Inside: Grains & Raw Material
Drought has more influence than expected
The most recent WASDE report, prepared by the United States Department of Agriculture (USDA), sent the grain market moving in all directions. The drought in particular has a greater impact than analysts had previously expected.
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Choose the subscription that suits youDe corn prices recently reached its highest point in 7 months. The product benefited from the report as inventories were reported smaller than analysts initially expected. Not only the Argentine production was reduced by 3 million tons (to 36 million tons), but also the Brazilian production estimate was reduced by 0,5 million tons (to 94,5 million tons).
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Corn quotations recently reached their highest level in 7 months.
Greater stock of soybeans
Soybean prices barely reacted to the WASDE report. There was a small decline as global inventories turned out higher than expected. It was initially expected that global inventories would amount to 94,4 million tons, but this has been adjusted to 98,1 million tons.
Since the export in the United States (US) was higher than expected, the price decreases were not too bad. For example, China purchased approximately 9 million tons of soy from the US in week 1,3. Mexico also bought a lot with 307.000 tons of soy. This is striking, because there is still fear about the outcome of the NAFTA Negotiations.
Drought affects again
The situation in Argentina and Brazil continues to occupy the minds. Due to the drought, Argentina's soybean harvest is estimated at 47 million tons, instead of the aforementioned 54 million tons. That would mean that the current harvest will be the lowest in 6 years. On the other hand, the expected Brazilian soybean production will be increased by 1 million tons to 113 million tons.
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Soybean prices showed a small decline after a prolonged upward trend.
Wheat production has been reduced
Growers are also dealing with drought in the Great Plains (US), the main wheat production area. This supports the wheat price. In several states, 50% of wheat is in bad to very bad condition. Due to the drought, the expected Argentine wheat harvest is also lower than in the previous season.
The USDA report reflected these concerns, given that global manufacturing numbers came in lower than analysts had expected. It is expected that almost 269 million tons of wheat will be produced. However, it should also be mentioned that there are problems with the export of wheat from the US. The country has stiff competition from Russia and Argentina.
Wheat quotes on the CBoT were again supported by reports of drought.