2013/14 grain harvest at the start of the price-decisive phase
With the start of the 26th week, the annual decisive phase of the fundamental price development for the 2013/14 grain year begins. Experience from previous years shows the average level at which prices settle for the period from the 26th to 39th week. This applies both to upward trends, as shown in 2007/08, 2010/11 and 20012/13, but also to downward and sideways movements in other years. Why this particular period? The explanation is simple. During this period, the decisive yield determination on a global level takes place in the northern hemisphere. Some of the grain harvests have already been harvested and the yield-generating phase of the maize harvests can be increasingly better estimated. The harvests in the southern hemisphere carry considerably less weight and can supplement or exacerbate the basic supply situation in the northern hemisphere.
The barley and wheat harvests are currently underway in the USA and the Black Sea region. As expected, the US wheat harvest of 55 million tons will be 5 million tons lower than the already weak previous year due to drought and wintering damage. The winter grain harvest in Russia and Ukraine started around 14 days earlier than usual. The first threshing results are more favorable compared to the weak previous year.
Both regions require the utmost attention, as the USA alone accounts for around 80 million tons and the Black Sea region for around 35 million tons of the total increase in the world harvest in 2013/14, estimated at 163 million tons. In the USA, the main crop is maize, which still requires a certain amount of development time before a sufficiently reliable estimate can be made. The Black Sea region is still dominated by the wheat harvest, which is now entering its peak harvesting period. More clarity will be gained in the foreseeable future.
Under the impression of high harvest expectations, grain prices are tending to weaken. The next few weeks will show to what extent this trend will continue or whether it will lead to a stabilization phase.
ZMP opinion:
The level of upcoming grain prices in the 2013/14 marketing year will emerge in the course of the 26th to 39th calendar weeks. The course of the harvest and vegetation so far suggests prices at the level of the multi-year average.
Bullish factors: US sowing areas are revised downwards, drought damage in the Black Sea region may reduce yields, Chinese harvest is rated lower, south-eastern Australia suffers from a lack of rainfall
Bearish factors: good growing weather in the US and the EU could contribute to higher yields.
