Strength seen in wheat and barley production.
ROME, ITALY — A “more positive outlook” for world wheat and barley production led the Food and Agriculture Organization of the United Nations (FAO) to raise its forecast for 2016 world cereal production.

In its
report issued Nov. 10, the FAO said it now expects 2016 world cereal production to total 2.571 billion tonnes, up marginally from the organization’s forecast in October and up 1.5% from the 2015 output.

Global wheat production in 2016 now is expected to rise to 746.7 million tonnes, up 1.7% from a year ago. The FAO said the uptick reflects “increases in the Russian Federation’s output — now anticipated at a new record — and in Kazakhstan, where favorable weather boosted yield prospects.”

Upward adjustments in the Russian Federation and Ukraine led the FAO to raise its outlook for world barley production. Meanwhile, weather-induced yield downgrades for Brazil, China, the E.U. and the U.S. led the FAO to cut its projection for the 2016 global maize crop. The forecast for global rice production in 2016 was little changed.

“Planting of the 2017 winter wheat crop is under way in northern hemisphere countries,” the FAO said. “In the United States, low price prospects and a subdued export outlook due to a stronger U.S. dollar are likely to result in a reduction in area planted, while dry conditions have also affected parts of the central and southern states. In the E.U., the 2017 winter wheat crop is being sown under generally favorable conditions, with recent wet weather expected to benefit early crop development. In the Russian Federation and Ukraine, the sowing pace is ahead of last year’s despite some unfavorable weather, and early projections point to a likely expansion in plantings.

“In southern hemisphere countries, the summer 2017 cereal crop is currently being sown, with overall conducive weather in South America benefiting early crop development. In Argentina, the maize area is forecast to expand by 6% from last year’s high level, reflecting continued strong export demand and high domestic prices. Favorable domestic prices are similarly anticipated to raise first-season plantings in Brazil over the drought-reduced level of 2016. In South Africa, early prospects for the 2017 maize crop indicate a production rebound from the drought-reduced 2016 harvest, under expectations that favorable price and rainfall prospects would boost both plantings and yields.”

The FAO forecast total cereal utilization for 2016-17 at 2.562 billion tonnes, up slightly from October and up 1.7% from 2015-16.

“Among the various uses of cereals, global feed use is likely to expand by 2.7% in 2016-17, supported by large coarse grain availabilities and ample supplies of low- quality wheat,” the FAO said. “Total feed use of coarse grains is currently projected at 756.6 million tonnes, 2.1% more than in 2015-16, while feed use of wheat is expected to reach 146.6 million tonnes, as much as 6.1% more than the previous season and representing an all-time high.”

The biggest year-on-year increase in feed use of cereals in 2016-17 is forecast for the United States, where total feed use is expected to be up by 10% to 156.5 million tonnes, with 92% of this volume, or 143.5 million tonnes, consisting of maize, the FAO said. Global food consumption of cereals in 2016-17 is forecast at 1.106 billion tonnes, up 1.3% from 2015-16.

The FAO’s forecast for world trade in cereals in 2016-17 was raised 0.8% from the October forecast to nearly 388 million tonnes, reflecting a 3-million-tonne upward adjustment to global wheat trade.

“While low international prices are expected to encourage larger imports by several countries, the Russian Federation is envisaged to emerge as the world’s biggest wheat exporter in 2016-17,” the FAO said. “Australia and the United States are also set to expand their wheat sales, while an output cut could keep exports by the E.U. significantly below the 2015-16 level.”

The FAO Food Price Index averaged 172.6 points in October, up 0.7% for the month and up 9.1% from a year earlier, with the staple grains’ index rising for the first time in three months.

The increase was driven primarily by jumps in sugar and dairy prices. The FAO Sugar Price Index rose 3.4% in October amid reports of production shortfalls in Brazil’s Centre South region and India's Maharashtra state. The FAO Dairy Price Index rose 3.9% from September, led by rising prices of cheese and in particular butter, as a result of sustained internal demand in the European Union after a period during which stocks were drawn down.

The FAO Oils/Fats Price Index, meanwhile, declined 2.4% from September, largely linked to weaker palm oil quotations as a consequence of sluggish global import demand. The FAO Meat Price Index also fell, dropping 1% in October, with the drop largely driven by slacker demand for European pigmeat from importers in China.

The FAO Cereal Price Index rose 1% in October, buoyed by tightening supplies of high-quality wheat even as the overall prospects for global wheat harvests have improved.