Ample wheat, record corn output caps prices, but food inflation fears remain: FAO

The United Nation’s Food and Agriculture Organisation (FAO) has released its bi-annual food outlook report and warned that strong wheat stocks and record corn output will not insulate prices from the influence of weather, geopolitics and government policy.

The report, released Friday, highlighted that an expected decline in wheat production – from record levels last year – would be offset by lingering heavy stocks, while a ramp up in corn production on the back of a huge Brazilian crop would likely combine with static demand levels.

However, food price inflation remained a significant concern as “global food production systems remain vulnerable to shocks stemming from extreme weather events, geopolitical tensions, policy changes and developments in other markets,” the FAO noted.

Collectively, and even with the cushion of additional supply, the cocktail had the capacity to potentially tip “delicate demand-supply balances” and impact prices and food security.

In detail, the FAO expects a slight decrease in overall wheat production globally, as key producers like Russia and Australia scale back output after breaking records, and total 2023 production estimated at 777 million mt, down 3% year-on-year.

Utilization is expected to hold unchanged at 780 million mt, but overall stocks are expected to fall just 0.7% from record opening levels to come in at 308 million mt.

Overall coarse grains production – largely made up of corn – is expected to rise 3% to 1.5 billion mt, with growth coming from the US, Brazil and the European Union.

Both the US and Brazil are expected to post an increase in demand for corn, where they are expected to be joined by China.

Despite a 3% increase in production, overall stocks are expected to increase by nearly 4% to 366.2 million mt as international trade outlooks record less impressive growth.

The FAO expects coarse grain trade to increase 1.4% to 221.4 million mt.

Finally, oilseeds are also expected to record increases in output and use, which is likely to peg back stock levels.

The FOA predicts a 2.7% increase in production to 253.4 million mt, with utilization rising 3% to 252.4 million mt, with the assumptions tied to “expectations of rising food consumption, mainly in Asia, and higher uptakes from the biodiesel industry.”