• Global grain prices are falling, and have been for some time. A combination of global factors led to this result.
At a time when the already high prices of many global staples – including cocoa, sugar and olive oil – have risen dramatically, several key staple crops are surprisingly becoming cheaper.
The price of cereal crops, specifically wheat, corn and even soybeans, is falling. This phenomenon is due to an accumulation of influences, but most significantly, an influx of new crops from Europe, the USA and the Black Sea region.
Analysts point out that the current decline in grain prices is not an exceptional situation, but follows a broader trend. There is usually a seasonal drop in prices with the arrival of new harvests and the start of a new marketing year, but the current decline is also due to high global production and weaker demand, particularly from key buyers such as China.
Futures wheat prices continue to decline due to the influx of new crops from Europe, the Black Sea region and the US.
World wheat harvest estimates for July and August 2024/25 ale United States Department of Agriculture (USDA), which expects the season to reach 798,3 million tons, further strengthened the downward trajectory of these prices, surprising many market analysts.
Absent demand from China is also driving prices down
Part of the downward trend in prices was due to lower demand from China. One of the reasons invoked by specialists, which determined this decrease, is the decrease in China's economic growth.
Second, several traders in the market inside China's borders suggest that there is a large domestic supply of wheat at the moment, meaning they no longer need to look outside.
Finally, China's pig herds have been reduced, which means that the need for grain has also decreased.
But demand from China is likely to pick up again later in the year, particularly when the US wheat harvest is ready, which could lead to renewed buying activity.
Favorable growing conditions in the US and Canada are bolstering expectations for large spring wheat harvests later this year, playing a key role in lowering wheat prices. Overall production in both countries is expected to exceed the previous year's levels due to increased yields. Major producers and exporters of wheat, the two countries together contribute about 22% of global wheat exports.
Corn prices are also falling
In the corn market, prices are the lowest in the last four years. This downward trend is driven in part by good weather conditions as well as, again, subdued demand from China.
And the most important cause is the retention of grain stocks by farmers. According to analysts, they have the highest grain stocks since 1988, which is due to both high production costs and low prices.
According to the August USDA report, corn production is expected to reach 1,2 billion tons worldwide for the 2024/25 season. This is driven by an increase in US production, estimated at 394,7 million tonnes.
The total output of other key exporters, such as Argentina, Brazil and Ukraine, also increased significantly.
Brazil and Argentina together account for about 45 percent of world corn exports, and a bumper crop in both countries can put downward pressure on prices.
Impact on underdeveloped countries
Falling grain prices are impacting many more people than just futures holders. Low-income countries are more likely to rely on grains for a higher percentage of calories because of the high price of meat. In general, meeting the required caloric intake from grains tends to be less expensive than a nutritionally balanced diet.
right FAO, Bangladesh, Mali and Ethiopia rely on cereals for 70% of their calories. The UN considers all these countries right "least developed". Afghanistan, Madagascar, Myanmar, Yemen, Egypt, Bhutan, Lesotho and the Philippines rely on cereals for between 60% and 69% of their calories.
In addition, some countries rely more heavily on imports than others, depending on their domestic capacity. Yemen, for example, imports more than 90% of its food because the landscape and environment limit its domestic capacity.
Soybean prices also continue to fall
Unaffected by recent events such as flooding in Brazil, soybean prices on the Chicago Board of Trade (CBOT) hit their lowest level in four years.
The combination of ample supplies and weak demand, backed by a pessimistic USDA report in August, is putting pressure on both grain and oil prices, pushing them down.
However, the grain world is also experiencing price increases. Although slightly down in July, Indian rice prices have generally been on an upward trajectory. The data shows that in January of this year, they reached a maximum level in the last 15 years. The reason is due to the trade restrictions imposed by the Indian government in the form of bans and taxes.
According to experts, the restrictions could be relaxed to avoid a surplus before the arrival of the new harvest in October. This could reduce the price of Asian rice, a price reduction that would benefit West Africa and the Middle East, regions that depend on Indian rice.
Article written by Gabriela Dan, Editor-in-Chief Arta Albă
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