I've recently cautioned that dryness in parts of Europe and North America could lead to poor grain yields, which would mean that anticipated record harvests in 2020/21 might fail to materialise. But data released by the International Grains Council (IGC) last week proved the opposite of what I had expected.

The IGC maintained its view that there are large grain supplies in the global market and that the 2020/21 season promises an even larger harvest (with the previous month's high estimates being revised upwards).

To start with maize, for the 2020/21 season global production has been lifted marginally from the April 2020 estimate to an all-time high of 1.2 billion tonnes, up by 5% y/y. As noted in my previous write-up, this is underpinned by expected larger harvests in the US, Brazil, China and the EU. The planting of this crop has begun in the northern hemisphere and it has progressed with minimal interruptions, albeit with the additional coronavirus-related precautions on farms.

In the southern hemisphere, maize planting for the 2020/21 production season will only begin around October. The focus is currently on the 2019/20 crop, which is currently being harvested.

South Africa expects the second-largest maize harvest on record, of about 15.6 million tonnes. Therefore, any dynamics on the global maize market will have minimal implications on South Africa as the country remains a net exporter.

The preliminary forecast for the 2020/21 production season (next season) released by the IGC suggests that South Africa's maize production could fall to 14.0 million tonnes. While it is too early to put much weight on such a futuristic forecast by agricultural standards, it is worth noting that the figure is well above South Africa's long-term average maize production of 12.5 million tonnes, so the country will remain a net exporter of maize.

In terms of wheat, the IGC lifted its forecast from April 2020 to a record 766 million tonnes. This is up 1% y/y and it is attributed to expected large production in Canada, Australia, Argentina, China, India and Kazakhstan, amongst others. This will mean that the 2020/21 global wheat stocks could increase by 6% y/y to 290 million tonnes. The wheat importing countries such as South Africa stand to benefit from such an outlook. Of course, assuming there will be no further restrictions on exports imposed by exporting countries as the data shows that there should not be global supply worries.

South Africa's production of wheat for the 2020/21 production season is underway and the outlook is not encouraging. Plantings are set to fall by 8% y/y to 495 000 hectares, mainly in the Free State. This means that South Africa will continue to have a large dependence on imports, which account for about 50% of annual consumption.

In the case of rice, the IGC has maintained its production forecast at a record 507 million tonnes, up by 2% y/y. With the main Asian rice-producing regions still some time away from harvesting, the outlook for rice production in 2020/21 is tentative. Nevertheless, under the current production forecast, global rice stocks could expand by 3% y/y to 182 million tonnes. This would add bearish pressure on prices and, in turn, be beneficial to wheat importing countries like South Africa.

While the IGC maintained a positive outlook despite the reported incidence of dryness which is threatening wheat; I still think the grain markets are not completely out of the woods. The weather remains a major risk factor that requires constant monitoring in the global grain markets. Having said that, I still think there is no need for panic at this juncture nor for major grain-producing countries to re-impose restrictive trade policies that some had implemented at the start of the pandemic due to supply concerns. The global grain markets are awash with carryover stocks from the 2019/20 production season, and optimism about the 2020/21 production season will become much clearer in the coming weeks.