.Corn prices went down after the suspension of the agreement between China and the US.
The paralysis of the agreement between these two countries means that there is no demand for agricultural products from China, which affects the prices of cereals very negatively.
Corn is a king in the world of the cereal market. Experts make their calculations on how the prices could evolve in the coming months. Although it is difficult to make a forecast, several factors can affect the rates.
According to the USDA report in January, the world cereal harvest continues to have essential figures. The volume grows every year, and it’s predicted that the crop will account for close to 2.17 billion tons.
Roberto Martín, head of cereals at AN Group in Castilla y León, explains that the price of corn in recent years has been very competitive for wheat and barley. Operators are betting on this cereal to make compound feed. Corn has a price differential of between € 15 and € 20 / t lower than wheat. Meanwhile, concerning barley, with a similar price, the option is also corn because it provides more energy.
The large volume of supply of this cereal causes it to generate a certain heaviness in the market since corn exports in the US are below the forecasts made by the market.
External factors have a significant impact on cereal prices
The South American corn harvest, with excellent prospects, yields harvest figures of 50 million tons for Argentina and 101 million tons for Brazil with export levels of 33.50 and 36 million tons, respectively. The second harvest of Brazilian corn, at the moment, is developing in the right conditions. Still, any inconvenience in the crop could generate complications for the correct implantation of the cereal.
Roberto Martín says that these variables could generate volatility in the corn market. All of those mentioned above leave bearish factors in prices. Except for some critical market change, there seems to be stability.
In this sense, there is a factor that is tilting the balance towards the negative side of prices, and that is the current Coronavirus crisis, that it is paralyzing the movement of goods and significantly hampering the trade agreement between the US and China. This does not seem to be resolved in the short term, Martin states.
Furthermore, the cereal markets are always on the lookout for any external factors that may affect prices. The specific case of the coronavirus crisis, coupled with the economic slowdown in the Asian country, the world’s growth engine, the markets have reacted in recent days with the drop in prices, not only in cereals but in other commodities.