GLOBAL GRAINS MARKET BEARISH, BUT BULLS NEARBY
Domestically and globally, most grain and oilseed markets appear solidly bearish, but several underlying factors were keeping market “bulls” close at hand, said Stephen Nicholson, executive vice president and global sector strategist of grains and oilseeds for Rabobank. Weather is an issue. “Across the US Corn Belt, we’re very dry. Our topsoil moisture conditions have improved, but there’s not much reserve, and we’re going to need timely rains.” Referencing the currently planted US winter wheat crop, besides dryness, Nicholson said the rising temperatures, especially hotter nighttime temperatures, may add stress to crops this summer.
Another area of concern, Nicholson said, is that while global grain stocks have rebounded, largely because of Brazil’s massive corn and soybean production in recent years, global wheat and rice stocks — the world’s major food grains — are continuing to contract. And history has shown that instances of food insecurity have the potential to spur communal unrest, which may solicit bullish market reactions. He said production areas in Ukraine, a longtime major grain exporter, are shrinking and may not be restored in our lifetime — or longer.
Domestically, Nicholson said market fundamentals mostly appear stable, but there are volatile indications simmering just beneath the surface, especially with soybeans. Recent data confirms the United States crushed a record 200-plus million bushels in the months of October, November and December, and with the domestic crush capacity continuing to expand, the pace of crushing is expected to grow, fueling a growing demand for soybeans. But Nicholson said that while soybean stocks are increasing, he doesn’t believe they are keeping pace with demand.
(Link: World Grain)
