Jonathan Lane, Trading Manager at Gleadell’s grain merchant offers analysis of the latest developments in the world grain markets.

The USDA reported the US corn stock higher than expected due to an increase in the national yield of 0.5bushels/acre. The crop increase of 48mln bushel was negated by an increase of 50mln bushel in exports. However, stocks at 846mln bushels were approx 100mln above average estimates. Corn production in South America was also cut less than expected (Argentina down 3mln/t, Brazil unchanged), leaving global stocks actually rising 1mln/t. US wheat, despite a rise in projected exports, showed stocks higher than estimated. Global wheat production increased by 2.5mln/t, leaving ending stocks also higher, up 1.5mln/t at 210mln/t.

Markets since Christmas have rallied on concerns over supplies in South America following adverse weather conditions. Whilst this still may have an impact in future USDA reports, today’s report has done precious little to shift the bearish fundamentals sentiment overhanging global grain markets, i.e. adequate supplies of corn and abundant supplies of wheat. The wheat market has been supported by the ‘corn story’ but, at present, the tale has run out of steam. Prices rose, but today’s report may leave the lemmings (funds) getting ready to jump. Experts who confidently predict the next move for these markets should come with a government health warning! Continued volatility is absolutely assured.

Summary

• The Argentine Government is set to ‘revamp’ wheat export system, corn next, seen spurring output.
• Informa cuts US corn yield projection to 147bushel/acre ahead of current USDA projection.
• Rains expected to hit Argentine grain areas, reviving corn and soybean crops.
• US wheat acres seen rising for 2012/13 despite disappointing crop in 2011 which was affected by drought conditions.
• Australian 2012/13 wheat output seen strong – investment in farms and equipment are keeping grower committed to wheat.
• French July-November wheat exports down 13% year-on-year at 7.5mln/t, compared with 8.6mln/t a year ago.
• South American corn/soybean crops expected to be cut in USDA report, but by how much, and is it already in the markets?
• Ukraine’s 2012 grain crop could fall 8% to 44.7mln/t due to a poor wheat crop - wheat exports set to fall 17% to 6.3mln/t.
• Russian Deputy PM says grain exports have reached 18.6mln/t so far this season – may not reach earlier projections.
• Egypt’s GASC purchases 240k/mt of wheat for March 11-20 shipment, including 120k/mt of French.