International grain markets ended December on a positive note. Green figures are also quoted on the first trading day of 2021. The question is how long this positive mood will last this year. Meanwhile, the quotations of maize and soya are reaching rare heights.
In the United States in particular, the CBoT quotations for soy and corn are bursting at the seams. The price has not been this high since 2014. This is a combination of high demand for feed raw materials and lower production in South America. It is becoming increasingly clear that less is being harvested in Brazil and Argentina in particular. This while Argentina accounts for 22% of global corn exports.
Argentinian export ban
Argentina's agriculture ministry has announced that the export of grain corn has been blocked until March 1 to ensure that the country retains sufficient product. This ensures that more trading is done on the US futures market. The decision follows a 3-week strike that also affected the Argentine export market. More strikes were announced at the beginning of January.
Supplies of corn and soy are declining worldwide as smaller harvests are expected in South America. The hot and dry weather is the reason for this. The expectations for the coming period also point to this.
China on the move
Dry weather in Brazil is sending soybean prices to price levels not seen since June 2014. The soy area is increasing in this country, but drought is limiting production. Right now, China is a major buyer on the world market for both soy and corn. The country is building up its pig herd and needs a lot of feed raw materials. In the country, commodity prices have risen to record highs at auctions organized by the Chinese government. The enormous grain reserves that the country once had have shrunk considerably.
According to reports from Reuters, the corn area in the country will increase this year. This is at the expense of soy, which is mainly grown for human consumption. The areas of rice and wheat are also increasing or at least remaining stable.
Russia decides
The export duties that Russia announced in December are still reverberating on the wheat market. This news ensured renewed confidence in a higher price, from which Europe also benefited. To date, Russia's wheat exports have had their best season ever. Fears of a high internal market price have led to exports being regulated. Russian arable farmers are reluctant to sell stocks. Only when they have to incur cultivation costs this spring (fertilizer and crop protection) will there be reason to generate cash flow.
Europe is experiencing a very mild and wet winter. This provides good growing conditions for winter grains. The area throughout Europe is expected to grow by 11%. In France, the largest wheat producer in the European Union, the figures are different than expected. According to the agriculture ministry, 4,73 million hectares of winter wheat have been sown. This is 12,4% more than last year, but still 2% below the 5-year average. The area of barley has increased by 7% and that of rapeseed remains the same.
Elsewhere in Europe, oilseed rape plots suffered from wet weather conditions in October. Many plots have also not been sown due to late timing. Arable farmers have opted for wheat here.
Drought
There is little real winter in Russia and Ukraine for the time being. A snow cover is required on the one hand to protect crops against frost and on the other hand to replenish moisture reserves. Something that was problematic last year. This also applies to the United States, where it is very dry in many parts. Areas where winter wheat grows are particularly affected by this. There is also little snow, which makes crops sensitive to possible frost damage.
Almost the entire American region where durum wheat is grown is experiencing drought problems. It is especially dry in the largest wheat state, Kansas. Only 33% of wheat is rated as good to excellent by the US Department of Agriculture (USDA).
Pride after the fall?
Only this spring can the balance be drawn up regarding the wheat and how this will suit the winter. Until then, there is little exciting on that front, or cold will suddenly arrive in areas where the grains have not been hardened off. The price increase of wheat is less explosive than that of other commodities and is therefore more stable. The soy and corn markets still have sufficient arguments to maintain price increases. As the price continues to increase, the chance of a reduction increases. For the American export market there is still the advantage of a relatively low dollar exchange rate.
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