The global grain glut and weaker demand from China will keep grain prices low into next year, according to analysts at Olam International, one of the world’s largest commodities traders, reports Bloomberg.
“Wheat prices have fallen to their lowest in 10 years, while corn is at levels last seen during the global financial crisis, as farmers in key growing regions, including the U.S. and Russia, harvest bumper crops,” says Bloomberg. “Low grain prices have been a boon for consumers and companies such as Nestle SA and Kellogg Co. but are hurting farmers and agribusiness including Deere & Co., the world’s largest manufacturer of tractors and combines.”
Olam sees little chance that a La Niña weather event—which would make parts of the U.S. colder, Brazil drier, and Australia wetter—will cut into supplies and drive down costs. “Other meteorological agencies … including the U.S. Climate Prediction Center, have recently lowered the chances of the phenomenon emerging this year or in early 2017,” says Bloomberg.
Olam stresses that it does not consider this the start of an extended period of extremely low grain prices, describing it as “a cyclical phenomenon.”
On Monday the USDA released its monthly Crop Progress and World Agriculture Supply and Demand Estimates reports, which were in line with analysts forecasts for low prices and oversupply. “Regardless of the numbers, you just have too much grain the U.S. and in the world,” Don Roose with U.S. Commodities said in an interview with Agri-Pulse.
Both corn and soybean crops in the U.S. are still on pace to set records, according to the USDA reports. “Total [U.S.] rice production was lowered 7.2 million hundredweight due to lower yield and impact on harvested area due to flooding in Southern states,” said Agri-Pulse. “However, global rice supplies were raised 1.8 million metric tons, largely on projected increase in harvested area in India.”