Market straddles complacency and worry

Recent tempestuousness in crop markets underlines two crucial dynamics of the present world market, according to a leading Rabobank analyst:

  • World crop stocks and trends are more comfortable than they have been for years.
  • Demand is growing, and any real challenge to production scares buyers.

“We do have growing stocks, but we’re not out of the woods yet,” Bill Cordingley, a managing director with Rabobank International of the Americas, told the Canadian Global Crops Symposium April 15.

Cordingley said the market mood keeps shifting as complacency based on increasing world grain stocks collides with worries about political upheavals in the Black Sea region and weather threats to crops.

The growing stocks have led to the generally bearish mood as a rebuilding of stocks replaces years of steadily declining stocks-to-use.

“We have seen a pivot to more bearish grains and oilseeds markets,” said Cordingley.

However, he said stocks are back to only average levels in many ways.

Feedgrains such as corn might be more than 20 percent more comfortably stocked than in 2010, with corn rebuilding by about 17 percent in the last year. However, wheat stocks are still slightly below the five-year average, and supplies have grown only six percent in the last year.

Oilseeds are also comfortable, with global production growing 6.3 percent in the past year while demand has grown only 3.9 percent.

However, demand growth is still considered strong.

“We certainly have not seen a drop in demand,” said Cordingley.

It means that threats to production still scare the markets, even with more comfortable supplies.

The unrest in Ukraine has done that recently, worrying buyers that a huge new supply factor could falter this year.

Its corn crop last year was about 31 million tonnes, up from about 10.5 milion five years before.

“Ukraine has been rapidly stepping up” in recent years with massively increasing production and exports, Cordingley said.

As a result, disruptions to operating cash or problems obtaining enough fertilizer and other essential inputs caused by the conflict this spring will undermine buyers’ confidence about 2014-15 supplies.

“We’re still coming from historically low stock levels, and it only needs one little bump in the road, and we’ve had a couple.”

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