Grain supply situation on the world market according to current estimates
The whole world is expecting a record global grain harvest. Forward prices on the stock exchanges have fallen accordingly. As the weather continues to develop favorably, prices are also falling. In Germany, barley and rye prices on the cash markets are well below €16 per tonne.
However, the fundamental supply-demand ratio is decisive for the price level, not the harvest result alone. A balance sheet must be drawn up in which initial stocks and harvest are on the supply side. This year's opening stocks are 35 million tons below the multi-year average. This amount must first be taken into account.
On the consumption side, human consumption, feed consumption, industrial consumption (including bioethanol) and seed are added together. Finally, the final stock is calculated from supply minus consumption. If the final stock is greater than the initial stock, an improved supply can be assumed and vice versa. Consumption is increasing by an average of 40 million tons per year, although last year industrial consumption did not boom but rather stagnated.
However, the data from the disastrous previous year is not a suitable benchmark for assessing the market situation
The stock-to-use ratio has proven to be a useful yardstick for assessing the annual supply situation. The long-term average should be just under 20 %.
If this indicator is calculated for the current year 2013/14 on the basis of the available estimates, the result is around 18.5 %. Although this figure is higher than last year's figure of less than 18%, it is considerably below the multi-year average.
Accordingly, the average prices for 2013/14 should be somewhat lower than in the past year, but at least at the multi-year average level. However, when determining prices, it is not only necessary to proceed schematically, but also to take into account the supply situation in the major grain exporting countries. The USA, the Black Sea region and the EU-28 are at the forefront of this. The significantly improved final stock-to-consumption ratio in these regions signals a higher supply capacity of export grain for the importing countries in need. This results in a price-capping effect that keeps the price manometer well above the multi-year averages.
As always in the market, it takes time for a price level to be reached that is in line with the current uncertain state of knowledge. Until something new comes along again.
