Grain Glut Growing With China Demand Falling, Rising Output

  • USDA report shows bigger global corn, wheat inventories
  • `We are not short of any global crop': AgriVisor analyst

The world grain market has been awash in supplies for years now, and it’s starting to feel like there’s going to be no end to the glut after the U.S. Department of Agriculture published its latest report Tuesday.

The USDA estimated Tuesday that global corn and wheat stockpiles are going to be even bigger than analysts were predicting. Futures for both commodities pared gains after the report.

After three straight years of price declines, the outlook for bigger supplies underscores why banks including Goldman Sachs Group Inc. are still bearish on agriculture. The bumper crops are also helping to keep global inflation in check, with world food costs staying near the lowest since 2009. The slump is hurting demand for seed producers and farm-equipment makers, and shares of Deere & Co. have fallen 13 percent in the past 12 months.

“We are not short of any global crop,” Dale Durchholz, senior market analyst for AgriVisor LLC in Bloomington, Illinois, said by telephone. “We are not going to see much food inflation any time soon. With the current weather forecast we should see most crops in the U.S. get planted in a timely manner.”

Corn futures for July delivery rose 1.6 percent to $3.655 a bushel at 1:20 p.m. Tuesday on the Chicago Board of Trade, paring earlier advances of as much as 2.3 percent. The commodity touched a 17-month low of $3.4726 on April 1. Wheat futures for May delivery added 1.2 percent to $4.525 a bushel, retreating from gains of as much as 2.2 percent.

The agency lifted its estimate for world corn production for the season that ends this year. As demand wanes, bigger harvests will mean fuller grain bins. Domestic stockpiles are projected to reach 1.862 billion bushels, topping the average analyst estimate of 1.847 billion and the USDA’s estimate of 1.837 billion last month.

World wheat inventories are estimated to reach 239.26 million metric tons, exceeding the highest estimate in a Bloomberg survey of analysts and 0.7 percent more than forecast last month, the USDA said. U.S. stockpiles this year may rise to 976 million bushels, the highest since 1987, according to the agency.

Use in China, the world’s biggest wheat-consuming nation, will fall to 112 million tons as the amount of the grain fed to livestock decreases. That would be the lowest since 2011.

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