The US presidential election will take place on November 3, 2020. Incumbent President Donald Trump will then take on his Democratic counterpart. It is certain that the international media will be full of this political game again next year. This also influences the grain market.
Mainly the commodities maize and soya could be affected by the presidential elections. In 2004, 2008, 2012 and 2016, these markets rallied at the time of the elections. However, there are more reasons to believe in a price spike other than election time.
Positive sentiment
Over the past 6 months, sentiment in the US grain market has turned from negative to positive. If the production next year in the US is disappointing, it will immediately have a (major) effect. Production in South America can also have consequences for the northern neighbors. Due to drought, more and more comments are already being made about, among other things, the maize harvest.
In their latest report, the USDA Department of Agriculture expects a closing stock of 1,929 billion bushels of corn and 460 million bushels of soybean. The previous estimates were 2,4 billion and 913 million bushel.
Price increase real?
Looking at the development of the soybean market, it is clear that the election period often resulted in a sharp price increase. For 2020, analysts expect a smaller rally than the past has shown. The hunch for this is that market conditions are different now, but not impossible. For maize, the cards are shuffled slightly more favorably.
Beyond the distant future, the US grain market has more to look forward to. For example, there is talk of an import deal from China for wheat. For now, it's just speculation. The past has shown that the Chinese are not always reliable in this area. 2019 has also proved that.
trade agreement
The market has entered the Christmas season positively, after it was announced that the US and China concluded a preliminary trade agreement. A victory that Trump could use well for the upcoming elections. Analysts are now wondering whether China will continue knocking for US soy, or whether it will turn its attention back to South America when the crop becomes available there. The maize export also has a lot to make up for. The volume sold is currently 30% behind USDA estimates.
The soy and corn acreage in the US is not expected to decrease much before 2020. However, the wheat acreage is an interesting one to follow. The USDA will announce more about this in early January. The final estimate for the 2019 harvest, which the market is looking forward to, will also come then. Until then, the market will continue to feel positive.
Wheat rates
What will we notice in Europe from a volatile market in 2020? It can (temporarily) mean more expensive feed raw materials, but followed by a significant price drop. It can actually turn out positive. The European wheat futures market measures itself against the price in Chicago and sees it positively. On Monday, December 30, the figures are also green, with a quotation of €189,50 per tonne for the March contract. The September contract is trading at €185,75 and the December contract at €188,25. Relatively high price levels, which hedgers can take advantage of.
Europe is still under the spell of acreage figures here. France, Germany and the United Kingdom are all responsible for cuts. This is especially the case in the latter country. Ukraine would also enter the new year with less wheat. Drought has caused problems with the turnout there.