AGIC speaker predicts grain lows have been reached

21.07.2016

A SPEAKER at next week’s Australian Grains Industry Conference (AGIC) said he is confident grain prices will not push below current lows.

Dave Hightower, US-based author of The Hightower Report, a grain market analysis, said while it was unlikely the market will see a short term uptrend in prices, it was likely current prices would respect lows set earlier this year.

“I think China might have less quality corn than has been advertised, while there are also concerns surrounding the Indian harvest,” he said.

This view is in contrast with more pessimistic market commentators who predict further drop in prices once the huge American corn crops begins to come off in August.

And he is also more bullish in the medium term on grain price prospects, saying farmers will respond to current low values by dropping production.

“I see definitive cuts in production cleaning up oversupply, especially with demand steady to higher going forward,” Mr Hightower said.

In the short-term, he said there was unlikely to be a weather-driven cut in US corn production, but added a late heatwave would be detrimental to that country’s soybean crop.

“The critical period for US corn is largely past but for soybeans it is right during this conference and through August where yields are set.”

Mr Hightower said he was still closely monitoring a late summer heatwave in critical North American production zones driven by a La Niña weather event.

“La Niña is still a situation to watch and it could have an impact on crop.”

Into the medium term, Mr Hightower forecasts the current trend of more soybean acres being planted in South America and more corn acres going in through North America to continue.

However, he said incentive to plant additional crop would not be there with current pricing levels and added growers would also ease up on input costs.

“We may not see a definitive reduction in acres, although the plant in Ukraine may come back, but rented ground production will decline and there will be fewer inputs into crops.”

Energy will also play a role in creating demand, with Mr Hightower saying US gasoline demand was better than the headlines suggested while Chinese ethanol imports were also soaring.

China will also be important in terms of feed grain demand.

“Chinese demand is a long freight train – slow consistent and very difficult to slow,” Mr Hightower said.

“The hog herd in China is not going to do anything but growth unless there is a disease issue.”

AGIC will be held at the Grand Hyatt Hotel in Melbourne from July 25 to 27.


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