World Grain - January 2013 - 26

FEATURE

Can grain and
oilseed markets
rebuild stocks?
T

he challenge for the global grain and oilseed markets in
2013 is rebuilding stocks given precariously balanced
fundamentals, according to a report released by Netherlands-based Rabobank in November.
Rabobank said it expects prices to move higher in the ﬁrst
quarter of 2013, which will slow demand from its current pace.
Current use levels, particularly for corn, wheat and soybeans,
appear to be running too fast given the sub-optimal 2011-12
crops in both the U.S. and South America.
Higher prices during this period should encourage increased
global production, resulting in a rebalancing of fundamentals
and a weaker price outlook for the second half of the year.
The following is Rabobank’s forecast for the wheat, corn
and soybean markets this year.
WHEAT
CBOT wheat prices are forecast to rise to $9.10 per bushel
in the ﬁrst quarter of 2013, then fall 23% to $7 per bushel by
the fourth quarter of this year. Rabobank said stronger U.S.
corn prices in the ﬁrst quarter are likely to support world
wheat prices in the same period, reﬂecting the 4.6% quarteron-quarter increase in its CBOT wheat price forecast.
“But the Northern Hemisphere wheat harvest is expected to
bring about a strong fall in prices from quarter one to quarter
two, provided production in the U.S., E.U. and Black Sea region is within 5% of the trend,” the report said.
Wheat prices are forecast to maintain a premium to corn
in order to limit wheat feed use in the U.S. “We expect
CBOT wheat prices to maintain a spread to 75¢ per bushel to
$1.30 per bushel over CBOT corn prices throughout 2013,”
Rabobank said. “We believe the spread will decline to 75¢ per
bushel in quarter two due to harvest pressure from the winter
wheat crop. Conversely, the spread is likely to rise to $1.10
26

by Arvin Donley

Rabobank says higher prices early
in 2013 will encourage production
increases in wheat, corn and soybeans
per bushel in quarter three as wheat harvest pressure wanes
and the corn harvest begins.”
In Europe, MATIF SA wheat contracts are expected to average €239 per tonne during 2013, falling to €225 per tonne
in the fourth quarter, the report said. The E.U. production decline of 6 million tonnes year on year to 131 million tonnes in
2012-13 has not yet been matched by sufﬁcient reductions in
demand, according to Rabobank.
“We still expect a 1% year on year increase in E.U. poultry
numbers in 2013, and the issuance of wheat export licenses
remains 3% above year-ago levels,” Rabobank said. “As a result, 2012-13 stocks-to-use for E.U. wheat is expected to be a
record-low 5.6%, a 3.8% decline year on year.”
Major wheat exporting regions are forecast to see the lowest
ending stocks-to-use on record of 11.3% in 2012-13, with the
drawdown in buffer stocks likely to increase price volatility in
2013-14. Any supply shock in 2013 would thus have a large
effect on wheat prices, the report said. However, downside
volatility is enhanced by managed money net long positions of
48,431 contracts, well above the historical average of 10,374.
“Our forecast stocks-to-use in major exporting countries,
up 3.9% to 15.2% in 2013-14, highlights the risk of speculator liquidation as fundamentals turn bearish,” Rabobank said.
“Current implied volatility levels for December 2013 options
January 2013 / World Grain / www.World-Grain.com

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World Grain - January 2013

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