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Wheat futures 'will depend on corn' for rally - Rabobank


The prospect of a global wheat price rally depends on the performance of corn, Rabobank head of commodities Stefan Vogel said, in a briefing which highlighted the


For the global wheat market itself, the bank was “not getting extremely bullish”, despite some threat posed by a lack of rainfall in much of Australia, where “plantings have been done in dry conditions”, Mr Vogel said.


The Black Sea region, while seeing some dryness, appeared poised for “decent harvest” if “not a record crop”, a factor which appeared evident in underperformance of European prices compared with those in the US.


Although US wheat prices have risen “pretty much the same as how corn prices have risen”, with the wetness which has dogged US corn sowings also a threat to the winter wheat crop and early harvesting, Paris Matif futures are only “somewhat higher”.


European investors, closer in geography to the likes of Russia and Ukraine, are taking a “closer look at Black Sea region” prospects, Mr Vogel told the International Grains Council conference in London.


‘Have to get bullish’

However, there is hope for wheat bulls, “depending on what the corn market is trying to tell us”, he said.


“If corn is rising high, wheat will not resist,” and will also post gains.


“If you get bullish for corn, you have to get bullish for wheat”.


The grains are rivals for uses such as feed, and in some biofuel plants, one reason why prices of the two are interlinked.


Knock-on effects

The comments followed a presentation in which Mr Vogel pegged at about 83m-84m tonnes China’s soybean imports this year, in the face of a trade war which curtailed imports from the US, and an African swine fever outbreak, the knock-on effects of which had proved of particular interest to clients.


He restated at Rabobank forecast of a 25-35% drop in Chinese pork production, equivalent to knocking out the whole of North American output of the protein.


The challenge for US exporters, in the face of retaliatory tariffs imposed by China on imports of US soybeans, was to gain 100% of demand from other buyers – a “pretty difficult” feat – or price crop so as to get some Chinese demand.


Mr Vogel also flagged the strains on South American logistics of Chinese demand which, having been seasonal, was now year-round, meaning extra storage needs.


B15 implications

He also highlighted as something of a market wildcard the potential for a fall-off in Brazilian soyoil exports prompted by the country’s adoption by 2023 of B15.


That is a 15% mix of biodiesel, made from vegetable oils such as soyoil, into transport diesel.


The B15 move was likely to reduce drastically Brazil’s soyoil exports, which are currently responsible for about 10% or the world total, and whose decline would represent an opportunity for producers in neighbouring Argentina.


Another dynamic in flux that Mr Vogel threw light on was India’s growing reliance on imported meals, as grows to some 16m tonnes, a factor that may put strain on its tough stance against supplies made from genetically modified crops.

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