IFC Markets | Jul 27, 2016 09:34AM ET
Weather affects grain crop
Wheat prices declined by 20% over the last 8 weeks and have recently updated a 10-year minimum. Farmers of almost all countries express dissatisfaction with low prices. Australian farmers have decided to reduce sales and they are going to build a number of granaries in the hope that the prices will rise in the future. Will this contribute to the increase in wheat prices?
Cooperative Bulk Handling, the largest Australian grain exporter, said that it is expecting a record grain harvest of 16 million tons this year and it is going to build granaries considering the current prices underestimated. The total wheat crop in Australia may exceed the official forecast of 25, 4 million tons. Theoretically, the rest of farmers may join this cooperative. The decision to hold of selling grains is based on the assumption that La Niña hurricane can develop in the Pacific Ocean. It can strongly damage agriculture.
According to the American state meteorological agency Climate Prediction Center, there is now a 55-60% chance that La Niña will develop. It develops in August-October. There is not much time left, therefore weather forecasts will be refined in the coming weeks. They can have a significant impact on wheat prices and other agricultural futures.
Last week, some European agricultural agencies stated that because of the bad weather, wheat crop in France may be the lowest for the last 13 years. In addition, grain production forecasts were reduced in other EU countries as well. Brazilian agency Cepea reported about the completion of corn planting in the country. It noted that there remains a risk of damage of part of the crops in Paraná state in southern Brazil due to drought.
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