Corn, soy, wheat prices to fall in 2016-17 – but canola to buck the trend

(Agrimoney) – World soybean and wheat prices will drop further next season, despite falling output prospects, with corn values to fall too – but the rapeseed market will buck the trend, Australian officials said.

Abares, the official Australian commodities bureau, forecast wheat prices, as measured by hard wheat at US Gulf ports, dropping $5 a tonne to $210 a tonne in 2016-17, well below highs of $390 a tonne reached early in 2013.

The forecast came despite expectations of world wheat output falling next season, by 19m tonnes to 720m tonnes, “driven by declines in yields from above-average levels” last season in the European Union and the former Soviet Union.

For Australia itself, Abares forecast a rise in output of 285,000 tonnes to a three-year high of 24.5m tonnes, helped by small rises in sowings in Victoria and Western Australia.

The bureau said that “relatively plentiful supplies are likely to continue in some of the major exporting countries, including the US”, noting enhanced expectations for exports from Argentina too.

‘Abundant world supply’

For corn, the price of benchmark US Gulf export supplies will fall by $5 a tonne to $160 a tonne in 2016-17, the lowest on a season-average basis for a decade, with Abares flagging “abundant world supply of coarse grains and relatively weak demand in some sectors of the market”.

World production of the grain was forecast rising by 14m tonnes to 982m tonnes, led by a bounce in European Union output to 66m tonnes from last year’s drought-depressed levels.

The US harvest was forecast “largely unchanged” from 2015, with an easing back in yields to long-term average levels balancing out a rise of some 2% in plantings.

Barley prices, meanwhile, as measured in the French port of Rouen were forecast easing $3 a tonne to $177 a tonne, despite a 2m-tonne drop to 144m tonnes in world output, led by expectations of smaller EU yields than the record highs achieved last year.

‘Record high stocks’

In the oilseeds complex, Abares forecast a $13-a-tonne drop to $349 a tonne in prices of soybeans, as measured in the US Gulf, a 10-year low, with Abares flagging the depressant effect of “abundant supplies” of oilseed meals, use as livestock feed.

“Despite a forecast second year of lower production,” with world output seen falling 2% to 311m tonnes, “soybean prices are expected to average lower because of record high carryover stocks from 2015-16 and an anticipated increase in world soymeal stocks”, the bureau said.

“This in turn is expected to weigh on the price of soybeans because soybeans are a relatively high meal-bearing oilseed.”

Abares said its forecast for lower world soybean output reflected expectations of declining output in Argentina and US, where farmers are expected to switch extra area to grains.

Oil vs meal

However, prices of canola, as measured in the port of Hamburg, will average $10 a tonne more in 2016-17, at a three-year high of $430 a tonne, helped by the oilseed’s status as being relatively heavy in oil rather than meal when processed.

“Canola has relatively high oil content, so its prices are expected to be supported by forecast higher vegetable oil prices in 2016-17,”  supported by the dent to palm oil output in the key South East Asian producing areas from El Nino-induced dryness.

“World vegetable oil prices are forecast to rise in the short term, reflecting forecast relatively low world vegetable oil production growth in 2016-17.”

Abares forecast world canola stocks falling to a four-year low, helped by a drop in output to 67m tonnes, also a four-year low, and led by weaker Canadian and Ukrainian harvests.