Coarse grains

by Chris Lyddon
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A positive outlook for corn (maize) production has taken prices lower with most of the feed grain markets following suit. Low prices may, however, stimulate increased demand.


“Looking beyond this fall’s feed grain harvest for 2014-15, market-related discussion may transition from the topic of large production to the topic of even larger demand, similar to what occurred after the bumper crop year of 1994,” the U.S. Grains Council noted in its Market Perspectives publication.

The FAO’s quarterly Crop Prospects and Food Situation report described the market. “Export prices of maize decreased significantly in June, with the benchmark U.S. maize (No. 2, Yellow) averaging $202 per tonne, 7% lower than in the previous month and one-third below its level a year earlier. The drop in international prices in June reflects the positive outlook for this year’s maize production in the major producing countries, particularly in the United States, China and several countries in South America.”

The International Grains Council (IGC) described the bearish tone in the maize market in its Grain Market Report. “With very few sources of fundamental support, world maize export quotations moved lower, with the IGC GOI sub-Index down by 7% compared to the last GMR,” it said. “Prices were pressured by a mostly positive U.S. crop outlook and prospects for strong competition from the southern hemisphere.”

U.S. futures slumped to more than four-month lows, falling by as much as 7% compared to late May, as a favorable supply outlook triggered speculative long liquidation, it said.

“Robust ethanol production data and worries about localized flooding and possible replanting in some areas provided light support,” it said. “With Gulf premiums slightly firmer on the drop in futures, spot export prices were down by a net 5% m/m, at around $208 fob.”

Falls were not restricted to the U.S. market. “Up River prices in Argentina were sometimes underpinned by harvest delays and resulting slow country movement,” the IGC said. “However, with exporters still conscious of the need to remain competitive, prices were around 9% lower m/m, at around $201 fob.”

After a seasonal three-month absence, maize export quotations were again available in Brazil, the IGC reported. “With exporters still busy shipping soybeans, most quotes were for shipment after August,” it said.

“Given spillover from lower international markets and, with harvesting of a large second (safrinha) crop under way, export prices had a mostly weak tone, quoted at around $206 fob (Paranagua, September),” it said. “Generally good crop weather has boosted production prospects and local prices are well below earlier peaks. Particularly steep losses have been recorded in Mato Grosso state, where another large safrinha crop is expected.”

The IGC also reported a 3% fall in old crop prices in the Black Sea region. “New crop business for shipment from November onwards was reported to have been light so far, with many sales booked on an optional-origin basis,” it said. “However, exportable supplies are expected to be quite ample and new crop prices were quoted significantly below spot positions, at around $205 (November).”

Barley prices have also fallen, but by much less. “The IGC GOI barley sub-Index dropped by 1% over the past month, weighed by mostly favorable crop conditions in Australia and the Black Sea region,” the IGC said. “Despite some seasonal weakness, export prices in the E.U. were supported by reduced production expectations, particularly in Spain, and stronger export interest.

“However, a $1 increase in export quotations in the E.U. (France) since the last report, to$217 fob (Rouen), mostly reflected a slightly stronger euro. Feed barley export values in Australia dropped by$2, to $251 fob (Adelaide), pressured by improved prospects for the next harvest. Nonetheless, prices remained relatively high due to reluctant farmer selling ahead of a potentially drier winter and spring.”

U.S. dollar denominated malting barley quotations firmed by $6, to $278 fob (Adelaide), partly because of a stronger local currency, but also supported by continued strong export demand from Pacific Asia, it said.

“Black Sea values were seasonally weak as harvesting in Ukraine got under way, dropping by $10, to $221 fob,” it said.

In the U.S. at least, sorghum avoided following maize down. “Firming basis levels amid sustained shipments to China helped to keep U.S. sorghum export prices broadly steady during June, despite a sharp decline in maize futures,” the IGC said. “Since the last report, export quotations moved marginally lower, to $242 fob (Gulf), resulting in a widening of the premium to maize to $34. At that level, the premium is much bigger than normal, but still below the historic high reached in 2007-08 when the E.U. was an unusually heavy buyer from the U.S.

“Values in Argentina declined by $13 to $164 fob (Up River), the lowest since June 2012, weighed by harvest pressure and slow export interest. However, the likely approval of shipments to China was expected to support values in coming months.”

Chris Lyddon is World Grain’s European editor. He may be contacted at: chris.lyddon@ntlworld.com.

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