Grain trade still searching for positive market signals

10.08.2016

As harvest approaches, the question on crop farmers' lips is what will it take to pull grain prices out of the doldrums ?

A massive weather event to interrupt the supply chain would certainly help.

Rabobank grain and oilseeds analyst Steve Nicholson said there have been a few quality issues in Europe and the United States, but nothing the market could not handle.

"The US record hard red winter wheat crop has a lesser protein level than what we would like.

"The other concern is that France had a horrible crop this year.

"So there is going to be a need in the world for higher protein, higher quality wheat that may not be readily available.

"Australia may be in the 'catbird seat' to supply that, particularly when you look at where you are geographically in the world."

Mr Nicholson is based in St Louis, part of the corn belt in the US state of Missouri.

He has been speaking to farmers in some of Australia's key grain growing districts about trends in the market and any potential upside in the months ahead.

He said all eyes will be on the South American grain production.

"There are expectations Argentina will plant more wheat and they'll plant more corn.

"They know what's happened in Europe. They also have the opportunity to move that crop into the southern trade flow, into Asia, India, those parts of the world," he said.

"It's the same thing you have with the Black Sea."

He said not only is there a freight rate issue, but the serious devaluation of their currencies for all those surrounding Black Sea countries has made them extremely competitive globally.

"Making them able to reach farther into the Australian market than typically would be the case."

Then there is the instability in global politics.

US presidential candidate Donald Trump has been fairly vocal in his stance against free trade.

Mr Nicholson said his comments were not helpful.

"Agriculture tends to be a winner in free trade agreements, not losers.

"Geo-political changes, the whole terrorism threat in the world and the instability that creates, does cause lots of volatility in prices that really we shouldn't be having right now because we have plenty of supply in the world."


abc

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