March 25, 2014
Global grain suppliesstabilising US prices: Rabbobank
World grain supplies are rebuilding and stabilising US grain prices,though not without challenges resultingfromSouth American production and Chinese demand, according to Rabobank analysts.
Grain markets are rebuilding and prices have moderated over the last six months and could go lower, said Bill Cordingley, managing director and chief of Rabobank''s agribusiness research and advisory group.
US planting intentions and weather will affect US grain prices in the next few months. However, Cordingley believesit is too early to tell how production will play outwhile most of the volatility in markets is coming from outside the US.
"All eyes are on South America and the Black Sea (region) as well as the US winter wheat crop," he said.
According to Cordingley, South America''s record soybean crop is challenged by rainy weather at harvest, its transportation infrastructure and logistics indeliveries to export markets, and the likelihood of drought in Brazil, decreasing expectations on its second corn crop.
Unknowns are also entering grain markets with the conflict between Ukraine and Russia, rallying contract corn prices to their highest in eight months on March 4. The Black Sea region represents about 20% of global wheat exports, 40% of barley exports and 18% of corn exports. Any volatilityin that regionmay havean immediate effect on markets.
While world demand for agricultural commodities remains strong,due toChina''s huge demand, there is some concern that China''s grain demand will moderate this year.However, China alsoseeks to build its strategic reserves, relaxing its 95% self-sufficiency policy for feed corn.
"China is very much a wild card," Cordingley said.
In the medium term, corn (which drives the grain complex in the US) is still on a bearish note.
However,with favourable weather, there could still be alarge crop in South America and a good crop in the US,while stocks are rebuilding,Cordingley added.