Rabobank Stefan Vogel

Slow global consumption growth in grain & oilseeds pressures pricing

Last month saw a set of further price declines across most global agri commodities, with the S&P GSCI Agriculture Index falling one per cent month-on-month and almost 20 per cent year-on-year, to 2.5-year lows.

RaboResearch general manager Stefan Vogel said the bearish sentiment has been particularly prominent across the grains and oilseeds (G&O) space.

Mr Vogel said ‘Non-Commercials’ (funds and non-physical trading companies) at the key grain exchanges in the US are currently holding a hefty net short position across the grain and oilseed complex – betting on further falling prices. “Last time we saw similar big short positions (in 2019 and 2020), it didn’t take funds long to ‘cover’ their positions and buy back securities  – just six weeks in fact – as delayed US corn plantings stoked fear back into the market and lifted prices at least temporarily. In 2024, any potential weather issue could induce some short-covering,” he said.

“In particular,” Mr Vogel said  “there is a high probability of a return to La Niña in the second half of 2024, which typically spells dryness problems for G&O production across the Americas, and good times for Australian grain farmers.”

For wheat, CBOT Wheat futures declined two per cent on the previous month in February, amid strong Black Sea export data.

Mr Vogel said “Rabobank remains rather neutral in our outlook for global wheat prices in the first half of 2024, with the global balance sheet expected to continue to sit in an oversupply situation as global grain consumption (excluding rice) in 2023/24 is expected to remain below the 10-year trend line for the second year in a row – albeit up from last season’s global high price- rationed levels.”

More positively in terms of wheat prices, there are some factors which should provide support in the second half of 2024.

Firstly, Mr Vogel said, the increasing probability of a return to La Niña and its often-adverse impact on wheat production in the US and South America. “While this would be counterbalanced by the higher production levels usually expected here in Australia during La Niña, on a global scale the event is overall detrimental to wheat production, but locally Australian producers should benefit from it,” he said.

The Rabobank analyst said additionally, early wheat crop conditions in France don’t look great, with only 68 per cent rated good/excellent compared with 93 per cent at the same time last year and there is a slightly lower crop area in France and Germany due to wet conditions during planting.

“CBOT Corn prices have been close to a four-year low, amid record production volumes in key export regions. Lower US corn acres and a weather problem in a key grain-producing region are needed in 2024 to balance an oversupplied global feed grain market in the second half of the year,” Mr Vogel said.

“For soybeans, “canola’s big brother”,  the massive stream of supply out of South America is being met with soft demand, and a global glut is brewing.

“For other soft commodities, markets have been mixed. Ahead of the Easter chocolate rush, cocoa prices continue their seemingly never-ending ascent, with the London contract up 48 per cent month on month in February, and almost tripling on year, as weak arrivals data in West Africa suggests there are serious issues with this season’s crop,” he said.

Meanwhile, Mr Vogel said commodities such as ICE White Sugar and ICE Robusta Coffee remain particularly sensitive to the ongoing Red Sea situation.

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