Forecast on increased grain production

8/26/2016, 8:56 PM (Source: Superfund)

In the last week, trading of many commodities was under pressure of an increased supply. Agricultural commodities were no exception and sellers were mostly active on cereal markets. Several consecutive sessions with a downward trend were recorded for U.S. contracts for corn and wheat, while soybeans quotes decreased below $10 per bushel.

The pressure of the increasing supply on cereal markets is mainly due to their abundance globally. Recently, the conditions for growing cereals in the United States were almost perfect and many other countries could boast with successful harvest. As a result, world production and grain stocks are extremely large - and this has a negative impact on their prices.

Last Thursday, the International Grains Council contributed to this price decrease by raising its forecast for cereal production for the 2016/2017 season. According to the institution, corn production is currently at 1.03 billion tons. This represents a historical record and a significant increase over last season’s 969 million tons. The council also said it expected production of wheat in the season 2016/2017 at 743 million tons, which would also be the highest level in history. To summarize, grain production in the world could exceed 2.5 billion tons for the first time ever in the coming season.

At the same time, the International Grains Council raised its forecast for soybean production in the world. In season 2016/2017 it is expected to be 325 million tons compared to 316 million tons in the previous season.