Grain prices: delayed start to the season from the (very) bottom?
In contrast to last year, producer price trends seem to be going in the opposite direction. Despite a fairly tight supply of goods from the old harvest, high harvest expectations are stimulating price fantasies at the lower end of the scale. For the time being, they are not fundamentally disturbed by the market and weather developments to date, although there are some serious clouds in the sky.
The prices quoted so far are only selective and not very representative, as often neither quality, region nor other price-determining marketing conditions are specified. The prices quoted for new barley range from €14 to just under €18.50 per tonne. Prices for rye are even lower. In Brandenburg, rye prices below € 13/dt are circulating. A case for the bioethanol and biogas plants! Wheat prices are still unclear, but there is resistance on the exchanges at prices above the €190/t mark, triggered by a strong resistance line on the Chicago exchange, also for the fall and winter futures, which will be tested from next Monday.
With increasingly higher temperatures and relatively stable weather, grain ripening is accelerating, which is coming at the right time for most winter barley, but will cost wheat considerable dt/ha in the grain filling phase. The faster the harvest gets underway and follows one after the other, the more typical harvest price pressure will build up, which was not felt at all last year. (=> Changeover of supply and purchasing strategies ?!)
If you look at the grain market from a global supply situation of the previous estimation results, doubts about the previously mentioned price development arise in addition to some confirmations.
|
High harvest - below-average prices |
Barely average harvest - average prices |
| Record harvest at world level: 1,945 million tons, caused by the highest acreage since 1996/97 and a previous record yield of an estimated 3.59 tons/ha | Tight initial stocks, which are 35 million tons below the 7-year average and would first have to be replenished. |
| Above-average harvests are expected in the traditional export countries of North America, the Black Sea region and the EU-28. The price-influencing export potential is correspondingly high. | Late and delayed start to the season for the majority of cereals, resulting in a shorter vegetation period and the risk of early frosts with yield and harvest losses |
| Restrained increase in demand: the booming increase in consumption in recent years due to the use of maize for the production of bioethanol is lacking. | Significant reductions in the US wheat harvest of -10 million tons compared to the average have already been determined, resulting in reduced exports . . . and in China with -20 million tons, resulting in a sharp rise in imports |
| Grain trade: traditionally strong importing countries in North Africa (with the exception of Tunisia) have had good harvests of their own; Egypt lacks the purchasing power to finance the previous import volume of 10 million tons of wheat. | In the southern hemisphere, there are signs of a weak harvest in the SW of Australia due to drought, while Argentina is already experiencing a decline in wheat sowings for customs reasons. |
| At the end of the year, stocks are expected to build up to just under 30 million tons, which is usually a signal for falling prices. | For parts of Russia (Volga and Siberian districts) and the eastern part of Ukraine, drought-related crop losses are estimated at a still uncertain level. |
| The grain harvests in France and the UK remain average to below average at best | |
| With rising mineral oil prices, demand from the bioenergy industry is picking up again. | |
| The final stocks in the exporting countries and thus any additional export potential available will increase by 30 million tons. | Despite rising final stocks, the 2013/14 stock-to-use ratio is below average at 18.49% (previous year corrected: 17.95%) |
The above figures are based on currently available information. As the majority of the harvest (especially maize!) is still in the decisive yield formation phase, a number of corrections cannot be ruled out, which could go in either direction. In particular, weather developments over the next 4 weeks will be decisive. We should not lose sight of the delays this year.
Conclusion: The decisive price discovery phase is starting late this year. The decisive outcome of the US maize harvest (half of the increase in the global harvest) will drag on until the end of August (pollination and grain filling phase). Even after that, the risk of early frosts in September has not yet been overcome. The stock-to-use ratio of 18.49 % already indicates a below-average supply. However, it should be noted that this year there are likely to be high surplus stocks available in the exporting countries for possible demand, which will keep the upward price margin in check.
However, the 2013/14 wheat market will remain rather tightly supplied. (China a new import player!)
