World oilseed prices look set to recover faster than those for grains, which will remain depressed by robust supplies, with wheat inventories on course to hit a record high.
The average Rotterdam soybean price of $350 a tonne for 2009-10, down 18% on last season, marks the bottom of the market, Australia's official commodities buruea, Abare, said in its annual crop outlook report.
The price will climb to $390 a tonne over the next five seasons, a rise echoed in canola and sunflower markets, while the soyoil price will jump by 25%, spurred by growing demand by biofuel plants, which have already tripled their consumption of oilseeds in the past decade.
However, grain prices look set to remain weak for at least two seasons, with wheat not expected to reach even this season's average until five years' time.
'Downward pressure'
"We really don't think prices will increase in the short-term, especially as we have major producing regions, including North America, the European Union and the Black Sea (region) still producing big crops," Terry Sheales, Abare's chief economist, said.
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Abare wheat forecasts: output, price and stocks-to-use ratio
2014-15: 680m tonnes, $210 per tonne (26.8%)
2013-14: 675m tonnes, $200 per tonne (29.1%)
2012-13: 670m tonnes, $195 per tonne (30.5%)
2011-12: 663m tonnes, $190 per tonne (31.2%)
2010-11: 656m tonnes, $196 per tonne (31.3%)
Indicator price: US hard red winter wheat, Gulf, fob |
World wheat production will beat consumption in 2010-11 despite a 12m-tonne drop to 656m tonnes in output as drops in US sowings feed through.
Inventories will in the next season hit a record 206m tonnes, taking the stocks-to-use ratio, a measure of market tightness and therefore of price expectations, to 31% from 19.3% two seasons ago.
"The recent increase in world wheat stocks has arisen from the combination of producers responding to historically high prices and weaker growth because of the economic downturn," Abare said.
While consumption of coarse grains is expected to grow faster, driven again largely by demand from biofuel plants, prices will be kept in check by a 4.9% jump in sowings over the next five years.
"More land is expected to be planted to coarse grains, particularly corn, which reflects the projected increase in feed and industrial demand," the bureau said.
Tightness to return
Nonetheless, Abare said that, in the longer term, demand would recover sufficient to outpace production, placing a prop once more under crop prices.
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Abare oilseed forecasts: output, price and stocks-to-use ratio
2014-15: 492m tonnes, $390 per tonne (8.9%)
2013-14: 479m tonnes, $380 per tonne (9.8%)
2012-13: 464m tonnes, $370 per tonne (10.5%)
2011-12: 445m tonnes, $368 per tonne (11.2%)
2010-11: 425m tonnes, $365 per tonne (12.0%)
Indicator price: Rotterdam soybeans, cif |
"Increased demand for grains, because of higher biofuels production and higher feed demand for grains, is likely to boost prices," the report said.
"Although crop yield improvements are projected over the medium term, particularly for corn, these increases are not expected to fully offset the increase in demand, leading to a gradual decline in stocks in the next few years."
China would see the biggest improvement in yields, thanks to the wider adoption of genetically modified crops, with biotech corn approved late last year.
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