In its price outlook, published this week on the back of the USDA’s June WASDE (World Agricultural Supply and Demand Estimates) report, Rabobank said: “The report was predictably neutral, with minimal adjustments across the commodities. Weather conditions in the major growing areas, as well as the upcoming USDA acreage and stocks report on 30 June, will be the key price movers.”
Wheat harvest weather dependent
Rabobank reported that US 2015/16 wheat production had been revised up, as the recent rain had increased yields.
Talking to BakeryandSnacks.com about what this means for the bakery and snack sectors, Stefan Vogel, global head of agri commodity markets research at Rabobank, said: “Right now, we’re in a situation where wheat stocks are relatively good versus past levels. Stocks have increased, which is good news for bakers, as it means supply is high and prices are low.”
However, he said this positive supply picture is tempered with concern about wheat quality, as rains continue in central US.
“Harvest has just started in the southern states and especially in the hard red winter belt, it has rained substantially for the last three or four weeks. When it rains before a harvest it can raise concerns about the quality of the wheat - the fear is that the protein levels might be lower,”explained Vogel.
He said that it would be possible to get a clearer picture of the amount of rain damage in two or three weeks, once the harvest had progressed further.
Meanwhile, he said a strong US dollar meant US wheat exports were moving at a very slow pace.
“Grain from the Black Sea region is being offered at much lower prices - US$30-40 cheaper per metric ton, which is making it harder for the US to participate in export tenders. As long as the dollar stays firm, we don’t see this situation changing,” he said.
Corn prices to fall
Vogel predicts corn prices should come down in the next few weeks, on the back of good US yield prospects and the large amount of grain that is still being held in storage.
The USDA is predicting a 2014/15 yield that is slightly below last year’s record but above the harvests of recent years. Vogel believes this can be achieved with favorable weather conditions.
For US corn growers, the recent rain has been a mixed blessing. On the one hand, it has produced good soil moisture, generating hope for good yield prospects, whilst on it has also resulted in the need to replant some acreage.
“The next thing to watch is heat,” said Vogel. “If we don’t get any heat until the end of July we can expect a decent yield without any damage. So far, the corn crop is off to a good start.”
A bumper Brazilian corn crop, which was harvested in April, is expected to exert further downwards pressure on prices.
“The Safrinha crop in Brazil has expanded by three million tonnes. This will increase competition and put pressure on prices,” predicted Vogel.