Analysts are warning of impending price increases for maize and wheat, after the USDA’s latest report on grains and oilseeds suggested stocks were tighter than previously expected.

In its quarterly update, published last Friday (11 January), the USDA said maize stocks stood at 8,030 million bushels on 1 December - the consensus estimate among analysts and industry experts had been 8,219 million bushels.

On wheat, the USDA said ending stocks for the 2012/13 season were now forecast to come in at 716 million bushels instead of the previously expected 754 million, as a result of increased demand.

Commodity prices: palm oil prices recover

Palm oil prices in the EU continue to recover from the two-year low they reached in December, moving up by 7% to £553.7/tonne over the past month. On a year-on-year basis, however, palm oil remains nearly 20% cheaper, thanks to good global supply and reduced demand.

In the wheat markets, the global 2012/13 wheat production forecast was this month raised by 3.7 million tonnes to 655.1 million tonnes, prompting a slight month-on-month drop in French milling wheat prices. Year-on-year, prices remain elevated - at £198.8/tonne, they are currently up 21.1%.

Meanwhile, durum wheat prices in the EU have become 31% cheaper over the past year, as the market returns to normal after the high prices of 2011/12.

Macquarie described the maize figures as “shocking” and said they underlined how strong demand for animal feed was at the moment. “The net effect was to drop ending stocks to 602 million bushels - the lowest stock level since the 95/96 season and one of the tightest balance sheets in history in terms of stocks to use,” it said.

Macquarie added that although it disagreed with some of the USDA’s implied feed estimates - possibly because the agency overestimated beginning stocks or miscalculated 2012/13 production figures - demand for animal feed needed to come down. “At the end of the day, demand is still running too strong, so further rationing will be required,” it said.

Rabobank agreed the figures showed demand for animal feed had continued at an “unsustainable pace” and, after a recent drop in feed prices, higher maize prices were now needed to ration demand. The bank added it also expected wheat prices to go up.

The USDA’s figures for soybeans were largely in line with market expectations, with the agency raising its US production estimate by 44 million bushels to 3,015 million bushels on the back of improved yields and a larger harvest area.