Yara: World grain stocks ‘may tighten further’

5 February 2011 (Agrimoney.com) – World grain stocks, already squeezed, are in danger of tightening further in 2011-12, Yara International has warned, highlighting the poor condition of winter crops and an incomplete rebound in fertilizer sales.

The nitrogen giant said that a rise of some 5%, to nearly 2.3bn tonnes, in world grain production was necessary to match it to demand. “A substantial harvest increase in the 2011-12 season is needed merely to avoid a further decline in inventories,” Yara said, forecasting that consumption would rise by about 2%. However, latest crop progress reports have “not been supportive of such an increase”. While the Norwegian group failed to pick out examples of struggling crops, the comments follow well-publicised drought setbacks to winter wheat in China, the top grower of the grain, and the US, the leading exporter. Furthermore, Yara, the top nitrogen producer, highlighted a reluctance among farmers to apply as much of the nutrient as they did in 2007-08, when crop prices last soared, implying less support to yields. “Season-to-date nitrogen fertilizer deliveries in Western Europe are 13% ahead of last season, but still 4% behind the 2007-08 season, when farmers also had strong incentives to increase fertilizer application,” Yara said. “To match the 2007-08 season, deliveries in the second half of this season would need to be 20% higher than last year.” In the US, nitrogen deliveries were also running 4% behind 2007-08 rates. Yara’s assessment comes amid a rash of preliminary estimates for 2011-12 crops, with Commonwealth Bank of Australia, for instance, forecasting a 15m-tonne deficit in world wheat production, following a 17m-tonne shortfall in the current season. Macquarie has forecast 2m-tonne shortfalls in world soybean and wheat production, but growth of nearly 5m tonnes in the global corn harvest. Last week, Societe Generale forecast a 16m-tonne increase to combined corn, soybean and wheat stocks in 2011-12, thanks to a sharp return to surplus in corn production. Levels of crop inventories are seen as a key signal of price movements, particularly when compared with consumption to calculate the stocks-to-use ratio. …

World grain stocks ‘may tighten further’ – Yara