'2021 will be a positive year for the grain market'

Rabobank expects global closing stocks of wheat to increase by just under 27 million tons this season, although those stocks are expected to be sold in full next year. The governments want to avoid food inflation at all costs and therefore replenish their own stocks. Rabobank foresees a wheat surplus of approximately 2021 million tons in 6, although La Niña will still be able to change that. According to the bank, the biggest risk of this weather phenomenon is that there will be insufficient snow cover. These weather-related risks will see the CboT quote for wheat remain at a minimum of $2021 per bushel in the first quarter of 5,50, well above the 5-year average. It is currently quoted at $5,93 per bushel.

However, the bank expects global wheat production to fall by more than 5 million tons in the coming year, mainly as a result of stagnating production in Russia (due to drought as a result of La Niña). The first forecast of the Russian harvest is 75,6 million tons, a sharp decrease of 10 million tons on an annual basis. On the other hand, a small expansion in the acreage is expected for the United States, although production will not exceed this season's level as a result. Higher production is expected in the European Union, which could put pressure on the wheat quotation on the Matif in Paris. It currently stands at €210,75 per tonne.

Something that will also affect the market in 2021 is whether or not to have a vaccine against the coronavirus. If there is a vaccine, the worldwide import demand for wheat will decrease slightly from the second quarter. China will remain an exception to this. The stronger US dollar is also likely to cause a tough battle in prices. This while improving the weather in Russia could cause global production to exceed current levels. In combination with a potentially large harvest from the European Union, this could lead to a wheat flood in the third quarter of 2021. Wheat prices could then drop significantly.

China remains important in grain market
Looking at the figures on the declining global stocks of maize and the growing demand for this product, Rabobank expects that the CBoT quotation for maize will not fall below $4 per bushel next year. Currently, this quote stands at $4,23 per bushel. Demand comes mainly from the Chinese animal feed industry. Although there is plenty of demand, the possibilities to expand the acreage seem limited. La Niña, for example, can cause production in South America to lose 15% layers due to drought. Rabobank therefore expects supply to remain under pressure until 2022.

China is not only ensuring a positive recovery of the maize market, but the soybean market is also benefiting from Chinese demand (+8%). Incidentally, there is a lot of demand for soybeans worldwide, so that there is little margin for supply problems. The fact that there are some problems with the sowing in Brazil therefore causes an upward effect of the quotation. The fear surrounding La Niña is expected to cause a strong rise in the CBoT listing next season. It now stands at $11,81 per bushel, but a quote of $15 in 2021 is not seen as impossible. In the most negative scenario, for example because the weather conditions are not too bad or the demand from China disappears, a price of $10,50 per bushel is used.