Upward trend in grain prices has come to an end

Foto: Ronald Hissink
Foto: Ronald Hissink

The strong price increases on the world grain market, both for futures contracts and in direct trade, have stopped.

Weather conditions have improved slightly, although concerns about drought in a number of areas are certainly not over.

Political complications almost always have an effect on the grain markets. Last week, amid the nervous anticipation of the US presidential elections, there has been some downturn in grain and oilseed prices on the futures markets. The physical markets, too, reflected less enthusiasm.

Wheat prices have fallen

In the United States, the price level of wheat has fallen mainly as a result of (much needed) precipitation. This depresses the wheat (futures) prices. Incidentally, this applies to roughly half of the areas with drought problems, and the crop condition is still not very good. The drought is still a cause for concern for winter wheat both in the southern US cereal regions and in Russia.

Oil prices are under pressure as a result of the fall in consumption due to lockdowns. This has an effect on the corn price, which is also related to the demand for ethanol. The corn harvest in Ukraine continues. Whereas the average hectare yield is increasing, the forecast for the final harvest has been reduced to 30 million tonnes, according to the Netherlands Enterprise Agency. Last season’s harvest amounted to 35.9 million tonnes.

Less worry about corn harvest

In addition, it is important to note that investors have invested a lot in the rising corn market on the Chicago futures market. If the market then develops less favourably, the mood can change significantly. For example, concerns about corn crops in South America that have so far been important to corn price increases have diminished considerably, the agricultural and economic site Agrimoney reports, and the corn harvest in the US is ahead of schedule. Whether China is indeed purchasing as much corn as announced is also being considered with suspicion.

Jack Kwakman Freelance journalist