Cereal prices on the CBOT and Matif ended slightly higher on Thursday. Drought in the US and Argentina and unrest in the Black Sea region are the main reasons for this.
The drought in the US continues to have an impact on grain prices. Data from the U.S. government's Climate Prediction Center shows that less than average rainfall is expected in November across large parts of the Mississippi River basin. It also remains above-average warm and dry on the southern Plains, which would be bad news for winter wheat germination. More rain is expected later in the winter in the Ohio River basin, which eventually flows into the Mississippi. About 60% of US grain exports leave the country via the Gulf Coast, where the Mississippi flows into.
The drought previously caused a centuries-old shipwreck to resurface and delayed transports of grain, fertilizers, coal and other raw materials. The Climate Prediction Center expects the drought to increase. This also affects wheat cultivation. According to Reuters, 90% of Kansas, the US's largest wheat producer, is experiencing some form of drought, the worst in eight years.
Argentina
The drought also has an impact on wheat cultivation in Argentina. The Buenos Aires grain exchange has lowered the expected wheat harvest for 2022/23 from 16,5 million tons to 15,2 million tons. The reason for this is the persistent drought in the country combined with a cold wave. Frost caused significantly lower yields in important areas sown with wheat on October 8 and 9, the grain exchange reports. It is also reported that 53% of sown areas are experiencing normal to poor conditions. The Rosario grain exchange cut forecast wheat yields to 15 million tons on Wednesday. The US Department of Agriculture estimates the harvest at 17,5 million tons. All estimates are considerably lower than last year's harvest, which amounted to 22,4 million tons.
The CBOT rose slightly on the news from Argentina. However, the International Grains Council (IGC) still maintains the harvest forecast for the 2022/23 season at 792 million tons, more than the 782 million tons of last season. The Matif also rose. A possible cause for this is the pessimism of the Russian government regarding an extension of the grain deal with Ukraine. Because while the UN has high hopes that a new agreement will be reached, the Russians have doubts.
The French consultancy Strategy Grains increased the harvest forecast for European wheat by 1,4 million tons to 125,5 million tons. The export forecast is increased by 2,3 million tons to 31,3 million tons.
Corn
The Buenos Aires Cereals Exchange has reduced the area sown with corn from 7,5 million hectares to 7,3 million hectares. The reason for this is the persistent drought. 17% of this has now been sown, which is 9 percentage points lower than during the previous production cycle. The reason for this is that the soil moisture is not optimal, the grain exchange writes in its report. This can have an impact on yields as early sown maize generally yields more.
French consultancy Strategy Grain has lowered its monthly corn crop forecast for 2022 from 52,9 million tonnes to 50,4 million tonnes. The reason is the drought. This latest forecast is 28% lower than estimated production in 2021 and the lowest corn harvest in the EU in fifteen years. Strategy Grains writes in the report that the market already seemed to be anticipating a significantly lower corn harvest by importing corn en masse. Corn from Ukraine and Brazil offers some breathing space and the consultancy also expects more imports from those regions in the future. Although that depends on the situation in Ukraine and the survival of the grain corridor.
The forecast for European corn imports has been increased to 23 million tons, of which 12,8 million tons will be supplied by Ukraine. A month ago the estimate was 21,4 million tons, of which 10,4 million tons were supplied by Ukraine. A recession could also potentially ease demand for corn, the consultancy reports. Strategy Grains predicts that corn demand from starch manufacturers could drop up to 6% compared to last year.
Corn prices rose on the Matif and CBOT. In Chicago this was also due to traders wanting to cover their short position. The IGC cut global corn production by 2 million tons to 1,17 billion tons.
China
Although soybean traders seemed to fear a declining demand for soybeans and competition for American soybeans from Brazil earlier this week, this turned out to be untrue yesterday. The US Department of Agriculture reported that the US sold 201.000 tons of soybeans to China this week and 132.000 tons to an unknown destination. Last week, a total of 2,234 million tons of soybeans were exported by the US. Of which 1,98 million tons went to China.
The strong export of soybeans did not go unnoticed by traders, causing the price on the CBOT to rise. The International Grains Council has reduced the global soybean harvest to 386 million tonnes, with 2021 million tonnes harvested in 22/355.
Futures
The price of the December wheat contract ended yesterday (20 October) at the Matif cap €338,75 per tonne, up 0,82%. The December wheat contract on the CBOT closed at $8,51 per bushel ($312,69 per tonne), up 1,16%. CBOT corn prices rose to $6,84 per bushel ($269,18 per ton), a growth of 0,81%. The November corn contract on the Matif rose to €332,25 per tonne, a growth of 1,6%. The November soybean contract on the CBOT rose to $13,91 per bushel ($511,10 per tonne), up 1,38%.