somali children face hunger in the worst
famine anywhere this century, according to the United Nations,
as a severe drought grips the Horn of Africa.
    Thousands of miles away in the United States, South Dakota
corn grower Mark Gross expects to harvest as few as 20 bushels
per acre on some fields this autumn, down more than 80% from the
local average last year, after drought and fierce winds ravaged
his land.
    Gross said the weather remained too dry in the spring and
then two derecho windstorms brought destructive
100-mile-per-hour (160 kph) gusts across fields in Hutchinson
County and southeastern parts of the state.
    "It's lining up to be like 2012," Gross said. "No one wants
to admit it, but it's true."
    Tight grain supplies reflect the impact of climate change on
crop production as well as growing global demand for livestock
that feed on corn, eating away at stockpiles. Inventories of all
harvested grain on hand globally will reach an eight-year low at
the end of this crop year, the International Grains Council said
on Thursday. 
    More poor weather could further reduce global inventories,
particularly if the current dry weather in South America
continues into the main planting season, as the crop cycle
shifts to the southern hemisphere.
    Crop forecasts in Argentina, the world's No. 3 corn
exporter, are already being scaled back due to dry weather.
    'VERY LITTLE WATER'
    In the Mayenne region in northwestern France, the European
Union's top grain-producing country, farmer Dominique Defay,
said some corn plants have few ears and he is bracing for a crop
35% below his average.
    He had been hoping for at least 135 bushels per acre, near
the low-end of his five-year average. He may get only about 90
bushels after France suffered its worst recorded drought since
1958.
    "These are crops that have had very little water," Defay
said.
        On average less than 1 cm of rain fell across France in
July. River tributaries dried up as successive heatwaves and
wildfires devastated the countryside. 
    EU production is expected to hit a 15-year low, a decline
that will push the bloc to increase 2022/23 imports from Ukraine
by about 30% from the previous year to 10.4 million tonnes,
consultancy Strategie Grains said.  urn:newsml:reuters.com:*:nL8N30M1R0
   Bigger European import demand means less for places like the
drought-stricken Horn of Africa.  urn:newsml:reuters.com:*:nL1N3060Q4
    Ukraine's exports of corn and wheat have risen since a
U.N.-brokered deal with Russia allowed shipments to restart from
ports that had been blockaded since the war started. But it
remains to be seen how much Ukraine can export, especially if
the war drags on.  urn:newsml:reuters.com:*:nL4N30E2LD
     "It's sort of a false hope that Ukraine is going to bridge
the current gap in supply and demand," said Gary Blumenthal,
head of Washington-based agricultural consultancy World
Perspectives. 
    Ukraine is expected to harvest 25 to 27 million tonnes of
corn in 2022, down from 42.1 million tonnes in 2021, following
Russia's invasion, according to official estimates.  urn:newsml:reuters.com:*:nL8N30U2FF
    Sanctions related to the war mean Russia has also struggled
to export what is expected to be a record-large wheat crop.
 urn:newsml:reuters.com:*:nL8N2ZN6CG
    Shipments of wheat and other agricultural products from
Ukraine have been a fraction of pre-war levels, said Kevin Hack,
a global vice president for ingredients supplier Univar
Solutions  UNVR.N .
    "The supply that's coming from that area can be cut off at a
moment's notice," he said.
    SOUTH AMERICAN HOPES 
    Farmers in China meanwhile, have grappled with dryness,
threatening crops, while India has limited rice exports due to
poor weather.  urn:newsml:reuters.com:*:nL1N30108S
    Agricultural lender Rabobank said the next U.S. wheat crop
is also at risk and will be planted in dust this autumn unless
rains fall. That is "a recipe for another tough crop production
year and strong support for prices," Rabobank said.
    A ratio that factors in U.S. wheat inventories compared to
usage and that reflects stockpile levels is expected to drop to
a nine-year low in 2022/23, according to Reuters calculations of
government data. The same ratio is also predicted to hit a
nine-year low for U.S. soybeans.
    "We end up, on the balance sheets, finding that it will be
another year where global consumption exceeds global
production," said Dan Basse, president of consultancy
AgResource. 
    Importers are setting their sights on South America, where
Brazilian farmers are expected to produce record corn and
soybean crops in 2023, according to analysts and the government.
Farmers hope for better weather for soy plantings that are under
way, after dryness spoiled part of last season's harvest.
 urn:newsml:reuters.com:*:nL1N30K1YT
    In Argentina, though, the Rosario Grains Exchange predicts
plantings that just began for the 2022/2023 corn crop will fall
7% from last season to 8 million hectares (20 million acres) due
to a familiar problem - drought. 
    The Argentine government has also capped export of the crop,
which will be planted in coming weeks, at an initial 10 million
tonnes, compared to 36 million tonnes in the 2021/22 corn
season.
    "If this were a race, farmers are starting in last position
with trouble in their engine," Cristian Russo, the exchange's
head agronomist, told Reuters. "The situation is extremely
complex, the most complex season we've had this century so far."
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World corn supply slumps to 12-year-low    https://tmsnrt.rs/3BzHBls
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 (Reporting by Tom Polansek in Chicago, Gus Trompiz in Paris,
P.J. Huffstutter in Bloomington, Illinois, and Maximilian Heath
in Buenos Aires. Additional reporting by Karl Plume in Chicago,
editing by Caroline Stauffer and Ross Colvin)
 ((Thomas.Polansek@thomsonreuters.com; https://twitter.com/tpolansek))