KANSAS CITY, MISSOURI, US – Grain and oilseed prices are sharply higher than they were a year ago. Tight supplies and strong demand have fueled a bullish market amid fears over the effect of weather in major producing regions, while the continuing pandemic means that concerns over supply chains remain, while end consumer demand patterns have shifted, notably away from food products consumed outside the home.
On Oct. 7, in its Cereal Price Index, the United Nations Food and Agriculture Organization (FAO) put the overall price of grains in September 2021 at 27.3% higher than the September 2020 level, with wheat at 41% higher year-on-year and 4% higher than August 2021. The FAO noted that during the month “tightening export availabilities amidst strong world demand continued pushing up international wheat prices.”
The UN organization also reported that maize prices were “nearly 38% above their levels of September 2020,” despite the fact that the rise in the crop’s price had slowed to just 0.3% between August and September 2021 “as upward pressure from hurricane-related port disruptions in the US was countered by improved global crop prospects and the start of harvests in the US and Ukraine.”
The year-on-year jump in prices is even greater for oilseeds, which, according to the FAO, now cost 60% more than they did a year ago, although it had slowed to an increase of 1.7% between August and September 2021. Palm oil has seen big increases and is now at a 10-year high, “underpinned by robust global import demand that coincided with concerns over below-potential production in Malaysia due to persisting migrant labor shortages,” the FAO said.
Global rapeseed oil prices also appreciated markedly, fueled by protracted global supply tightness. By contrast, world soy and sunflower oil prices declined in September on the uncertainties regarding soy oil uptake by the biodiesel industry and prospects of ample global supplies in the 2021-22 season.
In its Grain Market Report of Sept. 23, the International Grains Council (IGC) put the overall price rise for grains and oilseeds over the previous month at just 1%. Its latest forecast for total 2021-22 grains production at 2.289 billion tonnes is just above forecast consumption of 2.288 billion. Forecast wheat output, however, at 781 million tonnes, remains short of consumption at 783 million.
For oilseeds, rapeseed production of 68.3 million tonnes falls short of forecast consumption of 69.3 million, while soybean output of 380 million is above the foreseen 376-million consumption level.
Wheat’s continued rise in September was a result of persisting concerns “about shrinking production prospects in some of the major exporters,” the IGC said.
“Concerns continued to be centered on tightening outlooks for exportable supplies in North America and Russia, and while the EU crop was still expected to be much larger than the previous season’s poor result, below-average quality was seen potentially limiting the volume of EU milling wheat for export,” the IGC explained. “Upward price pressure was moderated by mostly good production prospects in Australia, even though ideas that the Australian crop could be a record were tempered by untimely frosts and unfavorable dryness in some areas.”
The Council said that despite high prices, there was limited evidence of waning buying interest from importers, and sustained strong demand provided underpinning to global markets.
“Some buyers were said to have adjusted quality criteria for milling wheat imports to accommodate purchases from the EU, including Algeria, Saudi Arabia and China, and the latter country was also said to have secured lower-grade supplies from France for feed,” the IGC added. “In addition, some countries suspended import duties to facilitate purchases.”
The IGC put wheat prices in September at “some 40%” above the year-earlier level.
Maize rose in September mostly because of gains in US export prices amid logistical challenges at the Gulf, the IGC said.
“While quotations in South America were also firmer, prices in Ukraine were seasonally weaker,” the IGC added.
“Harvest pressure and worries about the export disruption at the Gulf due to hurricane damage saw US futures (December) drop by 5% m/m,” the IGC said. “Although weakness was also linked to upgraded USDA production and carryover estimates, overall declines were pared by talk of disappointing early yields.”
Gulf premiums soared on stiff competition for reduced port elevator capacity, outweighing losses in futures and lifting nearby fob quotations by $20 month-over-month, to $279, the IGC said.
“Aided by steady grower selling, export activity in Argentina was brisk during September, despite complicated river logistics,” the IGC said. “With steep losses in US futures, Up River premiums strengthened, also underpinned by concerns about dry early conditions for new crop seeding and fears of another La Niña weather event, while fob prices moved $9 higher, to $245.
