Latest USDA report highlights need for urgent grain marketing decisions

UK growers should start making decisions for marketing 2013 crops with some urgency following the latest USDA report predicting significant increases in global grain supply and ongoing downward pressure on prices, warns David Eudall of Nidera UK.

The report issued on Friday 10th May suggests a near 25 perecnt increase in global maize stocks over last year presenting a real risk to UK producers as global markets could now rapidly erode profit from new crop prices levels as the summer progresses, he says.

“The USDA report gives the first complete estimate of global grain and oilseed supply and demand for 2013/14 and whilst these figures are by no means set in stone, they do paint a worrying picture for UK producers.

“With normal weather over coming weeks, there will be significant supply replenishment in major producing regions and even areas where stock levels have been run down to critical levels in recent years are forecast to see improved production.”

The report predicts 2013/14 US maize production will be 359 million tonnes - up 85 million tonnes on the drought struck 2012 harvest – with US corn stocks forecast to more than double to 51 million tonnes by the end of the season.

In total, global maize stocks could increase by 30 million tonnes to 154.5 million tonnes – a near 25 percent increase.

Production of wheat is predicted to increase in the EU, Russia and the Ukraine and these will easily offset the 5 million tonne reduction predicted for the US crop. These increases will take global wheat production to over 700 million tonnes, increasing stocks by 6 million tonnes.

“Demand will remain high, which is good news for prices, but the view is that the increased supply will now cope with this,” David Eudall says.

“Weather is still the key factor in the short term and old-crop grain stocks are still tight globally, so traders will be very reactive to any unfavourable weather which may change these predictions.”

But the reality is that barring a weather event the scale of last year’s drought in the US, stocks will be replenished and prices will fall as a result, David Eudall says.

“We know that many UK producers are under pressure at the moment and there are many uncertainties about the domestic crop. The weather in the next six weeks across the entire Northern hemisphere still needs to be monitored closely to ascertain crop development and yield potential."

 “But from a grain marketing perspective, this is now a very different year from recent ones and growers must start making plans and not run the risk of sitting back and hoping the market will pick up."

“This is a critical time and markets will now move fast so complacency over marketing decisions could present a genuine risk to the prosperity of many farm businesses.”

Maize for popcorn, cultivated in Hungary, producer UNO FRESCO TRADEX. Deutsch: Mais für Popcorns, kultiviert in Ungarn von UNO FRESCO TRADEX. Français : Maïs pour faire du pop corn, produit en Hongrie par UNO FRESCO TRADEX. (Photo credit: Wikipedia)