Chinese grain: Why it’s important to look closely at the global grains balance sheet this year
The Australian grains industry is sitting pretty, according to a recent agricultural report. But a number of offshore variables could put a tailspin on the global grains balance sheet this year.
What happens in China this season could have a knock-on effect for the rest of the world’s global grains industry.
That’s according to the latest World Agricultural Supply and Demand Estimates report, which put global grain ending stocks for the 2021-22 season at 783.85 million tonnes, and global wheat ending stocks at 294.96 million tonnes.
Australian total wheat production for the 2021-22 season was forecast to reach 33 million tonnes, up on the 2019-20 production figure of 15.2 million tonnes.
And while the report painted a positive picture for the Australian grain industry, a number of offshore variables could put a tailspin on the global grains balance sheet this year.
Thomas Elders Markets analyst Andrew Whitelaw said it was important to pay attention to wheat production figures this season.
“If we take the numbers at face value, around the world stocks are very strong, the strongest they’ve been,” Mr Whitelaw said.
“But a lot of those stocks are held in China, about 48 per cent. It means they’re not available to the global market. Then there’s the question, do those stocks actually exist?”
Mr Whitelaw said an interesting dynamic this season would be the role of corn, as both wheat and corn are interchangeable as animal feed.
“There has been production issues in the US this year, a big storm went through Ohio in September last year and removed a lot of the corn crop,” Mr Whitelaw said.
“At the same time, China has gone from importing less than 7 million tonnes (of corn) to importing 26 million … that flows onto everything else, and for demand for wheat.”
The report forecast global corn production to reach an all-time high, with corn usage to lift 3 per cent.
ANZ head of agribusiness insights Michael Whitehead said China could influence the global grains market if the ongoing African Swine Fever outbreak experiences a second wave.
“If their pig herd recovery is strong, it’s great news for Australian grain because the feed demand is there,” Mr Whitehead said.
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