Tuesday, 7 January 2020
Major US markets have all been under a degree of pressure in 2020 following the US air strike in Iraq early on Friday 3 January. Chicago wheat (May-20) falling 1.7% from January 2 to close yesterday (6 January). Maize (May-20) has fallen 1.6% since the 2 January and Chicago soyabeans down 1.2%.
Losses have also occurred in UK feed wheat futures (May-20), down £1.50/t from the market high on 2 January to close yesterday at £152.00/t (6 January).
Further escalation in the Middle East would likely add further political pressure to global markets, outweighing the otherwise more buoyant outlook.
Persistent dry weather in Brazil to provide grain market support
The Brazilian first maize crop is facing mounting pressure as dry conditions persist, with soil moisture falling to 5 year lows since September.
The planting window for first maize crop in Brazil is between October and November, with pollination during December and January for harvest beginning in February.
The minimal rainfall and lacking soil moisture has been most notable in the prominent first maize crop producing state of Rio Grande do Sul. Producing 5.8Mt in 2018/19 out of the total 26.2Mt of first maize crop.
The Brazilian organisation Conab was forecasting a rise in production to 6Mt, following a 5% increase in planted area. Yet with water stress having been a concern throughout the development of this important Brazilian domestic crop, production fears are mounting with downward revisions now possible.
Although the first maize crop is the smaller of the two maize harvests in Brazil, a tightening of available domestic supply and rising domestic consumption has led to a rise in internal domestic prices. As internal Brazilian maize prices rise, export prices too may well become elevated, which would provide support to the global grain benchmark of Chicago maize futures.
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