April 7, 2009

World grain prices remain sensitive to fluctuations in world supply and demand, despite a large carryover from last year's bumper harvest, said grain co-op Openfield.

Openfield expects 30-35 million tonnes of grain worldwide will be carried into the 2009-10 season, with particularly large surpluses in the US and Black Sea regions. However, reductions in plantings and lower yields for the coming harvest indicate that production may decline and keep markets balanced.

Of the overall global stocks, about 28 million tonnes is in key exporting regions, said David Doyle, Openfield head of wheat and feed barley desk.

That carryout should compensate for the expected decline in production this year, but markets will be sensitive to any serious reduction in production and major downturn in demand, Doyle said.

The UK was on track of move 3.7 to 3.8 million tonnes of its four million tonnes exportable surplus, due in part to favourable exchange rates and shipments to buyers in China and the US, he said.

Looking at the size of the crop this year, the UK will need outside influences and correct price structure to alter the supply and demand balance, Doyle said.

But grain flows and price volatility would become more erratic with commodity markets so vulnerable to outside influences such as the weather and government policy intervention, he said.

However, opportunities to maximise returns will appear if traders watch out for them, according to Doyle.