Inside: Grains & Raw Material
Week 14: most expensive weather disaster hits grain market
The grain market has been hit by the most expensive weather disaster of 2018. Countries such as Argentina and Uruguay are particularly affected by a prolonged period of drought, which has been going on since November. What effect does this have on the grain market?
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Choose the subscription that suits youThe dry weather is a huge blow to Argentina, where the agricultural sector is the engine of the economy. Insurance broker Aon Benfield indicates that economic losses in those two countries have already reached almost $3,9 billion, making it now the costliest weather disaster of 2018.
The drought not only causes yield loss, but also quality loss. This means that the products yield less. Also in the United States (US) drought is the cause of the poor condition of winter wheat and the later sowing of spring wheat.
Rising rating
All in all, conditions are driving wheat prices to rise, despite high world inventories and the unexpected expansion of the wheat area in the U.S. According to the US Department of Agriculture, USDA, that area increases by 3% to 19,2 million hectares, of which 13,3 million hectares are winter wheat.
The wheat price on the CBoT in Chicago is slowly recovering after falling sharply at the end of last month due to expected rain. The stock closed on Thursday, April 5, at $170,77 per tonne. Although the drought suggests that the quotations are slightly higher than last year, the current quotation is comparable to the quotation of 2016 (during the same period).
Matif in Paris
The Matif in Paris is riding the wave of developments on the American stock exchanges and closed on Thursday, April 5, at €166,75 per tonne (quotation for May). It is an increase of €3,75, compared to the week before. The less good grain exports from Europe received a boost, because Algeria and Egypt bought large quantities of milling wheat.
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The wheat quotation on the Matif in Paris followed the rise on the American stock exchange.
Trade dispute
Corn prices rose sharply, partly because the recent USDA report stated that the corn area in the US will decrease next season to 36,1 million hectares (-2%). However, the upward trend in the listing is under pressure due to the announced levy on ethanol by China. It trade conflict between the US and China also causes soybean prices to fluctuate considerably.