Corn stocks in the United States, the world’s largest shipper, continue to decline at a time when agricultural markets are rooted in concerns over tight supplies and food inflation.
The weather is too dry for crops to thrive. Americans go on summer trips, which burn corn fuel mixed with gasoline. China is scouring the global grain market to feed its expanding herd of pigs.
This pulls maize supplies to their lowest since 2013, according to the Ministry of Agriculture monthlyglobal agricultural supply and demand report released Thursday.
Grain prices have already hit eight-year highs recently. Since it is primarily used to feed livestock raised for meat, the expensive corn ultimately adds to the pressure on buyers already struggling with higher grocery bills.
Inflation “is definitely going to increase over the medium term,” said Terry Reilly, senior commodities analyst at Futures International LLC. Rising commodity costs “will essentially raise prices at the retail level at all levels.”
Rising food prices have hit the world, reaching their highest level in nearly a decade, according to a United Nations gauge. Prices paid by American consumers in May saw their biggest annual increase since 2008, around 5%, according to Labor Department data released Thursday.
Corn futures were up 3% after the report at $ 6.2825 a bushel.
The recovery or decline in crop prices largely depends on weather conditions this year. The drought is plaguing some of the world’s largest producers, and with supplies tight, it’s putting daily weather forecasts in the spotlight. Traders and investors are obsessed with rain showers and droughts, even among second-tier growers like North Dakota.
The weather conditions this year are particularly tricky as, while some areas suffer from parched farmland, too much rain in other areas is also a problem for some farmers, which adds to the volatility of the market.
“As drought conditions persist in the US Upper Midwest and farmers struggle with slow emergence rates, corn futures are likely to give soybeans a healthy dose of cash in the weeks to come.” , said Jacquie Holland, analyst at Farm Futures.
There is a rare glimmer of hope in the American report. The world is on the verge of producing the most wheat ever, and global stocks of this staple are expected to increase.
Heavy rains in Europe and the Black Sea region strengthen prospects for the next wheat harvest. Wheat is the first major grain crop collected in the northern hemisphere, and sufficient supplies from major shippers could also help allay some of the supply concerns.
The US monthly fixes the Russian harvest at a record 86 million tonnes and has increased EU supplies by 3.5 million tonnes compared to its May report. The US forecast has also been raised.
Still, markets remain nervous about corn and soybean supplies.
“If we get a short harvest in the United States this year, which is an obvious possibility, we can totally blow up the global corn and soybean balance sheet, ”said Arlan Suderman, chief raw materials economist at StoneX. “This is a very big concern.”
– With the help of Kim Chipman and Dominic Carey
(Updates with chart and analyst quote in the last paragraph.)