November 17, 2011


World grain prices may pick up in 2012


Global grain prices will remain steady till the end of 2011 due to investors' fear of economic uncertainty but could pick up early in 2012, US analyst AgResource said on Wednesday (Nov 16).


"Grain prices may not have a lot of downside risks but until we get comfort in the economic landscape of the world it may not have a lot of upside potential," AgResource Director Dan Basse told Reuters on the sidelines of the Global Grain conference in Geneva.


"Our vision is that a bottom in the grain markets could occur late this year or early next as people start looking at forward positions," he said, pointing to expectations of reduced exports from Black Sea countries and tightening US and Chinese corn stocks.


Uncertainties surrounding the euro zone debt crisis in Europe and upcoming elections in major producing countries such as Russia, the US and China could lead to considerable volatility within broad ranges, he said.


Basse stressed that making price forecasts this year was particularly difficult, as opposed to last year when a bull run could be anticipated.


He pegged wheat prices at between US$5.8 and US$7.2 a bushel on the Chicago Board of Trade and at EUR180-220 (US$243-297) on the Paris milling wheat futures. They were trading at US$6.3 and EUR186.25 (US$251.6) a tonne respectively by 1320 GMT.


For US corn, prices should remain within a range of US$5.90-7.20 a bushel, against nearly US$6.4 on Wednesday.


"We still think corn is the most bullish grain...but then the world is awash with wheat, which is the most bearish grain," Basse said.


Separately, Basse forecast global wheat output to stay nearly flat in 2012 while the world's corn harvest will rise 1.5%.


The only market that Basse clearly expected to rise in the next months was the vegetable oils market, due to lower forecasts of palm oil output and rapidly expanding biodiesel use in Latin America.


"It's the dark horse," Basse said.


Precise forward wheat prices were hard to call because the key factors, weather and Black Sea exports, were unpredictable.


However, exports out of the former Soviet Union, mainly Russia which will probably have exported 15-15.5 million tonnes of wheat by year-end out of a total of 18-18.5 million seen this season, were bound to slow down, which could support prices, especially if they restricted exports.


"If cash prices start rising too dramatically within Russia then (Prime Minister Vladimir) Putin or the government will have to do something that slows it down, whether that's another duty or some kind of tax or restriction," he said.


In the case of corn, a lot of the price was still tied to tightening supplies in the US.


"There is still some upside in corn (prices), there is no doubt, but there is also some downside," he said.


These difficulties to anticipate prices and fears for the future lead end users to make short-term purchases lately, which put grain markets in a fragile situation, Basse noted.

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