May 29, 2012

Blurry outlook of global grains triggers price instability

During this month, ambiguity in grains and oilseeds production outlook worldwide ruled market activity, making prices more unstable, and also partially reflecting deepening concerns about the world economy amid eurozone problems.

There was an associated marked strengthening of the US dollar, contributing to movements in dollar-denominated export quotations. While prospects for world wheat production were initially considered mostly favourable, markets turned abruptly higher as crop perceptions deteriorated.

US corn values slumped following bearishly interpreted official supply and demand data, including an above-trend rise in projected 2012/13 yields. An equally sharp rebound followed, boosted by tight nearby supplies and strength in wheat, but the market turned lower again, weighed by good early growing conditions.

After recent strength, soy values were pressured by weaker external markets, especially crude oil and equities, with a stronger dollar and signs of slower demand from China weighing on US futures.

Mostly because of a sharp drop in the sub-index for soy, IGC's daily index (GOI) fell by 3% over the month. The average of ocean freight rates in the three grains-carrying sectors was pressed lower by a build of surplus Panamax tonnage.