The price of wheat, corn and soybean are expected to increase for the next while as a result of the worst drought in the U.S. Midwest since 1956. This drought is affecting not only the land and crops in the United States, but other nations around the world as well. For instance, supplies are tightening in Russia, the world’s 4th largest exporter, and crops are threatened in Australia, the world’s second largest exporter. That said, however, other factors such as climate change, and crops’ yielding level, could also fluctuate and change the crop prices.
Wheat
Wheat price is anticipated to increase next week due to an increase in the world demand and decrease in supply. Russia, as one of the world’s biggest wheat exporters, is possibly controlling their export due to the lack of stocks. If the domestic price continues increasing, Russia is likely to curb grain export to protect domestic consumers. At the same time, world’s largest corn importer,Japan, plans to import 1.21 million tons of wheat for animal feed. This number is 58% higher than their estimation in March, indicating that the supply of corn is tightening, which leads to an increase in demand for wheat. Also,Moroccoestimates a 17% import on soft wheat from October to December. Adverse weather depletedMorocco’s soft wheat harvest to 2.74 million tons, while their domestic demand was 7.1 million last year. Morocco is looking at an additional 4.3 million tons of soft wheat import.
By increasing the demand from the importing countries, and decreasing in supply from the major exporters, it led to an increase in wheat price.
Soybean
Soybean futures had its biggest percentage drop in a year, and reached its annual low price on Monday, September 17th. CBOT November soybeans fell 70 cents per bushel. This was resulted from better-than-expected harvest yields in theMidwestfarm belt. Due to the drastic drop in price, major fluctuations can be observed in soybean price, before it stabilized again. Hence, soybean future could be hard to predict for the next week.
Corn
Like soybean, the price for corn is likely to fluctuate a bit. The U.S. Department of Agriculture claims that half of the nation’s corn crops are in poor or very poor conditions. However, corn future has been decreasing at the beginning of last week since part of the corn harvest was completed. As of this weekend, about 60% of the corns were finished for harvesting, and the corn seeds were doing better than expected. Occasional showers were also boosting crops. Nevertheless, the drought has still caused the corn supplies to be constrained. Farmers in theUShave cut feed corn consumptions by 8% to 4.4 billion bushels. Corn users, such asJapan, have been substituting wheat for corn; this could also mean the depressing in price for corn.
In the case of corn, different factors point to different directions. Corn price could either go down or up next week, though it is not likely that it is going to have major increase or decrease in price.
Reference:
http://www.businessweek.com/ap/2012-09-20/rainfall-easing-drought-in-certain-corn-states
http://www.dailytimes.com.pk/default.asp?page=2012%5C09%5C22%5Cstory_22-9-2012_pg5_10
http://www.ft.com/cms/s/0/e04706c0-fca4-11e1-9dd2-00144feabdc0.html#axzz27EbDjNPd
http://online.wsj.com/article/SB10000872396390443995604578002130070385440.html?mod=googlenews_wsj
http://in.reuters.com/article/2012/09/17/markets-grains-idINL3E8KH41Z20120917
http://www.reuters.com/article/2012/09/20/wheat-morocco-idUSL5E8KKOK020120920
http://www.reuters.com/article/2012/09/21/japan-wheat-feed-idUSL4E8KL2DC20120921