Global corn and wheat may move higher on demand boost

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global corn and wheat may move higher on demand boost

2014-07-28 10:05 |
source: China Grain Network |

according to an article written by Reuters columnist Gavin Maguier, the general increase in global agricultural product inventories is the main cause of the significant decline in agricultural product prices in recent months. Among them, the prices of corn, wheat and soybeans in the new season are all close to the lowest level since 2010. Corn and wheat prices, if they continue to fall in the coming weeks and months, could spur improved demand and lay the groundwork for a price rebound. But the rebound in soybean futures prices may face pressure from exporters to sell stocks at rallies.

The article points out that the harvest of winter wheat in the United States is coming to an end, and the pollination period of corn crops is in good condition. More and more traders and market participants believe that the supply situation of corn and wheat is basically a foregone conclusion, and the supply situation of corn and wheat will not change much from now to the autumn harvest. The U.S. Department of Agriculture predicts that the global ending inventory of corn in 2014/15 is slightly higher than 0.188 billion tons, and the global ending inventory of wheat is slightly lower than 0.19 billion tons, totaling more than 0.375 billion tons, which is the highest level since 2000. Ample stocks have prompted traders to turn their attention to the demand side, looking for signs of demand and guessing how large demand could help corn and wheat prices rebound.

According to Ma Guier, livestock stocks, ethanol production and exports are the three pillars of corn demand, while domestic and global demand for wheat flour processing is the main consumption of wheat. By all accounts, the recent sharp fall in grain prices has boosted end-user profits. If prices continue to decline, corn and wheat demand is likely to show strong growth in the coming weeks and months. At the same time, American farmers are flush with cash, so they are not eager to sell corn or wheat at such low prices. Instead, it seems that farmers intend to take advantage of the rich storage network across the country so that they do not have to sell large-scale grain to the market. The sluggish pace of farmers' sales, coupled with improved end-user profits, will provide potential support to the corn and wheat markets and set the tone for a steady rebound in corn and wheat prices in the second half of 2014.

In the case of soybeans, stocks held by major exporters are more important for price trends. With the U.S. soybean crop still not entering the critical bulging period, the selling pressure on the soybean market is much less than that on the corn and wheat markets. Although the price of corn in the new season has fallen by nearly 18% since the beginning of the year, the price of wheat in December has fallen by nearly 13%, and the price of soybean in November has fallen by less than 6% in the same period, because the market is still worried about the bad weather after the U.S. soybean crop enters the grain-bulging period in August. This means that exporters are the key to the future direction of soybean prices, as exporters will sell stocks when prices strengthen, which may limit the rebound momentum of soybean prices in the near to medium term.