Grains outlook: tighter EU supplies temper price falls

By Lynda Searby

- Last updated on GMT

Related tags Wheat United states

Grains outlook: tighter EU supplies temper price falls
 With another good US harvest on the way, grain prices are expected to move lower, although weather conditions in the EU and Canada are likely to prevent them from falling far. 

Dr Amandeep Kaur Purewal, senior analyst with the UK’s Agricultural & Horticultural Development Board (AHDB), told us that recent benign weather conditions were benefitting US maize and wheat production. 

Therefore, the International Grain Council (IGC)’s decision at the end of last month to revise estimates for US wheat production up to 58.5Mt will have come as no surprise to insiders. 

“Maize needs good soil moisture so the rain has come at a good time - some analysts have described the conditions as ‘almost ideal’,​ said Dr Purewal. 

She said that overall this was making for a bearish outlook in the US, with prices continuing to fall, although the month of August would most likely see a few jitters in response to any extreme weather. 

“During the month of August, any changes in the weather will provoke short term knee-jerk reactions in the markets,” ​she explained. 

EU and Canada: a different story​ 

Meanwhile, Canadian wheat and EU maize production forecasts for 2015/16 have been reduced by the IGC. Canadian wheat output is now forecast at 28Mt, down by 2Mt from June. EU wheat production has been estimated at 148.5Mt, marginally lower than previous estimates, and EU maize prospects were lowered by 0.7Mt to 66.9Mt. 

“This all has to do with the weather. In Canada, recent rains have come too late for crops already hit by dry conditions in June, and in the EU, hot and dry conditions have put stress on the crop at a development stage when moisture is crucial,​explained Dr Purewal. 

She continued:“EU yields are expected to be impacted. In the latest MARS bulletin, the EU Commission revised forecast maize yields down to 6.7 tons per hectare, which brings the season’s forecast below the five year average.

Feed grain supplies are far tighter than they were last year, according to Dr Purewal, and so far, it doesn’t look as though there will be a repeat of last year’s quality issues, which resulted in much of the French crop being downgraded to feed. 

“A tighter EU grain situation will mean prices will be supported, so prospects are slightly more bullish for the EU than the US,” ​she said. 

However, EU price rises are likely to be kept in check by global cereal prices, which are falling. 

More wheat in feed?​ 

Another development of particular interest to the feed industry is that in the EU, the premium of wheat over maize has fallen to levels not seen since February 2014. 

“This is something to monitor as it will affect how much wheat or maize goes into animal feed,​said Dr Purewal. 

Oilseed outlook bearish

After the recent downward pressure on oilseed prices due to favorable weather in the US, soybean futures have seen a slight recovery, according to the latest IGC update.

However, Dr Purewal said the overall outlook for oilseed prices was bearish, despite expectations for tighter supplies of rapeseed due to smaller EU, Canadian and Australian crops. 

The condition of the soybean crop is good - not far off last year’s, although August will be a critical month for determining yields for the October/November harvest, said Dr Purewal. 

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