Updated IGC forecasts lead to soaring corn and wheat prices

The International Grains Council (IGC) published its market report for wheat and corn yesterday. The IGC remains more sceptical about grain production than the US Department of Agriculture (USDA). Admittedly, the IGC did upwardly revise its corn production figure by 2 million to 963 million tons - at the same time, however, it now predicts that demand will be lower, likewise by 2 million tons. 

Thus the IGC continues to envisage a global deficit of 13 million tons in the year 2015/16, its estimate coming no closer to the USDA's forecast of only a marginal deficit for corn. That said, the high surpluses of the previous two years and the correspondingly high stock levels would still result in an ample supply situation. While the IGC was still anticipating a balanced wheat market at the end of May, it is now forecasting a slight 2 million ton deficit for the year 2015/16, notes Commerzbank. 

The reappraisal was prompted by weaker wheat production. Although the ICG expects global demand to be 2 million tons lower than previously estimated, this is not sufficient to offset a 4 million ton fall in production. The IGC attributes the lower production to unfavourable weather and harvesting conditions in India, Australia and the EU. Both corn and wheat were able to gain just short of 3% during the course of trading yesterday to close at 383 US cents and 538 US cents per bushel respectively, adds Commerzbank.