Market assessment: marketing opportunities for German grain on the increase
The 2016/17 harvest is now well underway in the northern hemisphere. As has been the case for the past three years, good to very good growth conditions have been recorded, particularly for wheat in Russia and the USA. "These good growth conditions are currently also being confirmed by the reported yields," says Steffen Holsten, Department Head Agricultural Products at AGRAVIS Raiffeisen AG.
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The wheat harvest in Russia is set to reach a new record level this year. In the USA too, the expectations of record yields are proving true. The estimates coming from the Ukraine and Romania are similar. However, Holsten also explains that globally, the 2016/17 wheat harvest – as at mid-July – will be greater than the global demand and will therefore result in a further stockpile.
Global trade flows are shifting
Nonetheless, something has changed compared to previous years, which could influence how prices continue to develop over the coming weeks. According to the yield reports from France and the estimates of many market observers, wheat yields there are expected to be well below average. Qualities in 2016 are expected to be much worse than the previous year. The expected smaller wheat harvest in France compared to 2015 is bound to cause shifts in global trade flows, according to Holsten. Germany could also profit from this, provided a normal harvest quantity is produced nationally. The wheat qualities need to be sufficient in Germany too, however.
Smaller barley harvest in Germany
The situation for the 2016/17 barley harvest is similar to wheat. Europe (EU, Ukraine, Russia) is by far the largest producer worldwide, accounting for nearly 70 percent of barley production. The 2016/17 barley harvest is expected to be around the same as the previous year, due to above-average yields in Russia and the Ukraine. In Germany and France, however, the barley harvest is smaller than the previous year. Germany's yield is average, and France's is well below average. Due to the reduced supply and the well-below-average barley qualities in France, a worldwide shift in trade flows for barley is also expected in 2016/17. "The same applies as for wheat: the German barley qualities must be better than the French and meet the minimum global requirements for trading," stresses Steffen Holsten.
Opportunities for marketing grain
Stimuli for the German grain market should come not just from the export market in the coming weeks, however. Soybean meal prices would need to remain well above grain prices for a long time. The soybean meal prices in the EU have fallen again currently due to growth conditions in the USA, which are better than expected, but they are still higher than April's prices. If soybean meal prices stay higher than grain prices over the long term, the percentage of grain in compound feed will rise compared to the previous year and the percentage of oil meal will fall. However, this assumption will not continue to apply for barley and wheat for the whole financial year. If the 2016/17 maize harvest in Europe returns to its normal level – after the drought-related drops last year – the proportion of maize in compound feed should increase again and replace other types of grain. There should therefore still be opportunities for German farmers to market their grain in financial year 2016/17.