That South American country is the larger exporter of soybean meal globally.
“Investors have gone long, taken out some of their profits. They had been betting on higher prices. But the information we are receiving from South America is that while the soybean crop in Argentina will not be exceptional, it won’t be the disastrous crop either analysts were forecasting due to the recent flooding. The crop looks ok,” Benjamin Bodart, director of London based, CRM AgriCommodities, told us.
Moreover, the yields in Mato Grosso, the biggest soybean producing region in Brazil, are forecast to be extremely high with market insiders predicting this year’s harvest in Brazil will be at record level – anywhere from 104 to 107 million tons of soybean production has been forecast, said the CRM analyst.
“It will be at least two months before Brazilian soybean farmers begin getting aggressive on sales, but the soybean market will likely remain bearish in the medium to long term,” said Bodart.
Another factor pointing to lower soybean prices on the world market, he continued, is the indication farmers in the Midwest of the US, when making decisions regarding their spring crop planting, will choose to plant more soybeans over maize, given that the price they get for that crop is 2.6 times that for maize currently, he continued.
Meanwhile, in terms of maize, he said a record crop is also on the cards from Brazil, with conditions remaining mostly favorable in the main growing areas there for second corn crop plantings, which have just started.
In Argentina, temperatures have peaked above 40 degrees Celsius but a record crop is still expected.
“It is difficult to point to a bullish outlook for maize even in the event of US farmers sowing less.”
On the contrary, Brazil had a disastrous maize crop last year – coming in at only 65 million tons – and was absent from the export market, to a large degree.
In terms of wheat, he said there has been little more than market noise about southern Russia being exposed to lower temperatures in the past few weeks, and not much in the way of “fresh news” about that grain sector.
“There have been some reports of winter kills in that region but crops have been protected, we reckon, by a good snow cover. Across the US plains as well temperatures have dropped below -20 degrees Celsius mid-January and crop conditions are down from last year but yields are not determined in January,” said Bodart.
Therefore, wheat is trading sideways, with the market awaiting data to clarify actual level of winter kills and European spring plantings.
“Europe is short of oilseed rape, though, with imports needed,” said Bodart.
With tights supplies and strong consumption across the EU, it remains the case that demand from Europe for Canadian and Australian canola will remain high in order to meet the demands of EU crushers and fill the supply void left by poor supplies of EU and Ukrainian rapeseed last harvest, noted Bodart.
Further to this, the EU will need to compete with China for canola throughout the rest of the campaign.
CRM is maintaining a watching brief on the feed barley market, particularly in the UK, where struggling farmers, for agronomic reasons, may sow a large acreage of spring barley.
“If that barley crop does not meet the quality specifications required for malting, the feed market could be flooded with barley, leaving feed grains well supplied, but it is pure speculation at this stage,” said Bodart.