The FINANCIAL -- In 2015, the grain and oilseed markets faced various factors contributing to development of both bullish and bearish trends, including weak underlying fundamentals, exchange rate moves, logistics-related supply problems, and weather risks, declared Daryna Kovalska, Agricultural commodities analyst at the company Macquarie Securities, during her speech at the conference "Grain Forum & Maritime Days -2015" on May 28.
“We have seen continued weakness in grains and oilseeds prices since the start of the year. The key drivers across markets have been better than the expected harvests and growing, large inventories, with more favourable weather in recent months also improving the outlook for crop supplies," - she said.
Also, D.Kovalska stressed that “assuming normal weather persists, we expect the bearish trend on prices will continue into mid-year, before tighter supply conditions for corn and wheat begin to shine through in the second half of the year. In the corn market, we believe that prices will get support once we see lower YoY corn crop harvests in the US, Brazil and Ukraine. We note, however, that El Niño could be beneficial to US yields, as usually it has historically delivered better pollination conditions in those regions. The strength of demand in the ethanol and livestock markets will, however, be supportive to prices”.
D.Kovalska said that similar to corn, the wheat prices will start recovering in the second half of the year, as tighter fundamentals in the 2015/16 season start to materialise, driven by lower crop production.
The largest drop in output is expected in Russia, where financial difficulties and unfavourable weather at the start of the season will most likely reduce wheat production. Another threat for wheat supplies today is in eastern Australia, and the potential for an El Niño to see the region become critically dry as the crop reaches its crucial growth stages. Moreover, if Macquarie Securities sees stronger feed demand expectations and positive sentiment in the corn complex, this will likely bring up the entire grains complex, D.Kovalska specified.
Macquarie Securities expects for a decline in market prices of soybeans in the next few years, as Farmers United States and South America do not plan to cut oilseed production even when the downward price trend in the market. Thus, the downward trend will dominate the market, and demand for soybean is not likely to block the increase in its harvest in 2015/16 MY. Provided that favorable weather in the US and Brazil, soybean ending stocks in 2015/16 season reached a record, summed up the expert.