Grain Market Review: Coarse Grains

by Chris Lyddon
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coarse grains
 
Improving weather in U.S. producing areas lowered maize prices in August after increases in July when conditions looked less favorable.

“Traders have not been kind to the corn market,” the U.S. Grains Council said in its Market Perspectives report on Aug. 17. “December corn futures have lost 14 cents in the past two weeks and over 40 cents since the end of July. The biggest factors have been improved weather across the Corn Belt and USDA’s 2017 yield projection.

“Bearish news came from reports this week that Brazilian farmers — particularly those in Mato Grosso — are having to store corn in open air piles on the ground due to lack of storage space. Brazil’s incredible production this year has outweighed its storage capacity, which would typically induce a wave a farmer selling and pressure price. However, falling prices at the CBOT this week have pressured U.S. and Brazilian export prices, effectively discouraging any farmer sales in Brazil. The lack of selling now means U.S. farmers may face more competition later in the marketing year.”

In its Grain Market Report at the end of July, the International Grains Council (IGC) reported rising prices for maize, although they were still well down on the levels seen at the last time 12 months earlier.

“The IGC GOI maize sub-Index gained by a net 2% m/m, with support stemming from weather concerns in the U.S. and slow country movement in South America,” the report said. “Despite recent advances, average prices are around 14% lower compared to last year.”

With July a critical period for U.S. crop pollination, movements in CME futures were heavily influenced by weather during the past month, the IGC said.

“After initially rallying on overly hot, dry conditions in parts of the Corn Belt, as well as spillover from the rally in wheat, gains were partially reversed in recent weeks, as some forecasts turned more favorable,” the IGC said. “However, given widespread talk that yields are increasingly unlikely to reach their trend potential, futures ended around 2% higher m/m.”

Barley prices also increased.

Underpinned by tightening world supply prospects and improved export demand, the IGC GOI barley sub-Index rose by 5% m/m,” the IGC said. “With E.U. output seen much lower than initially anticipated, dollar-denominated feed barley prices in France increased by $11, to $173 fob (Rouen), also partly because of currency movements.

maize monthly prices
No. 2 yellow corn, fob, Gulf ports.
Source: World Bank
 
“Conditions for crops in Australia remained difficult and amid good demand feed barley export values increased by $4, to $211 fob (Adelaide). Quotations in the Black Sea region gained $11, to $170 fob, on relatively tight nearby availabilities.”

Sorghum rose in the United States, following maize.

“U.S. Gulf export quotations rose by $10 over the month, to $187 fob, reflecting net gains in maize futures and firmer basis levels amid deteriorating crop conditions,” the IGC said. “However, advances were limited by an increased official production outlook and worries about 2017-18 export prospects.”

Sorghum prices in Australia posted steep gains on adverse crop weather, strength in the wheat market and improved domestic feed demand, it said.

“With currency movements magnifying gains in dollar denominated values, export quotations jumped by $28, to around $269 fob (Brisbane),” the IGC said. “In Argentina, where harvesting entered its final stages with good yields reported, Up River quotations declined by $6 m/m, to around $131 fob.”

A rise in U.S. oats futures of 11% month on month was caused mostly by “supportive technical features,” the IGC said.

“A reduced domestic production outlook and concerns about crop prospects in Canada also underpinned,” the IGC noted. “Values in Australia were seasonally firm, with additional support from dry conditions for the next crop. In the E.U., the market in the U.K. was broadly steady in light activity.”

The IGC also noted a fall in prices in Germany for rye, down 7% on the month, with seasonal weakness and favorable production prospects weighing on the market.

In its August Feed Outlook report, the USDA’s Economic Research Service (ERS) reduced its estimate for coarse grains production.

“Foreign corn production is reduced but is fully offset by increased output of barley, rye, and millet,” the ERS said. “Foreign coarse grain trade is projected higher, led by Brazil and Ukraine, while U.S exports prospects are reduced. World coarse grain production for 2017-18 is projected down 2.3 million tonnes this month to 1.314 billion, with the United States accounting for virtually the whole decline. Foreign coarse grain production is nearly unchanged month-to-month at 941.1 million tonnes, with increases for Ukraine, Zimbabwe, and Russia offsetting reductions for the European Union (E.U.) and Canada.”

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