September 9, 2011


World grain prices to remain buoyant



Global grain markets are expected to stay volatile till next March, according to the Commonwealth Bank of Australia.


The bank's latest commodity analysis has forecast high world prices for wheat, corn and canola through to the second quarter of 2012.


CBA said feed grain stocks were tipped to fall this year to their lowest level since 1973, with prices likely to set records in the coming year.


The report said the tightening in world feed grain stocks was largely due to adverse weather and a relentless surge in ethanol production in the US. "We believe world feed grain prices are likely to post fresh records in the coming year, with Chicago corn prices likely to exceed US$8 a bushel for the first time."


CBA said the main risks to corn prices during the next year were a significant change in US ethanol policies, global economic recession, lower global meat demand and a collapse in world commodity prices.


The tight corn supplies are, in turn, expected to underpin wheat prices.


CBA has forecast the average corn price for the December quarter of this year and March quarter of next year at US$7.83/bushel, just below the world record set earlier this year.


Thereafter, the corn price is expected to decline relatively quickly to an average of about US$6.67/bushel by this time next year.


The bank has forecast CBOT wheat prices for the same periods at US$7.83/bushel.


CBA is not expecting wheat to decouple from corn prices until September next year.


World canola prices are expected to average slightly higher than current levels in the last quarter of this year but about AUD35 (US$37.19) a tonne below levels at the start of 2011.


But CBA has added a word of caution.


"The outlook for stronger global grain and oilseed prices is not without risks," it said.


"Although we do not expect a GFC (global financial crisis) Mark II event to occur, we would be naive to ignore its present danger."

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