Grain prices that tumbled in recent weeks may rebound as demand stays robust while global stockpiles tighten after drought hurt crops from the U.S. to Russia.
Corn on the Chicago Board of Trade, the global benchmark, has slipped 13 percent since reaching a record $8.49 a bushel on Aug. 10, and wheat traded in Paris is down 4.8 percent from a 14-month high in July. While farmers are harvesting crops across the Northern Hemisphere, temporarily inflating supplies, world corn and soybean stockpiles as a percentage of consumption may drop to a 37-year low after dry weather in the U.S., South America and Europe, U.S. Department of Agriculture data show.
Corn may rally to $10 before this time next year because cattle and hog producers haven’t culled herds even as feed costs rose, Hussein Allidina, head of commodities research at Morgan Stanley, said Oct. 3 in an interview at Bloomberg News offices in London. Wheat prices also will be supported as livestock farmers substitute more of the grain in feed for high-cost corn, he said. Barclays Plc analyst Sudakshina Unnikrishnan expects CBOT soybean prices to rally to $18 a bushel, above the all-time high of $17.89 set Sept. 4.
“It’s a time to keep your nerve and wait for the markets to rebound, because they probably will,” said David Sheppard, managing director at Gainsborough, England-based grain exporter Gleadell Agriculture Ltd. “We’re in the calm before the storm with world grain markets. Russia and Ukraine are running out of exportable surpluses. France is selling quite aggressively into recent tenders, and if it carries on at the same rate they’ll probably be overselling.”
Corn may rise as high as $8.75 a bushel before next year’s Northern Hemisphere harvest, according to a Bloomberg News survey of as many as eight traders and analysts at the 52nd European Commodities Exchange in Edinburgh last week. Wheat may return to this year’s high near $9.50 a bushel and soybeans may reach $18, the survey showed.
Crops have been the best performing commodities this year on the Standard & Poor’s GSCI Index of 24 raw materials, even after recent price declines. Wheat traded in Chicago, the biggest gainer, has surged 31 percent, and in July touched $9.4725 a bushel, the highest price since August 2008. The MSCI All-Country World Index of equities is up 12 percent this year.