Large Chinese corn harvest increases pressure on market

The grain market is receiving conflicting signals from different sides. In China, the corn harvest has begun and Beijing is counting on a large harvest. More domestic corn can limit China's need for imports and thus put pressure on the international grain market. European wheat is being supported by the weaker euro and the ongoing problems with grain exports from the Black Sea region. Wheat on the Matif futures market in Paris managed to recover on Tuesday from its lowest level in six weeks. The December contract fell during the trading day to €231,50 per tonne, but then recovered to around €236,50 per tonne. Wheat also rebounded in Chicago. The December contract closed 4 cents higher at $6,92¾ per bushel. Part of that recovery was technical in nature. Traders covered short positions ahead of the American inventory figures that will be released on Wednesday. In the meantime, the grain market remains looking for direction. The export problems around the Black Sea are large, but on the other hand there appears to be sufficient grain available worldwide. Chinese corn harvest gets under way An important new signal comes from China. There the autumn harvest has started and according to the Chinese Ministry of Agriculture the crops are looking good. The area under corn has increased in particular. The government therefore expects another large total grain harvest. The summer harvest, especially wheat, had already been brought in earlier and it has been confirmed that production came to 150,75 million tonnes. Corn is an important part of China's autumn harvest and China is at the same time an important player in the international market for feed raw materials. A large domestic harvest can further reduce the need to import corn. This is especially important for the United States. The recent trade agreements between Washington and Beijing have lowered Chinese import tariffs on American corn, but American corn is still relatively expensive. On the US Gulf, according to market information, offers are $0,10 to $0,20 per bushel above Brazilian corn and $0,30 to $0,60 above Argentine corn. That makes a strong rebound in Chinese demand for American corn less likely for now. A large Chinese harvest reinforces that effect. Indirectly, that is also important for wheat. When China buys less corn on the world market, more American and South American grain remains available for other buyers. That increases competition between wheat and corn in the feed market. Weak euro helps European wheat For European wheat, the picture looks somewhat more favorable. The euro fell on Tuesday to its lowest level in three months against the dollar. That makes European wheat cheaper for buyers who calculate in dollars. At the same time, the strong dollar works against American exporters. The lower euro can help European exporters attract a larger share of international demand. Especially now that Russia and Ukraine are having trouble getting their grain to buyers. This means that in the wheat market it is not only about how much grain is available, but increasingly about who can actually supply the grain at a competitive price. Corn pushes wheat aside in Ukraine In Ukraine, that logistical problem may even become bigger in the coming weeks. The Ukrainian farmers' association UAC expects wheat exports to come under pressure in October and November when the corn harvest also comes onto the market there. For October, around 600.000 tonnes of wheat have so far been booked for export. For corn it concerns about 850.000 tonnes. Wheat and corn must compete for the same limited logistical capacity. According to UAC, Ukrainian seaports have in practice been blocked since the end of July by Russian missile and drone attacks. More grain therefore has to be transported via the Danube and over land. Once larger volumes of corn become available, that can further crowd out wheat exports.