Wheat and maize prices fall despite drought

Corn and wheat prices have been falling since the beginning of this week on both the Matif in Paris and the CBoT in Chicago. Besides the fact that the weaker dollar and firmer euro did not help the mood, the decline is mainly due to the good conditions of the wheat and maize in the United States (US).

In Europe, the situation is less rosy, which is mainly caused by drought in key production areas. This is also reflected in the recently published report by the European Commission (EC) on the situation last season and the expectations for the coming season.

Lower grain yields
According to the EC, the grain harvest for the 2017/2018 season amounted to 307,1 million tons, which is almost 1% more than the 5-year average. This is striking, because a decrease in the acreage was visible. The EC also expects that grain production will not be as great this season, due to the less favorable weather conditions. According to the EC, production in the European Union (EU) will fall by 2,5%.

The EC also expects that the wheat yield in the Baltic States, Finland, Sweden and Germany will fall by 3% to 5%. In addition, the Commission expects a decrease of 1% in France, compared to the 5-year average. The harvest in Romania and Bulgaria will probably also be disappointing.

The above, together with the expected lower revenues in Russia and Ukraine, will result in lower revenues in the European continent. For the coming season, the EC expects the yields of common wheat to fall by 3% to 138 million tons (compared to last year).

Europe is also struggling with a considerable wheat stock, because the export leaves something to be desired. Last year's revenues also contribute to the large stocks. The EC report shows that the soft wheat harvest last year amounted to 141,8 million tons, well above the 5-year average. In particular, production in France and Romania rose strongly, by 33% and 17% respectively.

Falling corn prices
Corn prices are also declining; the Matif is currently quoted at around €170 per tonne. On the CBoT, the decline in maize prices is driven by weather forecasts (reducing heat), which affects the critical pollination phase. In the US, the current weather conditions are very good for the maize, so there are good expectations for the yields.

However, the crops in Europe are in much less good shape, the EC reports. The important maize areas (Scandinavia, the states around the Baltic Sea, Germany and a number of central Member States) have to deal with high temperatures and a lack of rain.

Soy price stabilizes 
On the other hand, the price for soybeans has stabilized somewhat, but at a low level. On the CBoT, the quote is currently hovering around $266 per tonne. According to the EC, production in the EU is increasing very quickly, which amounts to a production that is no less than 45% higher than last year. This means that imports were lower last season than in previous years.

The expectation for the coming season is mainly that the acreage of soybeans in the EU will decrease. Nevertheless, the EC expects soy production to increase by 5% to 2,8 million tons.A declining wheat price, despite concerns about drought in the crop.