The market is closely watching production problems around the world, including Russia, Europe, Argentina and the U.S.
GENEVA, Switzerland (Reuters) — Weather hiccups in major cereal producers have cast a doubt on prospects of a global grain glut and made fundamentals regain their status of key market drivers after being surpassed by politics, notably the war in Ukraine, analysts say.
Wheat prices in Chicago gained 33 per cent in the past two months after falling to a four-year low, supported by mounting concerns on lower volumes even as analysts still expect a record-high crop this year. Corn prices also turned higher, although at a lesser extent.
“Between the Russian frost problem, too much rain in Europe where some fields were flooded, bugs in Argentina and delays on U.S. plantings, Mother Nature is very angry right now and these elements are creating turmoil in the market,” said Dan Basse, president of AgResource.
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“Looking forward, the next two or three weeks will be key for crops. We should have a clearer picture by June 1,” he added.
May frosts in some key-growing regions of Russia, the world’s largest wheat exporter, and drought in the southern regions of the country prompted analysts to lower their crop and export forecasts, although the harvest is still expected to be abundant.
Meanwhile, in Argentina, the world’s No. 3 corn exporter, a severe leafhopper insect outbreak has caused major damage to corn fields, the Rosario grains exchange said.
In the European Union, soft wheat exports are expected to remain stable next season despite a lower harvest seen at a four-year low.
AgResource estimates the world’s wheat harvest, including soft wheat and durum output, at 789 million tonnes. The estimate is slightly above last year but down nine million tonnes below the recent U.S. Department of Agriculture forecast.
“European and U.S. farmers will be the main (beneficiaries) of what is happening. Losers will be importers like Egypt’s (state buyer) GASC and Chinese buyers,” Basse said.
In Paris, François Luguenot, a grain analyst and contributor to French commodities research firm CyclOpe, warned that geopolitical risks remain despite the renewed focus on crop fundamentals as the price driver.
“If tomorrow things flare up in the Black Sea and the boats no longer come out, that’s hot,” he said.
“If we can no longer cross the Strait of Panama or the Suez Canal, it’s hot, too. And that, all of that for the moment is under the rug.”
