A fund-inspired rally in oilseeds has added a bullish element to grains as financial operators move into soft commodities. The UK market is being bolstered by a weak currency but with projections showing a large new crop, the fundamental picture remains bearish.
“It is the same old story,” Stuart Attridge, trader at Harlow Agricultural Merchants, told Agritrade News. “It all kicked off when the speculative element once again came into the market in the US.” He cited a weaker dollar and a weaker European economy among reasons that have made soft commodities look like a good place for investors to put their money.
“That’s the first port of call,” he said. It looked like it was safer there. Reduced US stocks and big Chinese purchases of oilseeds had contributed to the bullish look to the oilseeds market and the effect has now spilled over into the grains. “The danger is you lose all sign of the fundamentals in your corn or wheat book,” he warned. “The whole thing gets into a quagmire.” To keep their books balanced, the funds bought into other commodities. At the same time the battle for acres between soybeans and grains in the US meant that higher oilseed prices were automatically bullish for grains like maize or wheat, threatening to cut supplies as growers move into the more profitable oilseed sector.
Weather has also helped to drive US grains prices higher, AHDB Cereals & Oilseeds reported, but then favourable crop tour results had triggered a sell-off. “With harvesting just a few weeks off in the US plains, the findings from the crop tours provide a relatively good indication of crop quality, and so far, yield prospects are encouraging,” the AHDB said. “Final results from the Kansas tour on Thursday forecast average yields at 3.27 tonnes/ha which, if realised, could be the second highest on record (3.30t/ha in 1998).”
Mr Attridge reported more movement of vessels for UK exports, including one to the US. “That appears to have been done on freight and currency,” he said, but stocks of grain were moving. “The old crop is gradually disappearing or being carried into the new crop,” he said. At the same time, the new crop appeared to be developing well, with rain and sunshine speeding development.
The USDA projects, in its latest World Agricultural Supply and Demand Estimates, a world wheat crop of 727.0 million tonnes, the second highest on record. “Large crops are expected in most key competing countries and favourable spring growing conditions suggest that yields will be well above trend in the EU, Russia and Ukraine,” it said. “Global wheat consumption for 2016/70 is projected slightly higher than in 2015/16 with higher food use more than offsetting a reduction in world wheat feeding. Global import demand for 2016/17 is down from last year’s record, but still very large. Global ending stocks for 2016/70 are projected at a record 257.3m tonnes, up 14.4m tonnes from 2015/16.”