Monday, January 17, 2011

Six months of bullish new and counting..!

The majority of the Australian 2010/11 harvest is now winding down, albeit some pockets in NSW/SA still being held up by wet weather, and the majority of southern Victoria just getting started. So with the market digesting six months of continued bullish news, what will then further ignite grain prices in the first half of 2011?

Last Thursday the USDA released a number of reports containing very bullish news for corn and soybeans (there was not one bearish factor in the report!). As a result the USDA sent a clear message ~ remaining 2010-11 corn and soybean stocks must be rationed and both markets must fight for acres in 2011 (especially corn with US stockpiles at 15 years low and amazingly down 25.4mmt compared to last year!). This suggests prices are headed higher and will set the tone for international markets for the first half of 2011.

For more in depth analyse of the report check out this week’s Profarmer newsletter, however one factor that still could push prices higher is a stronger La Nina on South American and US growing season conditions. The USDA trimmed 2011 Argentine soybean production moderately with most private forecasters already severely cutting their estimates. If dry conditions spread north to Brazil and into US (as is the pattern of a major La Nina event), current production and stock estimates will be severely challenged and panic buying will again arise.

So all eyes will be closely monitoring the weather events unfold in South America over the next couple of months and seeing if the La Nina dry weather pattern strengthens and if so the flow on effects for Brazil and the US.

So what does US corn prices mean for my weather damaged downgraded wheat stored on farm? The trade is reporting overseas Australian feed wheat demand is picking up from Asian buyers, competing against US corn that traditionally is sourced for their stock feed rations. So if traditional US corn importing countries start rationing their demand due to increased prices, and make the switch to the surplus Australian feed wheat, there will be some gradual recovery in feed wheat prices once local harvest pressure eases.


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andreafox21 said...

Pretty awesome post. I would say that the Wheat prices have decreased in value the past couple of months but is recovering slowly as the demand increases because of the Christmas season.
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