Agri View - September grains & oilseed update ::Macquarie Research,

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Agri View
September grains & oilseed update
Feature article
 In this report, we highlight our current view of the global grain and oilseed
complex and underline our expectations of the forth coming USDA WASDE
report. Our current forecast of US corn yield is 148.8bpa, which will require
the US to ration 400m bu of demand year on year.
Our View
 Corn: We expect Monday’s WASDE report to show a significant drop in US
corn production, leaving ending stocks critically tight and the requirement to
ration at least 400m bu of demand. From a global perspective some of the fall
in US production will be offset by an improvement in Ex-US production. We
expect to see revisions higher for both Ukrainian and Brazilian production
estimates. From the demand side we expect corn feed demand to be rationed
from a price standpoint and from wheat substitution. We forecast global corn
demand at 854mt, roughly 11mt below the USDA’s current estimate.
 Wheat: US wheat futures have been buffeted by bullish corn fundamentals,
which will lead to increased wheat feeding. We have also seen the
continuance of aggressive offers of Black Sea wheat into the export market,
culminating in no US bids in Thursday’s Egyptian tender. For this reason we
don’t think the USDA current estimates of SRW exports are achievable.
Globally wheat crops continue to improve; we have revised our global
production number significantly higher, reflecting the improved performance in
the FSU. In Monday’s WASDE report we expect the USDA to raise their
estimates of EU production; our current forecast is for a wheat crop of
135.8mt. We also expect the USDA to revise Canadian production higher to
23.5mt.
 Soybean: As the lack of rain during August has restricted US soybean
production potential, we have reduced our yield estimates to 41.8bpa but
remain more optimistic than the USDA. From a price perspective we think the
majority of the move in Soybean prices has been inspired by the bullish
fundamentals in the US corn market. In the near term the market’s
concentration will remain focused on the outlook for US yields, but the large
stock piles of soybeans in Brazil and the heavy palm oil balance sheet should
help neutralise this issue. Due to the large increase of supplies of vegetable
oils ex-US, we expect soybeans to remain the laggard of the grains and
oilseed complex.
 Rapeseed: We have lowered our expectations for German rapeseed
production as conditions through harvest have been challenging. We
currently forecast EU-27 production at 18.0mt, implying a large increase in
imports year on year. European oilseed prices have been restricted by the
large increase in expectations for the sunseed crops of both the EU and Black
Sea region countries. However, we expect EU rapeseed prices to move
higher in the coming months to open the arb to import Canadian rapeseed.