US spring is make or break for grain prices

Speculators now hold their largest net short position in Chicago Board of Trade corn futures, meaning they're betting the market will continue to push lower.

If we look at global corn estimates by the United States Department of Agriculture, world production is forecast to be up 76 million tonnes year-on-year to a record 1.23 billion tonnes.

Global corn consumption is also expected to increase by 42Mt year-on-year to a record 1.2 billion tonnes.

Hence global ending stocks-to-use ratios, which indicate how much the world has in store versus how quickly the world consumes it, are expected to increase year-on-year, but by less than one per cent.

Of the major corn exporters, Argentina and the US are expected to contribute most of the forecast 20Mt increase in world exports with an increase of 17Mt and 11Mt respectively.

The other major exporters of Brazil and the Ukraine are forecast to decrease exports by a combined 8Mt this year.

Argentina's corn crop is approaching harvest through March, April and May and generally looks in reasonable shape despite some hot dry weather reported through January.

US corn on the other hand is planted in April, May, and harvested through September, October, and November, so there are a lot of variables before US corn production is realised.

The USDA is forecasting lower US corn plantings and higher consumption this year, meaning the projected increase in US corn supply hinges on good growing conditions and good yields.

The decline in prices imply the market is feeling comfortable US corn production will reach the USDA's forecast record production levels of 389Mt.

Demand for grains globally is increasing over time, and the world needs to produce more grains from the same amount of land. That may indicate farming has a reasonable outlook.

In the medium term, many critical northern hemisphere crops are entering a period of "make or break" as their spring approaches.

This can create price volatility particularly when stocks are tight.

Last week 37 different buyer businesses purchased 26 grades of wheat, barley, canola, lentils and oats across 14 port zones around Australia through Clear Grain Exchange.

That was despite best published bids of many grades and commodities remaining at, or near, recent lows. Buyers were actively searching and bidding for grain and often reaching grower target prices.

If your grain is not offered for sale it can't sell. Growers can offer their grain for sale at the price they want and have a say in grain prices.