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HomeLatest NewsWheat, corn, soybeans... The euro drives the collapse of agricultural grain prices

Wheat, corn, soybeans… The euro drives the collapse of agricultural grain prices

Date: June 9, 2023 Time: 13:29:48

The war in Ukraine short-circuited world grain markets in the first of 2022 both in direct production from the Black Sea region, as well as the secondary effects of the initial shortage of fertilizers and the diesel produced by Russia, omnipresent in all activities related to energy, metals, agriculture and raw materials in general.

The farmers, above all, put their hands up in the face of the hyperinflation of costs that occurred on their farms to feed their respective cabins with fodder, feed and grain during the winter, but reality has changed completely and prices return to pre-war levels. In other words, disinflation is accelerating in one of the most opaque sectors in price formation.

But the records in the prices that were abandoned to see in the contracts on wheat (13 dollars per bushel), oats (7.7 dollars), soybeans (17.3 dollars) or corn (8.1 dollars) in May 2022 have given way to a collapse with few precedents. The graphs reveal price falls that warn of a bear market in dollars, which is also becoming even cheaper for European importers due to the rise of the euro against the dollar, which is 16% above its 2022 lows.

Soybean futures on the Chicago Stock Exchange accumulate falls of more than 10% from the highs of the year. In recent days, this downward trend has resumed due to symptoms of low demand for US supplies and competition from the Brazilian crop. Wheat accumulates a 43% collapse in seven months and is at its lowest since October 2021, before the inflationary wave caused by the Russian invasion of Ukraine.

Corn prices have also cut about 22% to $6.7 a bushel, according to the Chicago Stock Exchange. Oats are the cereal with the greatest cumulative drop (-55%) from their highs, although it is also the one that has been stabilized for the longest time (six months) at around 3.6 dollars. Some operators, quoted by Reuters, predict greater downward pressure due to healthy production levels in the US, the drop in its imports and the expected increase in the harvest in Brazil, one of the main players in the agricultural market worldwide. .

Argentina, another of the major players in the sector, is making reductions in its crops due to the drought that has isolated some producing regions, especially soybeans. In the Black Sea region, Ukraine has exported almost 23.6 million tons of grain so far in the 2022/23 season, which means that production has barely suffered a 29% decline despite the war. The export agreements sponsored by Turkey have allowed the opening of neutral corridors so that the cereal continues to leave.

According to the Annual Summary of Crop Production 2022, published last Thursday by the National Agricultural Statistics Service of the United States Department of Agriculture (USDA), the production of both corn (-9%) and soybean (-4% ) will need compared to the previous year, while winter wheat planting increased 11% to 2023. The 2022 US inventory report reveals declines of 7% in corn storage, 4% in soybeans and 7% in wheat.

Bank of America, world fertilizer prices climbed at least 300% from 2020 to mid-2022 Its analysts estimate that, for example, this increase could possibly increase the price of at least $1 and $0.6 per bushel of corn and soybean, respectively.

The experts recall the direct relationship between the use of fertilizers and the increase in agricultural production, so they infer that the fall in 2022 may be due to the lower use of these agricultural catalysts. “Estimating the impact of reduced fertilizer use on crop yields is challenging due to limited information and other factors affecting yields, but there is a positive relationship between fertilizer use on farmland and crop yields.” “Cereal crops In addition, the impact on crops depends on who reduces their use, since the poorest countries can see a greater difference in yields due to reduced fertilizer use,” they point out.

Puck Henry
Puck Henry
Puck Henry is an editor for ePrimefeed covering all types of news.

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