The Hindu Business Line : Record output of global grains seen

SIGNIFICANT increases in global output of major grains namely wheat, coarse cereals (mainly corn or maize) and rice have been projected for the year 2004-05. Higher production has been made possible by favourable weather conditions in principal growing countries including the US, European Union and China.

World wheat output is projected at a record 616.9 million tonnes (551.4 mt previous year) and coarse grains at 984.7 mt (903.9 mt) while milled rice production is estimated at 398.2 mt (389.1 mt) by the US Department of Agriculture in its latest world crop production report.

A major increase in world coarse grains output is contributed by USA (+43 mt and China +10 mt). Specifically, world corn output is now placed at a new high of 691.3 mt, substantially up from 619.0 mt of 2003-04, with the US contributing to 298.2 mt, up from 257.0 mt of last year.

China's corn production for 2004-05 is projected at 126 mt versus 115.8 mt of last year thanks to favourable weather conditions and higher yields. China is seen producing 126 mt of rice too, up from 112.5 mt of last year.

The agency has projected Indian wheat crop for 2004-05 at 72 mt (65.1 mt), coarse grains at 29.9 mt (37 mt) including maize at 14 mt (14.7 mt) and rice at 83 mt, down from 87 mt of last year.

Massive increases in major crops are expected to keep the principal agri-commodity markets on leash. Grain prices are expected to come under downward pressure. However, a surge in demand caused by global economic recovery and growth prospects in Asia are expected to moderate the weakness.

Cotton: USDA has forecast world output of 111.7 million bales (480 pounds) of cotton, up from 94.7 million bales. All the three major origins harvest higher crops, with USA registering a record 22.55 million bales (18.26 million bales last year), China 29.5 million bales (22.3 million bales) and India 14.2 million bales (13.8 million bales).

World cotton market is already bearing the brunt of large supplies as reflected in falling prices. Currently, prices are in the 42-45 cents a pound range as re seen as weak. These consumer friendly prices are expected to encourage mill use.

However, with consumption trailing production, inventory build up is inevitable. Exporting countries are likely to be extra-aggressive in marketing surplus cotton.