Page 141 - Food Outlook

Futures markets
Contributed by Ann Berg (International Consultant)
Market indicators
Except for a brief upward spike during early July, futures prices for wheat, maize and soybeans traded in a relatively narrow channel over the past six months, as weather threats to global production and trade restrictions hinted by the US did not materialize. US wheat prices remained at the lower end of their five-year average as a result
of burgeoning production elsewhere, despite crop year 2017/18 being the lowest US all-wheat production in
15 years. Maize futures prices similarly traded near the low end of their five-year average, tracking slightly above last year’s values, which slid to multi-year lows following a record crop. Soybean prices followed a pattern similar to that of 2015, when they had declined by 30 percent in value before stabilizing.
Record exports from the US for 2016/17 may indicate that prices at these low levels have found their equilibrium values, at least until planting season commences again
in spring 2018. At a recent outlook conference, which included the US Department of Agriculture (USDA), the Congressional Budget Office (CBO), the Food and Agricultural Policy Research Institute (FAPRI) and the Chicago Mercantile Exchange (CME), economists forecast a five-year continuation of current prices at around USD 140 for maize and USD 350 for soybeans, while omitting a wheat price forecast, which is increasingly dependent on uncertain global factors.
Exogenous markets, such as foreign exchange and energy, exhibited small adjustments as the USD lost value from a multi-year high reached in late 2016 and crude oil price
USD per tonne
700
500
300
100 2013
Percent
90
60
30
600
400
200
0
2014 2015 2016 2017
0
2014 2015 2016 2017
2013
CME futures prices
CME futures volumes
Thousand contracts
2014 2015
Wheat Maize
2016
2017
Soybeans
2013
Historical volatility (30 days)
Wheat Maize
Soybeans
Wheat Maize
Soybeans
FOOD OUTLOOK NOVEMBER 2017
0
2014 2015 2016 2017
Percent
60
40
20
2013
Wheat Maize
Implied volatility
Soybeans
135