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Commodities - MARKETS OUTLOOK
Commodities - MARKETS OUTLOOK
Commodities - MARKETS OUTLOOK
by John Buckley
"MAIZE prices
proved surprisingly
resilient to the
USDA issuing a far
more bearish than
expected set of US
and global supply/
demand data in
November. As many in
the trade anticipated,
it raised its estimate
for US yields but
by more than most
analysts expected, to
a new peak of 169.3
bu/acre."
the last count, this years crop had jumped yet again to a new peak
of 157.3m tonnes, even bigger than last years record 156.5m
and it might even exceed that when all the recounts are done.
EU domestic wheat use is estimated to edge up by about 3.3m
to almost 127m tonnes this season. Even if the Union exported
the 33.5m tonnes USDA have projected (down 5% on the year),
it will add 3m tonnes to already ample carry-out stocks next
summer (currently seen around 16m tonnes). The trouble is,
exports are nowhere near the required pace, currently running
31% down on the year as the Russians and Ukrainians continue
to undercut most of their rivals (apart from the EUs own Black
Sea supplier Rumania).
This would be weighing on EU wheat prices more, if not for the
weakness of the euro. This has an immediate firming impact on
the mostly euro-zone producers wheat values through the Paris
futures markets and, further forward, at least raises European
hopes of becoming more competitive on export markets.
However, that effect may be muted until the CIS suppliers have
got through their usual front-loading of their exports which at
present seems to be still going on.
Another factor that might help EU wheat exports rally is the
above threat to the Black sea exporters 2016 crops. If these
do seem to be getting into serious trouble, Russia would likely
re-impose the export duties it used early this year (when its 2015
crop seemed to be at risk although less so than now) to control
trade. There were even rumours in early November that Ukraine
was already looking at ways to put an informal cap on exports
but, at time of going to press, that was so far unconfirmed.
Overall, the various weather issues overhanging 2016 crop
prospects will at least demand some caution from those who
might have sold the wheat market down, regardless of whether
prices fall below the cost of production.
But plenty of maize
MAIZE prices proved surprisingly resilient to the USDA issuing
a far more bearish than expected set of US and global supply/
demand data in November. As many in the trade anticipated, it
raised its estimate for US yields but by more than most analysts
expected, to a new peak of 169.3 bu/acre. That boosted the US
production estimate by 2.5m to 346.8m tonnes - 14.3m less than
last years record crop but still more than enough to meet foreseen
domestic and export demand which the Department reduced by
a combined 2.3m tonnes. It means US carryover stocks will rise
rather than fall this season, going out at a hefty 44.7m tonnes their highest for some years and a good cushion if anything goes
wrong with the 2016 crop.
The key factor weighing on US and global maize prices
remains export competition amid yet another year of big
production in South America. Although Ukrainian and EU crops
are well down this year, so is global consumption and import
demand (by over 4m tonnes).
Ukrainian production and export supply is still large in
comparison with earlier years while Russias crop is a post-Soviet
era record 12.75m tonnes (up 2m on last years).
The next Latin American crops, which arrive halfway through
the world 2015/16 season, are expected by the USDA to dip as
farmers shift some land to soyabeans and Brazils delayed soya
sowing results in a smaller Safrinha or second crop of maize when
the soya crop is likely harvested late too. Some local analysts
2014/15
2015/16
Change on month
Europe
156.47
157.27
+2.0
World
725.1
733
+0.2
118
+1.5
10.6
-0.6
Australia
Russia
CONSUMPTION
China
23.67
26
59.08
60.5
118.5
EU
123.5
126.8
India
93.1
93.9
Brazil
Russia
World
10.7
35.5
China
-0.5
+0.9
-0.6
36.5
707.1
CARRYOVER STOCKS
-1.0
-0.5
717.4
74.1
+1.0
87.1
-2.5
USA
20.5
24.8
+1.4
World
211.7
227.3
-1.2
EU
13.3
16.3
+0.9
Main changes this month to the world maize balance (USDA) mn tonnes:
CROPS
2014/15
2015/16
Change on month
Brazil
85
81.5
+1.5
Ukraine
28.5
23
-2.0
Argentina
26.5
25.6
+1.6
WORLD
1,008.8
974.9
+2.2
China
202.0
214.0
-5.0
USA
301.9
301.1
-1.3
USA
S Africa
CONSUMPTION
EU
361.1
10.8
78.0
346.8
12.8
75.5
WORLD
975.5
971.2
China
100.5
114.4
Brazil
11.6
9.7
WORLD
208.2
CARRY-OVER STOCKS
USA
EU
44
9.2
44.7
6.5
211.9
+2.5
-0.8
-1.0
-9.6
+23.8
+5.0
-5.5
+1.4
+24.1
this seasons global ending stocks estimate and along with the
higher US stocks, it paints a far more bearish picture for maize
prices than expected a month ago.
True, there is still the question of an 18m tonne slump in this
years European maize crop, expected to double its import
more. World stocks are also huge and able to meet a large
chunk of new crop demand from next July onward. But less
CIS competition could be a key factor later in 2016, allowing
wheat prices to rise off their current low levels in the second
half of the 2016/17 season and maybe earlier than that.
Wheat area is seen slightly lower in 2016/17 by the IGC. Yields
might also be affected if farmers try to cut costs at these low
prices by reducing use of inputs. Controlling a price-depressing
global wheat surplus may not be such a bad thing if it helps
farmers pay their bills and secures future output at the needed
level. (After all, world consumption of wheat does grow each
year and has put on over 100m tonnes in the past ten years alone.
72 | December 2015 - Milling and Grain
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OILMEALS/PROTEINS
While trimmed a bit from last month, massive soyabean crop
surpluses across the Americas continue to offer the promise of
cheaper global oilmeal costs going well into 2016 - despite the
downturn in alternative oilmeal supplies from rape, sunflowers,
cottonseed etc.
A new and highly influential factor may be a new businessfriendly president in Argentina the worlds largest soya meal
exporter where soyabean stocks have been held back and built
up by red tape in the past
Lower costs and big supplies might encourage more demand
for these feed ingredients indeed the USDA has recently
uprated its forecasts for soya meal consumption although
the strong US diollar in which commodities are mainly traded
offsets some of this price advantage, particularly in countries
with weak currencies.
Amid these huge soya stocks, there is clearly plenty of room to
meet bigger feed demand without tightening supplies or raising
prices.
Soya meal will continue raise its already dominant share of the
protein market, demanding price restraint across the oilmeal
sector.
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