Farm Ireland

Thursday 26 April 2018

Adverse weather keeps commodity prices high

Elevated agricultural commodity prices will remain this season as unfavourable weather impacts production, offering little chance to replenish stocks, according to Rabobank.

In its monthly overview of the commodities market, Rabobank said: "Weather is currently the focal point for agricultural markets, supporting prices and increasing volatility.

"The tight supply of many products requires favourable conditions for production to replenish stocks and meet growing demand, but in many producing regions adverse weather conditions are threatening output potential, and markets are reacting by pricing in production risks."

In Europe, excess rain during harvest threatens to downgrade wheat quality for the second year running, the report states.

Hot and dry conditions in the US are "imperilling" the corn, wheat, soybean and cotton crops and the Brazilian sugar crop has been revised lower due to weather conditions.

Rabobank states: "There is simply not sufficient inventory levels in many markets to cope with below trend production which supports our outlook for prices remaining at elevated levels throughout the 2011/12 season."

The next two months' weather in the US will have a major influence on corn price, which threatens Rabobank's earlier forecast that prices would ease.

Soybean prices are likely to outperform corn, with lower than expected US production.

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US and global soybean stocks are expected to decline in 2011/12, which will "support prices in order to ration demand".

Russia has lifted its grain export ban (introduced in August last year) which dragged world wheat export market prices lower in June.

However, they have since "recovered strongly" amid global weather concerns, according to Rabobank.

This volatility is expected to continue as diverging forces impact the market.

A surplus is forecast this season, albeit less than originally expected, but prices are still expected to ease.

However, lower production output in Brazil is a concern.

Indo Farming