Cotton, Wheat and Corn Make Ground

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You will find the latest rural and agribusiness insights in this story.
Slowly but surely the picture for 2011 is starting to emerge. The USDA planting indications were released earlier this month, with cotton (11%), wheat (8.5%) and corn (4.5%) showing large estimated increases on 2010 numbers. Predictions of a 1% fall indicate a less positive outlook for oil seeds.

Demand for cotton looks likely to remain strong. Despite the recent availability of the southern hemisphere crop, prices are continuing to sit around $600/bale.
Last week's USDA supply and demand estimates for 2011 revealed only minor changes to last month's figures. The only exception was a predicted reduction in corn consumption through to the end of 2011 - but with prices currently trending up, the markets think the USDA has got it wrong.
Wheat prices have also been rising recently, (although not as fast as corn) and the corn wheat spread has been in decline, implying potential upside to wheat going forward.
Work has begun on Bankwest's 2011/12 grain estimates. Thus far indications are for continued growth in global demand (2,250Mt for cereals), albeit at a reduced pace as US ethanol demand tapers. Supply is harder to gauge; the IGC is predicting 2,255Mt, while our estimates are a little lower at 2,240Mt. With supply and demand roughly in balance the determinant - as always - will be yields. Even if we see some production increases next year, the low level of stocks on hand suggest commodity prices are likely to stay up through the 2011 season.

COMMODITIES
WHEAT
The planting intentions report triggered a rebound in wheat prices, which was also driven by weather concerns in the US winter crop regions and parts of Europe. Corn prices have been driving the price for wheat higher, with the market apparently disregarding USDA predictions on stock rationing in 2011/12. There are concerns building about stock levels this year and next.
BARLEY
Following a recovery in February, barley prices have since softened and are currently sitting at $300/t for new season malt barley and $240/t for feed. In Victoria, where parts of the rail system are inoperative due to flooding, there's been strong demand for old season feed barley with prices of $245/t delivered to port being offered. Corn futures support feed barley prices.
CANOLA
Canola cash prices have recently regained territory, climbing back up to $610/t with soybean stocks recorded down 2% year on year. Soybeans and, in northern regions, canola will be forced to compete for acreage with corn and wheat in North America, but it's nonetheless anticipated that this year's oilseed crop will be third largest on record. The last time oil was trading at its current price, oilseed prices began to be driven by oil, rather than food crops, so if oil prices continue to rise canola has potential to take off.
LIVESTOCK
Saleyard lamb prices set new records with trade lambs averaging 639c/kg in March. As farmers opt to hold stock or purchase more, rather than sell, the market is still heavily supported by restocker competition. The beef market, meanwhile, has followed the lamb market trend; low supply and strong competition has pushed the EYCI to 412c/kg.
WOOL
After trading comfortably within an upward trend since November, the EMI has just recorded its first lower week-on-week level in almost two months, easing to 1375c. China's strong raw wool demand continues to largely support the market, with increases in supply not anticipated over the next year.