Stefan 4778

‘The heat is on’ for global grain market – Rabobank

Grain and oilseed prices have been on a rollercoaster in recent weeks and the next two months will likely see continued volatility. RaboResearch Australia & New Zealand general manager Stefan Vogel said a look at global crop conditions and hedge fund positioning helps to explain many of these price moves.

In early May, Mr Vogel said most of the grain crop conditions around the world were still considered to be favourable. Since then, conditions in different parts of the world have moved towards more extremes.

“Here at home, the rainfall across many Australian wheat-growing regions has improved crop conditions and expectations for production volumes. And also in Argentina’s wheat belt, crops enjoy decent conditions.”

He said in the EU, major grain exporter Romania is on track for a record crop while feed grain importer Spain, thanks to rain, is expecting much-improved domestically-grown grain volumes. “The rest of the EU – despite some ‘wetness’-reduced volumes in key exporters France and Germany – is, overall, in adequate shape.

“Ukraine’s government, thanks to higher planted acreage than expected, also uplifted its wheat crop forecast.

“In the US, headers have had almost half of the country’s winter wheat and yields are much better than last year,” he said.

Mr Vogel said all this has calmed hedge funds who, over the course of May, had panicked following frost damage to Russian wheat and bought back large chunks of their wheat net short positions at key exchanges. “And while it’s difficult to assess the extent of frost damage in wheat, the estimates for Russian production volumes have tumbled in recent weeks – below the 80 million tonne mark previously forecast and down from the past year’s well over 90 million tonnes. Combined with lower inventories in Russia, that’s good news for Australian farmers as the wheat export availability in the upcoming 2024/25 season from Russia might decline to close to 45 million tonnes from an estimated 54 million tonnes this season,” he said.

“As we enter July, the world has just seen the USDA’s changed acreage estimates for US corn, wheat and soybeans – one of the few major ‘fundamental’ data points the market will receive for several weeks.”

For the next two months, Mr Vogel said Australian wheat prices are likely to be most impacted by the following factors: local weather, harvest news in the northern hemisphere, weather in Russia’s spring wheat belt and corn price moves (which will closely follow rain and heat forecasts for the major corn-producing states across the US). Those factors will bring almost daily new headlines and, with them, continued price volatility is likely.

He said demand for vegetable oil is expected to remain strong due to biofuel growth.

“On the supply side, the vegetable oil market looks at a rather polarised global picture. Global canola production in 2024/25 is forecast to fall from the strong levels seen over the past two years. Sunflower seed production may stay rather stable.”

“With soybeans, supply-driven price pressure looms, as global soybean production is forecast to rise to new all-time highs, up almost seven per cent year on year,” Mr Vogel said. “The market will pay close attention to US weather to predict if the US soybean crop can rise back to 2021 record levels. And in Q1 2025, all eyes will be on South American weather to see if crop issues will once again arise or if the region will emerge from the weather and disease-related problems seen in recent years and deliver a record volume.”

To find out more about other Rabobank research, contact your local Rabobank branch on 1300 303 033 or subscribe to RaboResearch Food & Agribusiness Australia & New Zealand on your podcast app.

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