In its Grain Market Report at the end of July, the International Grains Council (IGC) said its GOI maize sub-index edged 1% higher in the month following its previous report.
“Prices in South America were mostly firmer on tightening nearby availabilities, especially in Brazil, but spot quotations in the U.S. and Black Sea region were weaker,” the IGC said.
U.S maize (corn) futures were heavily influenced by weather.
“As concerns about a Midwest heatwave dissipated in the second half of July, futures reversed course, with the spot contract touching a 22-month low, ending down by 6% from the last GMR,” the IGC said. “After recent heavy selling, non-commercial funds fully liquidated their previous large net long position.”
The IGC also reported a 6% rise in prices in Brazil on tight nearby availabilities.
“With local stocks almost depleted by earlier, very rapid exports, values were underpinned by poor harvest results and slow producer selling,” the IGC said. “Because of fieldwork delays and disruptions caused by a brief truck drivers’ strike, some exporters in Argentina were reportedly short on spot supplies.”
The IGC’s index for barley fell by 3% on good harvest prospects in Australia and the Black Sea.
“Favorable early harvest results weighed on prices in the Black Sea region,” the Council said. “However, concerns about production prospects underpinned in the E.U. (France), where prices were slightly higher.”
For sorghum, U.S. Gulf export quotations eased to the lowest level since mid-April “against the backdrop of weaker CME maize futures,” the IGC said. “After the heavy purchases of recent years, the market was also lightly pressured by an expected reduction in buying interest from China. Potentially slower demand from China added to a negative tone in sorghum in Australia, where ample availabilities of alternative feed grains weighed on the market.”
U.S. September oats futures fell by a net 2%, mainly driven by wheat and maize.
“The large net short position held by speculative funds provided some underpinning,” the IGC said. “North American cash oats trade remained light, as farmers were reluctant to sell at current prices.”
In a report called “Lost in the Maize,” Rabobank considered the effects of Chinese policy changes.
“China already announced plans to end its costly corn stockpiling program, effective as of the 2016-17 new crop,” Rabobank said.
“The government is striving to relieve supply-demand imbalance and cut massive inventory. China’s massive feed grain imports, which account for 70% of the global traded sorghum and 25% of barley, will significantly slow down while the domestic corn price declines and local corn consumption rises. International trading houses will have to keep an eye out for unexpected risks by monitoring China’s corn exports, which potentially rise as well as soybean imports, which potentially face a slowing growth.”
“USDA’s world coarse grain production forecast for 2016-17 is raised 1.5% in August, and production is now expected to marginally surpass its 2014-15 record as it rises 6%,” the USDA said. “Global coarse grain production in 2016-17 is forecast at 1.322 billion tonnes, with the year-to-year production increase primarily driven by rebounding corn production in the United States, Argentina, Brazil and South Africa. The United States accounts for most of this increase, more than offsetting lower expected production in China and Canada.”
The USDA also raised its world coarse grain consumption forecast for 2016-17 by 0.7% in August.
“On a year-to-year basis, an unusually strong rate of global consumption growth is now expected at 5.1%,” the USDA said. “This would be more than twice the average rate of recent years. World coarse grain consumption in 2016-17 is forecast to increase by 63.3 million tonnes from the year before to a record 1.311 billion.”
As with production, the annual change in world consumption of coarse grains is primarily driven by changes in corn, the USDA said.
“World corn consumption in 2016-17 is expected to rise 6.1%, or 58.3 million tonnes, from the year before to 1.016 billion tonnes,” the report said. “Gains are spread over a number of countries, led by the United States (up 14.2 million tonnes) and China (8.5 million.”
Although ERS has raised its forecast by 1.9% to 173.2 million tonnes, the level of coarse grain trade predicted for 2016-17 is still 3.1% below the record 178.7 million traded in 2015-16.
