Politics and precipitation: grain markets keep close eye on elections and rain

By Jane Byrne

- Last updated on GMT

© istock/Veresovich
© istock/Veresovich

Related tags Wheat

The weather and the outcome of the French elections could play a pivotal role in the European wheat market in the coming weeks. 

FeedNavigator spoke to Benjamin Bodart, director, CRM AgriCommodities, to hear about global grain market developments from the perspective of the feed industry and livestock production sector.

“The weather market is kicking in now across the Northern Hemisphere. Things are improving for wheat. The UK and France are starting to see some modest rain. If we get a new round of precipitation in Europe in May, followed by sunny but not too hot days in June, we could see a rebound in European wheat production – in around 155m tons – compared to last year when French wheat output was at a 30-year low.”

He said there has been very little winter kill in wheat crops in Russia, which has been, since 2015, the key wheat exporter globally and a bigger influence, together with other Black Sea producers like Ukraine and Kazakhstan, on wheat prices than Europe.

“There has been some political tension between Russia and Turkey of late, with Turkey threatening to curb its imports of Russian wheat. However, if it does impose such a ban, it is likely to have little impact on prices.”

“There is a lot of wheat still around. It likely will not be a sellers’ market, but livestock producers should see low wheat prices during the harvest.

He forecast a slight increase in 2017-18 global wheat ending stocks, not due to any great hike in output, but because of record large opening stocks.

French elections 

Though he noted that if former Front National leader, Marine Le Pen, wins the presidential race in France, and not Emmanuel Macron as predicted, there would be an immediate drop in the euro; moreover, the win would likely trigger a rush to export higher volumes of wheat and other commodities, tightening the wheat stock in Europe. “We have seen shock outcomes elsewhere, and there is definitely more complacency about a Le Pen presidency in France today than there was in 2002.”

However, all is still to play for in those elections.

The world is awash with grains, and is not short of meal and protein either, he stressed

“However, there has been some volatility in soybean prices due to concerns over the weather in the US currently.

“Moreover, speculators and funds have record short positions for CBOT wheat and corn, and near record ones for the soybean complex for this time of the season. Speculators remember the floods mid-April in Argentina last year and are being extra careful in case the same weather pattern hits again.

“However, if such flooding were to occur, there would likely only be short term rally on prices, as the markets would be compensated by the record soybean harvest in Brazil.”

Below freezing temperatures in Northeastern France and in Germany earlier this month could result in lower EU rapeseed output, with concerns the expected rebound in EU rapeseed production would be less than previously forecast. “Some 20% of the French rapeseed crop was exposed, but talking to the trade, impact from that cold spell will likely be limited. More time is needed to see the real influence on production as it is still early in the season.”

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