Grain prices retreat further due to favourable crop prospects

The December contract for US wheat closed trading yesterday at 476 US cents per bushel and thus 1.5% down on the day before. European wheat traded in Paris shed 1.6% and closed at a ten-month low of €169 per ton. 

Although corn was likewise unable to resist the downswing in grain prices entirely, it lost only 0.4% and was priced at 367 US cents per bushel by close of trading. Grain prices are weak because record crops are anticipated and worldwide supply is ample. 

If this picture is confirmed when the latest forecasts of the US Department of Agriculture are published at the end of next week, prices could well find themselves under further pressure. Despite a pronounced El Niño, even the outlook for the Australian wheat crop - which is normally hit hard by this weather phenomenon - remains unaffected so far. 

"Grain prices are therefore likely to remain under pressure in the short term. That said, the market is currently pricing in the best of all possible scenarios and in our opinion is underestimating the risk posed by possible production outages in Australia and increased demand", says Commerzbank.