U.S. harvest beckons new era of plenty...almost
World corn inventories were expected to thin to just over a 53-day supply by the end of the current season, about unchanged from the five-year average, while wheat inventories were estimated to be 10 days smaller than the five-year average at about a 75-day supply, the data showed.
Despite the improvement, however, inventories are still far from what would be deemed "comfortable" by historical standards, said Ashmead Pringle, president of Greenhaven Group.
Only when inventories reach the equivalent of 20 to 25 percent of annual global demand -- at least an 80-day reserve -- will consumers be able to rest easier.
Global corn stocks were last near such a level in 2002 when prices for the grain were less than half of today's levels. World wheat stockpiles hovered above a 100-day supply between 1997 and 2003, when benchmark prices were between 35 and 50 percent of today's prices.
"You need to really have at least another good year to be a bit more comfortable with the supply," said United Nations' Food and Agriculture Organization (FAO) chief economist, Abdolreza Abbassian.
"If for one reason or another China does not produce a record crop and the supply situation from other major exporters is not as good as this year, you will immediately get back to the turbulent situation we had in the past few years," Abbassian said.
Most global grain importers are resting easier now than just about any time in at least the past three years - a period that featured a U.S. drought that cut corn exports from the world's top supplier to a 37-year low and a worst-in-a-century drought in Russia that shut off exports for nearly a year.
Importers are now gradually shifting from their hand-to-mouth buying strategies to more forward-buying as prices for corn, soy and wheat have all fallen from near-record highs to multi-year lows as the U.S. autumn harvest neared.
U.S. soybean sales to all destinations for delivery in the 2013/14 (September/August) marketing year have risen 4 percent from a year ago, while corn sales are up 31 percent and wheat sales are up 38 percent, USDA data showed.
Resources-hungry China currently has 28 percent more U.S. soybeans on the books that it did a year ago and more than three times as much U.S. corn.
Phones on U.S. grain export desks are ringing more now than they have in at least a year. The most likely catalyst: grain prices are a good value.
"We spent the last three years in a high price environment and we're now seeing the impact of what a low flat price environment does to our industry," said a veteran U.S. grains exporter, who asked not to be named.
"The last time prices were this cheap in the last six or seven years was during the financial crisis. It makes you wonder if we didn't just go through three years of destocking and demand rationing and now we're about to go through a year of massive stock building and demand stimulus."