Grain prices moved lower in recent weeks, leaving some in the sector wondering if, and when, another grain marketing opportunity like that seen in May could arise.

RaboResearch Australia & New Zealand general manager Stefan Vogel said global grain supply seems poised to improve. “While corn production in the Black Sea region is suffering from heat and dry weather and northern European wheat yields disappoint following an extremely wet season, overall production issues in those regions don’t seem significant enough to drive prices substantially higher,” he said.

Mr Vogel said the key global market driver for grain currently is the US, where the corn crop has largely finished pollination, a crucial yield-determining phase. “Weather conditions there were overall good, which kept grain prices under pressure as a strong US corn yield – and with it heavy global feed grain supplies – are expected.”

He said producers of stock feed around the world will likely switch some of their consumption from wheat to corn and, with it, wheat prices will also feel the pain induced by corn.

“The weather still needs to be watched in the US as well as in Russia’s spring wheat belt, but, for now, weather forecasts suggest we are quite unlikely to see a repeat of the May 2024 price spike as the projections for output volumes in both regions have improved in recent weeks.

“On the farm input cost side, urea prices have moved largely sideways for several months as global demand has been lacklustre. If demand improves, prices could move somewhat higher as globally, supply is quite constrained,” he said.

Last week, Mr Vogel said here in Australia, “we saw the Reserve Bank of Australia (RBA) decide to leave the official cash rate unchanged at 4.35 per cent”.

The RBA did though state that they “seriously considered” a rate hike, and the risk of a further interest rate increase still exists, he said.

“The RBA noted that inflation is proving persistent and underlying inflation – according to the latest quarterly Consumer Price Index (CPI) data – has fallen very little over the past year.”

Mr Vogel said economic growth has been weak in recent quarters in Australia and there are risks of lower-than-expected household consumption and higher-than-expected unemployment in the quarters ahead.

“The external environment is also highly uncertain, with signs of a slowdown in economic growth in China and the USA, and potential supply shocks from the conflict in the Middle East raised as potentially confounding factors,” he said.

“At RBA governor Michelle Bullock’s press conference after the bank’s August board meeting, it was made clear that the RBA board’s decision had been between hiking rates (to try to bringing inflation under control more quickly) or holding rates at current levels for an extended period of time,” Mr Vogel said. “It appears the RBA has chosen the option of holding for an extended period due to forecast uncertainties, but it is also signalling to the market that a rate hike could still happen if this ‘hold for longer’ strategy doesn’t work. Market indicators point to the chance of a few smaller rate cuts in 2025.”

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