Grain & Oilseed: Too Much In The Silo, Too Little In The Bank

- Janine Ryan

Prices for grains, oilseeds and soft commodities continued decreasing in 2017. As 2018 approaches, the oversupply of grains and oilseeds, resulting in record stock levels, will keep prices under pressure.

The S&P GSCI Agriculture Index lost 5% in the first 10 months of 2017, reversing the gains of 2016. Soft commodity prices were particularly weak. CBOT (Chicago Board of Trade) wheat and maize prices were also down, whereas that of soya bean remained unchanged. Low prices of grains and oilseeds have so far only marginally translated into lower supply. The US Department of Agriculture (USDA) estimates that 3,1 billion tons of grains will be available globally in 2017/2018, compared with 3,23 billion tons in 2016/2017.

At the current pace, global stocks of grains and oilseeds will require years to decline to average levels. Current market conditions favour consumers; producers are at a disadvantage. As global grain stocks are eroded, either by farmers planting fewer hectares to grain in response to negative margins, or favourable weather conditions, volatility is likely to creep higher, and diligent risk management will become increasingly important.

MAIZE

Following record ending stocks in 2016/2017, global maize prices have been characterised by historically low volatility and rangebound CBOT maize prices. This has resulted in lower supply chain margins and fewer opportunities for supply chain participants to capitalise on the price opportunities that usually occur in more volatile markets.