Global grain markets kicked again towards the end of last week on; confirmation by Putin that Russia would not be lifting its grain export ban until after next year’s harvest; Informa economics slashed its estimates of US corn yields; good news on US grain exports; increased speculative fund interest in grains after an easing in the $US.
We have our doubts about whether the three former factors will be enough to sustain current grain price levels without the later….and we have no idea whether the later factor will be sustained. What! I here you ask? Well, unless the $US keeps easing I don’t expect global grain values will keep improving.
On the Russian export ban, the is fully what I expected anyway after early results from the Russian harvest started to filter through and confirm worst-case production estimates. To date they have harvested around 43mmt, down 34% on the same time last year. When they started talking about importing…the picture was pretty clear. We are still not sure why the market reacted to this as I viewed this as factored into prices.
US ProFarmer is very skeptical about latest corn yield estimates from Informa. Informa’s 'mostly likely final' corn yield estimate is reportedly 158.5 bu/ac. US ProFarmer reckons this was a shockingly small figure and one that it didn’t see reflected when on its US Crop Tour. US ProFarmer is expecting average US corn yields to be 162-165bu/ac, much closer to the USDA current estimate. I am not sure why the trade puts so much emphasis on what Informa says, in my opinion and experience US ProFarmer makes MUCH better estimates.
I also think we need to be careful about all the excitement surrounding US exports. The USDA already has them penciled in for a pretty big lift in exports. Big enough to have many of the trade talking about the potential for these volumes to choke up grain export channels. While the jury is still out, we suspect current feverish buying could be linked to grain importers wanting to extend coverage after Russian banned exports and before the US runs into logistical problems once harvesting of massive US corn and soybean crops commences in the next month.