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Outlook 2010 : Grain and soy markets are cooling, temporarily.

15 January 2010
Prices for feed maize and soya are settling into a cold spell which could be temporary.

What a ride it has been for agri commodities!

Once considered the dullest of plays, the bullish year that was 2007 saw investors sit up and take notice as prices for maize, wheat and soy rose to record highs on the back of poor harvests and strong competing demands.

Things have quieted down significantly since mid-2008 when prices rose to new all-time highs of over $6/bushel for maize and $13.80 for soya beans.


Maize prices slid to $4 a year later, hovering at $3.50 in the second half of last year and staying range-bound at about $3.20 towards the end of the third quarter.

 

As all eyes were on how harvests would pan out in the key Northern Hemisphere regions, better than expected yields and output in the US, EU-27, Ukraine and Canada have partially offset the poorer harvests in China and Russia to improve overall global maize production. Such growing global harvests shaved about $1/bushel off prices between the second and third quarter.

The U.S. Department of Agriculture’s October World Agriculture Supply and Demand report put current global maize production at close to 1.3 million metric tons (MT) higher than in 2008/09.

 

Despite lower estimates for maize supplies for the marketing year, larger world wheat stocks and slower trade for both import and exports of coarse grains are expected to continue exerting some downward pressure on maize prices. Prices could, as a result, exhibit some volatility, moving into a trough at year-end before picking up in the first quarter of 2010.

 

For oilseeds, a forecast of 429 million MT, or an increase of almost 8% on year, puts an ample figure to 2009/10 world production.

In particular, soya bean production rose in the US, Argentina and Paraguay, as better-than-expected yields helped allay earlier worries of uncooperative September weather.

For Argentina, expectations for the 2010 harvest call for a sharp turnaround from last year’s drought-reduced harvest. Forecasts for increased supplies from the US, Brazil and Argentina year-on-year have also eased concerns of a tight supply situation in the old crop soya bean market.

 

As with maize, better-than-expected production has eased the pressure from soya bean prices into the harvest months, which has since fallen to under $10/bushel from the second quarter’s high of $11.30. The USDA reported the season-average price range for soya bean higher by 20 cents, at $8.20-$10.20 per bushel in November, nudged up no doubt by a robust export demand coming from Asia, the EU-27 and Russia.

 

Argentina’s impressive acreage increase of 12% from the previous year is also giving a strong indication of bountiful supplies from the Latin American producer, which WASDE estimates at over 50 million MT for the 2009/10 marketing year.

In addition, higher rapeseed production mainly in the Western Hemisphere will also loosen any grip on overall oilseed prices at least for the rest of this year. EU-27 rapeseed production is estimated to hit a high of 20.6 million MT and Canada at 10.5 million.

 

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source : Feed International Januari 2010


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