La Niña and China push up grain and oilseed prices

Published on : 17/11/2020 – 00:02

Rising prices of corn, wheat, soya …, world agricultural prices are soaring at the same time when the economic crisis linked to Covid is reducing the purchasing power of many consumers. Involved in this food inflation: the massive purchases of China and the return of a climatic phenomenon, the Niña.

La Niña is back and it is this weather phenomenon that is creating the surge that we have seen in the grain and oilseed markets since mid-year. Unlike the Niño, the Niña increases rainfall in Asia, which disrupts the production of palm oil, the prices of which are increasing. On the other hand, La Niña dries up the American continent and Europe.

La Niña threatens corn production in America

And here it is mainly the corn that suffers. Production was revised downward by 40 million tonnes in the United States, compared to April, and by 10 million tonnes in Ukraine, also a major world exporter. ” This is, underlines Michel Portier, director of the consulting company Agritel, a real change in balance in the global maize balance », Which carries in its wake the whole complex of cereals and oilseeds. Wheat is at its highest since 2014, soybeans since 2016.

As China makes record orders

Especially since China orders record quantities of grain. ” This is the other big surprise in world agricultural trade this year, considers the expert. Chinese demand is exploding. While Beijing had established an import quota of 7 million tonnes of corn in the spring, 13 million tonnes should reach Chinese ports according to the US Department of Agriculture, and up to 25 million tonnes »according to Agritel and other independent analysts. China is one of the only growth poles in the world at the moment, it stores corn to rebuild its pig herd.

Withholding of Russian wheat as tenders multiply

Added to this is the retention of Russian grain farmers, they have delayed the sale of their wheat rather than converting it into rubles, whose value is collapsing. At the same time when importing countries are increasing the number of calls for tenders, whether it be Saudi Arabia, Algeria or Morocco: these countries had fallen behind on the usual schedule of their purchases.

Return of a bullish cycle in favor of the falling dollar?

In the longer term, is this the return to a bullish cycle for agricultural commodities, after five years of low prices? In any case, there is a strong comeback in investment funds, with record long positions on the futures markets, notes the policeman of the American stock market. According to Michel Portier, “ asset reallocation is underway in investors’ portfolios Which are currently turning away from the greenback in favor of agricultural commodities.

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