“Firstly there were rains towards the end of the harvest which affected quality, so the Russians are not forecast to export as much milling wheat as previously thought.
“We are not sure about what percentage will be feed wheat quality yet, but we expect Russian exports to slow in the coming months as winter sets in and logistics become more challenging,” Benjamin Bodart, director, CRM group, told us.
He added that a lack of snow cover still remains a concern for Russian wheat should temperatures drop sharply.
Market 'awash' with cereals..
CRM, said Bodart, is recommending feed compounders to wait a bit longer before booking anything forward: “The world market is still awash with cereals, and a bumper crop of wheat is expected in Australia and Argentina."
Although, he noted the quality of wheat harvest from those two countries remains to be confirmed as high yields could dilute the protein content.
Australia has raised its forecast for wheat production during the 2016-17 season by over 16%.
“The maize performance in the southern hemisphere is good; and with conditions favorable, farmers in Argentina have made solid progress on 2017 maize crop planting,” said Bodart.
The UK’s AHDB noted yesterday that optimism over the Brazilian soybean crop has increased further on forecasts the harvest in Mato Grosso, the largest soybean producing state, will begin earlier than usual.
Price movements
Meanwhile, wheat prices shot up in Chicago last Friday (December 2), as “investor funds liquidated their positions and withdrew from bearish bets on wheat, with a resulting rally in prices for that crop,” reported Bodart.
A weaker US dollar and strong crude oil prices are also said to be supporting prices on the maize side.
In terms of European grain market movements, Bodart sees the euro as more volatile than sterling going forward: “There is uncertainty in euro countries over the outcome of pending elections in two of the major EU players, France and Germany.”
He said the resignation of Italian prime minster, Matteo Renzi, has added to that growing sense of economic insecurity. “And we now have a bit more clarity on what the likely impact of a Brexit will be on the UK,” argued Bodart.
So continued sterling movements against the euro will dampen UK crop price gains against Paris futures, he said.
USDA projections
CRM’s latest grain market report also noted the recently released figures from the US Department of Agriculture (USDA) showing its long term agricultural projections.
Soybean plating estimates showed a hike; however, a declining yield estimate next year will offset this increasing area, said CRM. Total supplies for 2017/18 remain nearly unchanged due to the high levels of ending stocks expected this campaign.
The CRM analysts said that, based on the current price ratio between soybean and corn, it seems likely that US soybean plantings will be even higher than current USDA projections for next year.
“As it stands the current price ratio between soybeans and corn for new crop is at 2.69 (soybeans are 2.69 times the value of corn) which is a big incentive for farmers to plant soybeans. For comparison, the ratio this time last year was 2.3 which was equal to the 10-year average,” they reported.
Regarding corn, the CRM team said the USDA’s long term projections indicate an environment of stagnating consumption following the growth seen over the past decade. It is estimated that the total US corn area will have fallen by 9.5 million acres by 2026.