Only a cataclysmic weather event will help rally grain prices

World grain prices look set to remain at current levels for the foreseeable future, according to R&H Hall trader Philip Lynch.

“All of the world’s main cereal-growing regions have just enjoyed an acceptable harvest,” he said.

“As a consequence, global grain stocks continue to rise relative to expected consumption levels. This is helping to create the bearish market conditions that have been a feature of the sector for the last couple of years.

Only a serious weather event will upset this balance.

Lynch spoke at the recent Poultry Industry Education Trust annual conference in Co. Tyrone.

He said that, despite the current state of international grain markets, producers in Russia and the Black Sea region continue to increase output.

“Two factors are coming into play here. First off, the currencies in most of the eastern European and South American grain-growing areas are weak, relative to the Euro and the US Dollar.

“This means that farmers are getting more, in their own money, for the crops they are growing.

“But, in addition, crop management standards are also improving dramatically in these regions. Farmers are securing better quality seed. They are also making better use of fertilisers and pesticides.

As a consequence, yields are improving while growers’ ability to cope with challenging weather events are much more robust than would have previously been the case.

Lynch added: “Yes, we have seen a significant fall-off in the US wheat acreage. But this has been more than made up for by the increase in output achieved in the world’s other grain-growing regions.

“Higher international production levels mean that more grain is available for trading purposes.”

Lynch confirmed that many of these same trends can also be discerned, where corn is concerned.

“Better agronomy standards are helping to boost crop yields. This, in turn, is putting downward pressure on international corn prices.

“Weather remains the great unknown, when it comes to predicting future crop yields. Where wheat is concerned, the production prospects for 2018 are already promising. Winter crops in the Black Sea region are looking well at the present time.

“Experience shows that if cereal crops get a good start, the prospects for the harvest that follows are normally quite strong.”

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