World grain production to reach new heights: Rabobank

Grain Central, July 13, 2020

NORTHERN hemisphere harvest pressure has pushed global wheat prices 5 per cent lower month-on-month with demand proving inadequate to keep Chicago Board of Trade (CBOT) prices above US500 cents/bushel, according to Rabobank’s latest grains analysis.

The passing of key weather risk windows supports global grain production forecasts for 2020/21 that exceed 2.2 billion tonnes.

In the report released today, Rabobank senior analyst grains and oilseeds, Cheryl Kalisch Gordon, said this new height in production, together with lacklustre demand growth prospects, had pushed the 12-month grain forecasts lower.

Cheryl Kalisch Gordon

Covid-19 related uncertainty continues to play on global grain and oilseed markets, as does the ongoing tête à tête in the United States-China relationship.

However, Ms Kalisch Gordon said growing confidence in supply was the major influence on markets this month.

In particular, late May rains halted further downside for European Union and Russian winter wheat production.

She said Russian spring wheat would require nearby rainfall to maintain yield prospects, but as it represented only 30 per cent of the total Russian wheat crop, remaining risk was limited.

Condition ratings for the US spring and winter wheat crops have been average to above average and, while annual production will be down year-on-year, conditions have been supportive of meeting market expectations.

Ms Kalisch Gordon said Australia’s outlook for supply recovery continued to support Southern Hemisphere supply, despite dryness concerns for Argentina.

The bank now expects CBOT wheat to trade between 485 and 495USc/bu over the coming year.

Corn prices

CBOT corn prices moved mostly sideways in the sub USc340 range, but did open July with a move above USc340/bu in response to the USDA planted area of corn estimate being revised down an unexpected 5pc in their 30 June update.

On the demand side, US ethanol production is returning to 78pc of last year, and US feed grain demand increasing, as processing plants bring capacity back online, is keeping corn prices off April lows.

Despite these demand improvements, Rabobank forecasts CBOT corn prices in the range of USc320 to USc340/bu through the next 12 months, a decline from last month.

Domestic price drop

Locally, wheat prices fell by between 7pc (NWC) and 13pc (KWI) last month, in line with global decline and declining basis.

Conditions in Victoria, South Australia and most of New South Wales continue to support yield upside, although regions of Western Australia, southern Queensland and western NSW will need rain in the next fortnight to avoid yield downgrades.

Ms Kalisch Gordon said east coast barley markets remained choppy in their ‘post Chinese tariff lower ranges’, as buyers reconciled near term demands with new crop supply firming in the wings.

Export zones are, and will continue, to trade flat as demand from international feed markets drives prospects.

“With a revised lower outlook for global wheat and corn prices, but still with expectations of the Australian dollar softening (through to mid USc60 range rather than our previous low USc60 range), we now see APW NWC trading at A$320/tonne in the fourth quarter this year.”

India lentil tariff reduction

Ms Kalisch Gordon said with India temporarily reducing its tariff on lentil imports from 33pc to 11pc until 31 August, local demand was expected to be supported during July.

“With 2020 Indian lentil production having come in well below government targets, we don’t discount the potential for an extension of the tariff relief on lentils.”

Weather watch

La Niña the chance of La Niña forming is now 50pc, and double the average likelihood, according to the Bureau of Meteorology.

Ms Kalisch Gordon said if the weather system eventuated, it would bring increased rainfall, particularly in central, eastern and northern parts of Australia.

In contrast, La Niña typically delivers reduced rainfall to Argentina which the USDA continues to slate for record wheat production, despite already dry conditions.

Source: Rabobank




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