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AgFlow for Global Grain Asia 2016: Overview of the 2015/16 season


In 2015, the grains and oilseeds market was oversupplied

Global wheat, corn and soybean stocks for end campaign 2015/16 (30 June) are expected to be 520.25 MMT; an increase of over 23 MMT from the previous campaign. Global trade of grains and oilseeds has declined with a clear shift towards Eastern Europe and South America, with the US now accounting for only 25% of total volume.

The start of 2016 has seen world stock markets fall further amid the tumbling oil price. The rout in commodities has deepened with continued concerns that the expansion of the global economy will falter while the energy markets are oversupplied.

China has stepped in to defend its currency while the Middle East’s geopolitics are deteriorating further.

It's not all doom and gloom

The situation is not all negative, with grain buyers utilizing lower prices which, in turn, provides cheaper food for the consumer. A firmer trend for the US Dollar did help some domestic markets - notably Russia, Brazil and Ukraine - where farmers saw better levels in local currencies.

This, however, did not help producers if they needed to import raw materials (seeds, fertilizer, chemicals, and fuel). Argentina’s new government have made clear their intent to re-establish a competitive export programme while some destination markets have political restrictions and others credit availability problems.

What does the 2016/17 season look like?

The outlook for the coming year appears to be a continuation of 2015; the US Dollar is expected to hold or strengthen even further and energy prices have more downside to come which will impact ethanol and bio-diesel demand. Traders are braced for another difficult year of tight margins and high risk. 

This will likely trigger further industry consolidation, reduce volatility and see more financial institutions close their commodities trading desks. The large multinationals will see opportunities to buy distressed assets and China’s COFCO has agreed to buy the remaining stake in Noble Agri to form a fully owned international trading company. 

One significant, unpredictable element for the soft commodity industry is the weather. Mother Nature can turn an oversupply to a shortage very quickly with crop failures.

This year, as opposed to last, the bearish elements are now all in the market for everyone to see.  In these tumultuous times, the industry will need all the expertise and knowledge they can muster to trade through a more difficult year than was experienced in 2015.

Content provided by AgFlow, January 2016.

This content is provided by Global Grain Events for informational purposes only, and it reflects the market and industry conditions and presenter’s opinions and affiliations available at the time of the presentation.

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