In contrast to the European maize market, the American market feels firmer. This analysis explains what is going on and whether prices can hold up.
While the corn quotation on the Matif reached a low of €153 per tonne last week, on Monday at 14:00 PM the current position of the January 2018 contract is €155. Despite these green figures, the prospects for the European corn market are not very good. The ample supply makes the raw material relatively cheap and changes are not likely in the coming months.
Highest level in 3 months
This is different in the United States (US). Grain maize is taking off on the Chicago stock exchange and on Monday, December 4, it reached its highest level since the beginning of September. The increase is triggered by concerns about drought in Argentina, which could cause yields to disappoint. There are areas in the corn belt that received some relief from precipitation, but the drought remains a concern for several growing areas.
In Brazil, corn production dropped by 17% in the 2017/2018 season. This is partly caused by a smaller area and lower prices. Production at 90.52 million tons is much lower than last season, when it was 108.87 million tons.
Another mood-setting factor is China's recent purchase order. Record high domestic corn prices are pushing buyers toward cheaper imported corn. The expected local shortage also provides support.
Will profits last?
Although the American corn market is now in an upward trend, it is not expected that profits will continue rapidly. It appears that any further climb will be curbed by rising US production. Farmers are expected to shrink in wheat and expand in soybeans and corn.