Agri­cul­tur­al mar­ket – insta­bil­i­ty of fluc­tu­at­ing grain prices

Ulti­mate­ly, mar­ket­ing the crop yield gives some indi­ca­tion from the eco­nom­ic view­point as to how suc­cess­ful the crop has been. The pro­duc­tion man­age­ment site focus­es on eco­nom­i­cal­ly viable busi­ness activ­i­ty and good risk man­age­ment with respect to suit­able mar­ket­ing strate­gies. For this pur­pose the indi­vid­ual fac­tors, such as stor­age capac­i­ty and weath­er con­di­tions must be tak­en into account. Sell­ing at the right moment is cru­cial, for grain prices are deter­mined not sole­ly by domes­tic fac­tors, but are sub­ject to con­stant fluc­tu­a­tions in price, which are influ­enced by glob­al mar­ket fac­tors. There­fore, the sit­u­a­tion on both the domes­tic and the inter­na­tion­al mar­kets must be con­sid­ered, in order to max­imise earnings.

Esti­mates of inter­na­tion­al cere­al pro­duc­tion and har­vests for 2020 

There is a vari­ety of Smart Farm­ing solu­tions, such as Smart­phone apps avail­able to assist in watch­ing the agri­cul­tur­al mar­kets and grain prices. For exam­ple, it is pos­si­ble to install an alarm, which sounds if grain prices on the Paris futures mar­ket ((Marché de Terme Inter­na­tion­al de France MATIF) are exceed­ed or fall short. In addi­tion, it is now even pos­si­ble to sell cere­als by means of a vari­ety of apps. Nev­er­the­less the ques­tion remains, what crop yield should be expect­ed and how are mar­ket prices devel­op­ing. The last few years of drought have left hard­ly any fod­der reserves, which means that high crop yields are desir­able, all the more so since, for instance, the glob­al require­ment for wheat has increased slight­ly. This has been caused by increased use of fod­der in Rus­sia and high­er con­sump­tion in Pak­istan and the EU as a food­stuff, seeds and cere­al for indus­tri­al use.

Wheat: Because, just as in the pre­vi­ous years, it has been too dry in Ger­many in 2020, wheat crop yields have on aver­age, with region­al fluc­tu­a­tions, been poor. Con­verse­ly, in the EU com­mon wheat pro­duc­tion fell short of the fore­casts. In par­tic­u­lar the sig­nif­i­cant­ly low­er yields in France are respon­si­ble for this, togeth­er with the poor­er har­vests in Roma­nia and Bul­gar­ia. On the oth­er hand, a large Russ­ian wheat har­vest was expected.

Maize: Because of the high rain­fall the maize had to be har­vest­ed ear­ly in Ger­many, which reduced yields. At the same time it was too warm in France, Ger­many and Roma­nia, which like­wise led to reduced crop yields.

Bar­ley: The bar­ley har­vest in 2020 is at the same lev­el as in the pre­vi­ous year. In this case low­er yields were fore­cast, since the yields in France were lower.

Oats: Despite unfavourable grow­ing con­di­tions the oat har­vest, the mea­sure­ment of which took account of the increase in arable land, shows an upward trend.

Rape­seed: Due to high­er yields in Ger­many, Poland and Lithua­nia as com­pared to the pre­vi­ous year the rape­seed har­vest for 2020 is esti­mat­ed as slight­ly high­er. Here the pic­ture is regard­ed as a whole and there are region­al fluc­tu­a­tions depend­ing on local cul­ti­va­tion conditions.

Devel­op­ment of grain prices on the agri­cul­tur­al mar­ket: inter­na­tion­al grain trade

The prices for cere­als and oilseed are once more on a ris­ing trend both in the USA and in Europe. A glance at Chica­go (Chica­go Board of Trade CBOT) shows increas­ing grain prices, in par­tic­u­lar for wheat and maize. The same can be seen on the futures mar­ket in Paris. Price fore­casts are cur­rent­ly fac­ing the chal­lenge of tak­ing into account the uncer­tain­ties from the dry weath­er con­di­tions in South Amer­i­ca and Rus­sia, as well as the high demand for cere­als from Chi­na. To this are added the reduc­tion in agri­cul­tur­al land and reduced cere­al and oilseed crop yields, for which the fore­casts, espe­cial­ly in the USA do not match the actu­al har­vest and grow­ing sit­u­a­tion. How­ev­er, some of the fore­casts are very spec­u­la­tive. For instance, the Inter­na­tion­al Grains Coun­cil (IGC) assumes a low­er maize har­vest, In this process sow­ing was not begun until Sep­tem­ber in South Amer­i­ca and this is already affect­ing not only the futures mar­kets in Chica­go, but also all the oth­er futures markets.

How long can prices remain at this high lev­el and when is it the right time to sell? No-one can answer this ques­tion with cer­tain­ty. In this case it is nec­es­sary to watch the mar­kets and as far as pos­si­ble to react quick­ly. With the uncer­tain­ty as to whether prices will con­tin­ue to remain so high or whether they will even rise high­er, trade is cur­rent­ly lev­el­ling off. Many farm­ers are in a sort of wait­ing posi­tion, watch­ing to see if and how the mar­ket is chang­ing, but this also has effects on the mar­kets and can lead to a slump. How­ev­er, should the crop yields fall low­er than fore­cast by the ana­lysts, the grain prices would pos­si­bly increase further.