“Shipments from Brazil remained subdued amid tightening availabilities, with much of the surplus reportedly already committed for export. Paranagua premiums rose, compensating for declines in Chicago futures, with fob values up slightly m/m, at $266.
“Ukrainian spot offers were quoted at a premium to competing origins in late-August, but prices eased thereafter as harvesting of what is expected to be a bumper crop got underway. At $262 fob, quotations were down by $8 m/m and below comparable offers in the US and Brazil.”
Barley prices were up by 2% month-on-month, but the IGC reported prices trading in a narrow range.
Overall market sentiment was influenced by neighboring markets, while increased import buying, including from Algeria, Jordan, Tunisia and Turkey, provided underlying support, the IGC said.
“Nonetheless, ideas that China could secure less than initially anticipated weighed on market sentiment,” the IGC said. “In the EU (France), cash values firmed by $4, to $280 fob (Rouen), with some underpinning from concerns about 2022-23 winter plantings. Similarly, prices in the Black Sea region posted small gains, up $4, to $264 fob.”
Australian prices for wheat moved higher despite better-than-expected crop prospects. The IGC said that in South Australia, prices rose by $4, to $254 fob (Adelaide), while those in Western Australia advanced by 6%, to $262 fob (Kwinana).
“Export prices in Argentina held mostly steady, at $265 fob (Up River), with continued strong buying by China providing support,” the IGC said.
For sorghum, US Gulf export quotations declined by $34 month-on-month, to $295 fob, on lower basis levels and weaker maize futures, the IGC said.
“In contrast, despite pressure from currency movements, prices in Argentina firmed by $5, to $235 fob (Up River), as export premiums rose,” the IGC said. “At $267 fob (Brisbane), values strengthened by $3 in Australia, underpinned by export demand and slow grower selling.”
Prices for oats in the United States were up by 8% on the month on a tight outlook for North American supplies, the IGC said.
Export prices in Canada climbed by $35 month-on-month, to $432 fob (Vancouver), as farmer selling was slowed by widespread reports of poor yields and quality, the IGC said.
“Milling rye prices in the EU (Germany) gained about $4 m/m, to $216 fob, while feed values edged modestly lower, to $202,” the Council said. “Milling rye prices at inland terminals in Russia were lifted by gains in other grains, adding $19, to $166.”
Rice, in contrast to other types of grain, was at multi-year lows in August, according to the IGC, but rose slightly in September on “a mild improvement in trading activities.”
The IGC said international prices had changed little in the month leading up to its Sept. 23 report.
“White rice quotations in Thailand ticked lower, 5% broken falling by $9, to $379 fob Bangkok, as traders looked to attract fresh demand, with currency movements also weighing at times,” the IGC said. “In contrast, Vietnamese offers advanced by $29, to $420 fob Ho Chi Minh, as COVID-linked movement restrictions added to internal logistical costs.
“Indian white rice export prices decreased slightly under increased competition from Thailand, while tightening supplies ahead of new crop arrivals underpinned in Pakistan.”
In oilseeds, soybeans were broadly unchanged “as steady to firmer quotations at South American origins contrasted with a modest decline in the US,” the IGC said. “Chicago soybean futures (November position) retreated by 3% in sometimes volatile activity.”
While prospects for continued tight US supplies remained supportive, prices were weighed by export demand concerns, the IGC said.
“This was partly linked to the impact of Hurricane Ida on elevators and Gulf ports, which saw China shift a portion of its nearby needs to Brazilian supplies,” the IGC said. “Movements in canola, vegetable oils and external markets were also influential at times. More recently, improved conditions for US harvesting lightly pressured, as did broader worries about the world economy.”
Rapeseed prices have been strong, particularly in Europe, where supplies are tight, but the IGC noted that “in two-sided, sometimes volatile activity, ICE canola spot futures in Canada declined by 5% m/m, as fundamentals support was countered by light seasonal harvest pressure, with movements in external markets and other oilseeds and products also influential.”