GRAIN & FEED MARKETS
Every issue GFMT’s market analyst John Buckley reviewsworld trading conditions which are impacting the full range of commodities used in food and feed production. His observationswill influence your decision-making.
Chicago soft red winter wheat priceshave dropped by about 8% sinceour last review after losing asmuch as 12%at one stage. InEurope, soft milling wheat futureshave dropped by about 8-9% whilein export markets,US quality hardspring wheats aredown by about 9%too. The smallestdeclines have beenseen in US hard red winter wheats amidcaution over thepoor condition ofthe coming crop.
ITH most of 2012’s adverse supply
developments now factoredinto prices, world grain andfeed markets are now starting
to fix their sights more firmly on 2013/14 crop
prospects. A recovery is certainly needed in
2013 cereal output. Latest estimates show worldproduction this season is dropping by about 75m
tonnes or just over 4% but consumption by only
37m tonnes or 2%, the balance coming off stocks.
While there have recently been some jitters
about South American maize and soyabean crop
weather, lower Argentine wheat quality, some
winterkill threats in the former Soviet countriesand a combination of drought and frost threats
to a poorly rated US winter wheat crop, price
rallies on the bellwether Chicago futures marketsfor both grains have largely struggled to hold up.
That, in turn, has encouraged European cereal
markets, to a large extent, to steer clear of further
steep price increases too. In fact, if anything, the
global grain and feed markets have maintained
gradual downward bias since our last review, the
major grains recently trading at their cheapest
since last July.
Partly this trend has reflected less interest from
speculative and other ‘outside’ money in the trend-
setting US futures markets. Even the index funds
or institutional investors, who have tended to stick
with cereals through thick and thin in the hope of
price rises have cashed in a large chunk of their wheat chips in recent weeks, preferring to ride
the remarkable recovery in US and other worldstock markets instead.
That said, investors haven’t done badly out of wheat in 2012 which saw this grain close with a
near 20% year-on-year gain in Chicago, albeit after
trading as much as 45% up earlier in the year. EUmilling wheat markets meanwhile closed the year about Δ50/tonne up (+25%), led by London feed-
wheat plus £53 or 35%. Interestingly, the wheat
markets across the Atlantic diverge completely on
their forward views. EU 2013 crop wheat futures
are cheaper than current old crop months whereas the US futures outlook shows higher distant prices.In contrast, forward US futures continue to point
to significantly cheaper prices for maize, for which
current months have come out of 2012 with a gain
of only 8% - quite a shift from last August whenprices were up by over 30%.
Wheat and maize prices have also come
under pressure from global export competition.
Despite this year’s smaller Russian, Ukrainian and
Kazakh crops, the Black Sea wheat exporters gave
their rivals a good run for their money with an
aggressive early season export campaign – as did the Argentines too from their own smaller wheat
crop. Even the EU, with a significantly smaller 2012
wheat harvest, has been running a much more
active wheat export campaign so far this season,
clocking up a 35% year-on-year gain recently. That
may lead to uncomfortably tight supplies here
before the season closes in June but it has all helpedkeep exports from the main supplier, the USA, well
Will 2013 be a year of crop recovery?
fd milliG tcholoG44 | January - february 2013