The devastation in the 9 main grain-producing regions of the United States has created uncertainty in the grain market. The market is also affected by trade war news and good European export figures. What is the effect of this on the prices?
By the floods in the American 'Midwest' prices for corn, soy and wheat rise on the CBoT in Chicago; although it remains unclear what the exact consequences of the floods will be. It is now clear that at least 405.000 hectares of agricultural land have been flooded.
The flooding occurred 1 week before the start of the sowing season in the Midwest. It is certain that this has significantly delayed sowing. However, it is still unclear how many hectares will ultimately not be sown. Another factor is that it is currently not dry in the country, which means that flooded areas cannot dry up. In fact, the Midwest is expected to receive 2% to 100% more rain over the next 200 weeks than is normal for this time of year.
Race against the clock
In the Midwest it will be a race against time. The corn must be sown before May 31, and the soybeans must be in the ground by mid-June, otherwise it will no longer be interesting for many farmers to sow. Yields drop quickly after those dates and in many states it is no longer possible to apply for insurance for the crops.
The United States Department of Agriculture (USDA) published recently the expectation for the area and the stock. As a result, prices fell sharply, while the consequences of the floods have hardly been included in this report. It is therefore unclear what the consequence will be; Currently, 0,5 million hectares are flooded, but that is only 1% of the total grain area in the United States (97 million hectares).
trade war
Yet the impact of the floods is clearly visible on the CBoT. All prices showed an increase from mid-March. The falling prices as a result of the USDA's publication have been reversed in April. This mainly has to do with the soybean market, as the trade war is nearing an end.
In Europe, the situation in the United States does have an impact, although the price on the futures market is mainly supported by the new supply of wheat to Algeria and good exports from France. In the long term, however, the fact remains that French growers have been saving their wheat for a long time, in anticipation of higher prices.