February 4, 2010

World grain markets to feel pressure in H1

 

International grain markets will remain under pressure during the first half of 2010.

Analyst Rabobank forecasts another lacklustre year of price performance compared to recent seasons, with average world stock estimates for corn, wheat and soy in 2009-10 showing a 3% annual increase, to their highest level since 2001-02.

The analyst also expects to see further losses in the grain markets during the first half of 2010, with a slower recovery projected for the second half.

The scale of recent price declines for both wheat and corn indicates a limited downside for markets, and long index funds in the Chicago futures market would provide some support, said Rabobank. While large wheat supplies would cap significant price rallies, the analyst projected that markets would reach a turning point in the second half of 2010.

Based on the magnitude of the USDA's reduction estimate for US winter wheat plantings, to their lowest level since 1913, a moderate tightening in US wheat stocks is expected in the 2010-11 season. However, Rabobank's yield analysis suggests it would take multiple crop disasters in the 2010-11 growing season to result in a bullish price scenario for the global wheat market.