In 16/17 MY grain prices downward trend may change to a positive. Due to results of UCAB experts research which is based on IFC data, wheat average price may reach 145 USD per a ton (+6% to 15/16 MY), barley – 141 USD (+5%), corn – 130 USD (equal to average price in 15/16 MY. The UCAB association analysts mark weather issues, shrinkage of transition stocks of corn & barley and possible increase of oil prices as major price growth drivers.

Wheat. According to new USDA report, global production of wheat reached 731 M tons (0.5% less than previous year). US experts forecast a record of average global yield rate at 3.33 tons per ha leveling 2.2% decrease of sowing areas. Along with, transition stocks expected to growth by 6.1% to record 258 M tons.

Due to UCAB forecast, Ukrainian market expected to short wheat production by 21% to 21 M tons as a result of crops area and yielding rate decrease by 13% and 9% (to 3.52 tons per ha). Experts forecast 10 M tons of export which is 13% less than previous year of 15/16 MY.  UCAB analysts estimate USDA’s forecast on production volumes of wheat at the level of 24 M tons as too optimistic considering projected crops areas of 6.4 M ha.

Barley. Overall production in 16/17 MY will decrease by 2% to 145 M tons due to 1.2% decrease of areas and descent of yielding rate by 0.7% to 2.94 tons per ha level). Considering demand increase on barley for feed (+1.7% up to 100 M tons), transition stocks will decrease by 5.9% to 24M tons.

Experts forecast decrease of production in Ukraine by 1.1% to 8.2 M tons due to yielding rate descent to 2.75 tons per ha. As a result, export during MY may reach 4 M tons – 7% lower than 15/16 MY.

Corn. Overall production volume of corn is expected to rise by 4.7% in 16/17 MY to 1012 M tons due to increase of areas globally by 1.1% and expected yielding rate at the level of 5.56 tons per ha (+3.5%). Nevertheless record consumption of 1007 M tons (+2.7%) will not allow to accumulate transition stocks which are valued at the end of the year in 205 M tons lowering 15/16 MY level by 0.6%.

UCAB experts project 13.1 increase of production of grain in  Ukraine up to 26 M tons due to increase of sowing areas by 9.5% and yielding to 5.9 tons per ha (+3.3%). Ukraine’s export of corn valued at the level of 17.2 M tons (+8.5).

Projected oil prices upward move is one of the major factors supporting grains prices. “Due to estimations of IFC oil prices will continue to growth smoothly. Market expects oil prices at the level of 50$ per barrel in 16/17 MY (18% higher than in 15/16 MY. At the same time other research agencies report that prices will move back to 80-100 USD per a barrel in 2018-2019. USDA experts are too optimistic in yielding rates estimations, along with traders’ communities underlines notable weather risks”, - UCAB Association expert comments.

Notice: grains prices forecast developed based on IFC materials on prices; global production forecast – USDA, Ukraine – UCAB.