The price of grain maize on the futures markets in the US and Europe has rocketed over the past month. May will also start with price increases. The signals for this feed raw material are green, which in turn has a major effect on other grains such as wheat. How about that?
Due to the later harvest time - compared to wheat - the old harvest has a longer trading period. On the Matif, the June contract is the most prominent, followed by the August contract. Then the switch is made to the new harvest (November). At the CBoT in Chicago there are the May and July contracts for the old harvest. The first expires on May 14, which gives trade an extra boost.
Price record
On Friday, April 30, the futures market in Paris closed at €241,25 for the old crop (June). The physical price for EU feed maize is even €260,50. A level that has not occurred in more than 10 years. This is caused by an extremely tight balance sheet and high demand for feed raw materials. In the US, corn prices have risen even faster. There, the futures market closed at $291,33 per ton at the end of April. The highest price in 8 years.
Two factors play an important role. To start with, it is the South American corn harvest in Argentina, but especially Brazil. This so-called safrinha corn is sown immediately after the soybeans while the combines are still in the field. Because the soy harvest was considerably delayed (due to rainfall), it was also not possible to sow corn on time. When it was finally possible to sow, there was no rain, which meant poor development. No significant rain is expected for the next 2 weeks. Due to the later sowing date and slow emergence, corn crops will soon have to mature in the warm Brazilian summer months. Far from ideal.
Eyes on US
This situation results in the US having to supply the world with corn. China in particular has already drawn heavily on supplies, which are therefore extremely tight. A disappointing South American harvest therefore means a 'perfect storm' on the corn market. The old harvest can benefit from this in the coming months, because that demand will almost certainly continue. There are simply no alternatives. Harvest is currently underway in Argentina, but not everything is going well there either. As is now customary, strikes throw sand in the country's export engine.
Even though it is cold and dry in some parts of the Midwest and Plains, farmers are still planting. Today (Monday, May 3), the US Department of Agriculture (USDA) will release new figures on sowing progress. This is ahead of the multi-year average due to the drought. Analysts are especially looking forward to germination and development in the cold and dry weather. In some parts of the US, such as the southern part of the Plains, a lot of precipitation can fall.
Conservative figures
The USDA has so far been cautious in its figures regarding exports, ending stocks and the new harvest. For example, the Agriculture Ministry still estimates the Brazilian corn harvest at 109 million tons, while some analyst firms are already at 104 million tons due to the drought and new cuts are in the pipeline. The high demand for corn also has an impact on ending stocks.
The current price level for corn ensures that buyers, especially from China, are increasingly choosing wheat in their rations. This supports the pricing of this commodity, which is also noticed in Europe. If the corn price remains at an above-average level, this will also place a floor in the wheat market.
Tightness continues
The cold weather is not yet causing problems with corn crops in Europe. In Ukraine - the largest corn producer - a record harvest of 36,6 million tons is expected. This is 6,3 million tons more than a year earlier, when drought caused low yields. Until the new harvest arrives, the market situation will remain tight on the global market.