Grains hit by profit taking but supply worries linger
Following the most recent production updates from the US Department of Agriculture, grain prices have eased, also helped by subsequent projections that late August rain may have improved yields on soybeans and corn. Indications have also emerged that demand destruction caused by higher prices is emerging. Recent export data on US produced corn showed sales dropped to one-eighth of the level seen a year earlier, and this helped trigger the biggest weekly loss in three months.
The near-term worry, however, centres around wheat, as the Russian government continues to send out conflicting signals on whether export restrictions will have to be implemented following a summer drought that has seen yields slump by 25 percent. Such a ban was last introduced in 2010 and hurt Russia’s credentials as the world’s third-largest exporter. Ministers have clearly been trying to avoid a repeat, but as domestic prices continue to rise and stocks dwindle, it may only be a matter of time. Should such a ban be implemented, it will add upside price pressure on European and American produced wheat, as buyers in the Middle East and North Africa will have to look elsewhere than Russia for supplies.