The world is harvesting its largest-ever wheat, corn and rice crops this year, easing tight supplies that drove world food prices to record levels earlier this year, the U.S. government forecast on Friday.
With the abundant harvests, including a record wheat crop in Australia, world stockpiles will gain a modest cushion against after successive years of razor-thin stocks. The U.S. soybean inventory would climb to the largest in five years.
Larger harvests will further dampen market prices that are already at their lowest in a year.
China led the sharp five per cent expansion in world corn production this year, the U.S. Agriculture Department said in an update of the world crop outlook.
Chinese corn production is up eight per cent from a year ago and up four per cent from USDA’s estimate in November. Record yields and favourable weather created a mammoth crop of 191.8 million tonnes.
Traders said wheat prices could drop by three to five cents a bushel when trading opened, with corn falling by four to five cents a bushel and soybeans by eight to 10 cents a bushel.
"There’s nothing here that is bullish," said analyst Roy Huckaby of The Linn Group in Chicago. "They shut down consumption all over the place."
Tight supplies drove corn futures prices to nearly $8 a bushel during the summer. Wheat and soybean markets also recorded historically high prices in a price surge that started half a decade ago in the United States.
World wheat production is up six per cent this season from 2010-11 with a record 28.3 million tonnes in Australia. Rice output is up 2.4 per cent and soybeans are down 2.4 per cent although Brazil has a huge crop of 75 million tonnes that will allow it to beat the U.S. as the top exporter.
In the face of competition from Brazil and Argentina, U.S. soybean exports are forecast down two per cent from the November estimate. The U.S. stockpile would rise to 230 million bushels, larger than traders expected and the largest year-end supply since 574 million bushels in 2006-07.
The U.S. corn stockpile would be fractionally larger than thought a month ago but still the smallest in 16 years. The U.S. wheat supply would be up six per cent larger than thought in November.
"Larger world supplies of wheat and competitive prices relative to corn boost prospects for 2011-12 wheat trade," said USDA, pointing to larger use of wheat as livestock feed in Mexico, South Korea, Japan, the Philippines, Thailand and Vietnam.
Despite growing a huge crop, China was forecast to import three million tonnes of corn. China is the world’s largest buyer of soybeans and cotton and analysts say it could become a major market for corn in the near future.