Rabobank Stefan Vogel

Grain prices on a roller coaster

Grain prices – especially globally – have been volatile in recent weeks.

RaboResearch general manager Stefan Vogel said fresh Russian attacks on Ukrainian port cities along with dry weather conditions in Russia and parts of Ukraine – as well as here in Western and South Australia – drove grain prices at Chicago Board of Trade up by approximately 15 per cent in the second half of  April.

Mr Vogel said luckily the improved rain forecast for Russia has not materialised and there are several other regions in the European Union also facing weather challenges, with parts of the south-eastern Europe too dry and parts of northern Europe too wet. “This includes crop conditions in France, which are experiencing the lowest rainfall levels for this time in the year seen in four years, which is putting yields at risk,” he said.

“And with May a crucial month for the development of wheat yields in the northern hemisphere, the market will remain volatile.”

Meanwhile, Mr Vogel said funds still hold a rather sizable short position at Chicago Board of Trade, which can further add to market volatility.

“Corn prices have also contributed to wheat price volatility. The US Department of Agriculture’s (USDA) predicted cut in US corn area might be overdone as US planting progresses well, and USDA’s next acreage estimate (on June 30) will be reviewed carefully,” he said. “On May 10, the USDA will also release its first forecast for 2024/25 global crop supply and demand, a potential market mover.”

Mr Vogel said South America’s corn crop is also not doing as well as expected earlier, as diseases cut yields. “Still, Argentina’s crop – at 50 million metric tonnes – will dwarf last year’s La Nina-drought plagued 36 million tonnes.”

The Rabobank analyst noted overall corn prices are unlikely to be excessively volatile before the US corn crop enters into the so-called “weather markets” in July and August.

“Price support for corn might come from various angles, but it won’t come quickly. Firstly global demand for corn is expected to rise thanks to a growing poultry feed demand as well as an improved ethanol outlook,” he said.

“And with a La Nina on the horizon, South American corn crops in 2025 – especially in Argentina – might once again suffer yield losses.”

Mr Vogel said canola is battling dry conditions, which are impacting planting in WA and South Australia. “However, Australia still has inventories left and the export window to the EU is quickly closing as European canola crops are already through the flowering stage and will be harvested as from June.”

He said Ukraine is expected to continue to export most of its canola to the EU quite quickly once harvested. “A positive might be that Russian rapeseed meal is now facing import duties into the EU, but those volumes have been rather small.”

Soybean prices have faced downward pressure, Mr Vogel said, as Brazilian farmers happily sold, taking advantage of a weak currency which also put Chicago Board of Trade prices under pressure.

“Australian farmers will not have felt these price swings as much locally as farmers in other parts of the world,” Mr Vogel said. “Wheat especially has not seen similar price increases locally. And the weather differences with dryness in the west of the country and good conditions in the east likely will also impact local prices accordingly if rains don’t arrive in May across WA and SA.”

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