Global forces are continuing to keep grain prices down as world grain stocks reach near record levels, according to an Ipswich-based grain, seed and fertiliser merchant.
Stuart Shiells, trading director for Ipswich-based COFCO International UK, which was formerly Nidera UK before its takeover last year, said global grain prices remain far below the highs of the last five years and have become ‘range-bound’ with little on the horizon to break the cycle.
COFCO Group, which stands for China National Cereals, Oils and Foodstuffs Corporation, is China’s largest food processor, manufacturer and trader and is state-owned.
Since harvest, grain prices have moved in a fairly narrow band dictated by the supply and demand dynamics highlighted by the International Grains Council (IGC) forecast, said Stuart.
Meanwhile world grain stock are set to reach 495m tonnes this year, the second highest on record, according to the ISG.
“The sentiment of the large investment funds - whose role is largely speculative - has been that the markets can only move lower. This reflects the view that ‘big crops get bigger’, an adage that has certainly applied to the current campaign,” he said.
European grain output rose by 6m tonnes to 304m tonnes, and the US harvest delivered 14.6bn bushels, the second highest on record. Canada’s wheat crop was significantly above trade estimates, he said.
“However, the key driver behind the negative market sentiment has probably been Russian output. This has exceeded the records set during the Soviet era and official talk of further significant upward potential in the coming years is only compounding matters,” he added.
Meanwhile, Australia is on track for a 22m tonne wheat crop.
However, prices could be affected by weather setbacks in different parts of the world, bursting the bubble that prices are currently within, the grain expert added.
“The spring will again introduce the potential for volatility as constantly increasing demand, especially for corn and soybeans, virtually dictates that production records continue to be set,” he said.
Cofco International employs more than 13,000 people worldwide in 35 countries.
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