MARKETS OUTLOOK Cereal prices on the floor
by John Buckley Although China is still a major contributor to global markets, USA and Canada are expected to make a comeback and be reinstated to the summit of world grain producers in the not too distant future
Constantly rising wheat crop estimates, record large global stocks of cereals in total and mostly ‘yield-friendly’ weather in the Northern hemisphere have continued to erode grain prices over the past month, resulting in US wheat trading near 10-year lows. Markets seem to have adjusted with remarkable speed to the loss of millions of tonnes of Brazilian maize exports to drought, confident that large US stocks will tide consumers over comfortably until the promised next round of better US, CIS, European and South American corn harvests. Neither have some significant quality threats to rain-interrupted wheat harvests in the US, Europe and the CIS countries offered much help to die-hard bulls. Breadwheat premiums over ordinary, biscuit and feed wheats might be up quite sharply but the price base from which they apply is well down. That traditional benchmark, the Chicago soft red winter wheat futures contract, for example, has been trading almost 23 percent below its recent highs. CBOT maize dropped too, by as much as 24 percent in the past month, setting its own near two-year lows and sharpening the competition between the two grains for US feed outlets. A similar story is emerging in Europe where the usual rivalry is expected to build between a larger feedwheat crop, a resurgent corn harvest and plentiful barley supplies. ‘Macro markets’ – equities, crude oil and other economic indicators have also remained bearish, especially since the shock outcome of the Brexit referendum. Despite the brave face put on things by the Brexiteers, analysts around the globe are nervous about the potential negative fallout – psychological and actual - on a still febrile world economy. As well as the Euro-zone’s problems, markets are also concerned that China is still slowing down, dragging with it emerging economies around the globe - which can’t be good for
82 | August 2016 - Milling and Grain