Analysts CoBank believe that commodity prices have already passed cyclical lows

Despite the excess supply of grains and oilseeds on the global market, increased biofuel production and improved export conditions are boosting hopes that prices have passed their cyclical lows, analysts at CoBank Knowledge Exchange report in a new forecast for next year.

Despite the increase in soybean sales to China, the US is unlikely to be able to restore historical export volumes, as Brazilian soybeans remain much cheaper. In addition, record oilseed production in countries located near China, such as Kazakhstan, will reduce the competitiveness of American soybeans in the Chinese market.

Almost all exporting countries have significant grain stocks and expect large corn and wheat harvests, which will complicate exports from the U.S. If China resumes purchases of American sorghum, this will significantly support grain prices.

Meanwhile, demand for U.S. grains and oilseeds will continue to grow as low prices stimulate consumption. Mexico, the top buyer of U.S. corn, wheat and rice, and the second-largest buyer of soybeans, will increase supplies. Demand for U.S. wheat and flour will grow in sub-Saharan Africa, and for soybeans and soybean meal in the Middle East and Southeast Asia.

Increasing global biofuel production will help boost demand for grains and oilseeds. In the US, the Environmental Protection Agency (EPA) is expected to decide on blending standards and exemptions for small refineries, which will provide market stability and stimulate demand for fats and vegetable oils as feedstocks for biofuel producers.

Strengthening requirements for biofuel content in diesel fuel in Indonesia and Brazil will reduce global vegetable oil supplies and increase the profitability of refining.

The soybean meal export market is becoming increasingly competitive due to the expansion of oilseed processing capacity in the US and Brazil to increase the production of biofuel oils. Therefore, Southeast Asia, Latin America and the Middle East will become regions of competition for soybean meal buyers between the US and Brazil.

Low grain prices will stimulate feed consumption in livestock farming, but the increase in feed demand will be moderate.

High production costs will force farmers to abandon corn cultivation and switch to cheaper alternatives, as prices for almost all crops are now below their cost.

Tags: grain, prices, soybean