Variations in the price of corn

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WORLD – Although soybeans have been the most disputed product in the middle of the trade war, corn has also been beaten and its producers manifest marketing problems with China.

The influence of USDA figures in the corn market, which is now down, has led to distrust of producers. The price of corn on the Chicago Stock Exchange has had variations so far this year. September's position peaked at USD181.68 in mid-June and by the end of August it fell to USD140.54; Thus, the price fell 23% in just over two months.

The most important decline took place after the publication of the monthly report of the United States Department of Agriculture (USDA), on August 12, since by the following day the price of the September contract would have fallen $ 10, from USD161, 51 to USD151.67, reports The Economist America.

This downward behavior did not stop until August 15 when the price reached USD141.33, a 12.5% ​​drop in 3 days. USDA revealed the area, production and performance figures for the 2019/20 campaign that exceeded June estimates and what was expected by private companies.

The data that caused the greatest impact on the stock market were those related to corn, as production projections increased by 650,000 tons with respect to the July report and almost 18 million tons compared to what was expected by the market (335,120 tons ), motivated especially by an increase in productivity, from 10.42 to 10.64 tons per hectare.

High corn inventories

Likewise, the final US inventories are projected at 55.40 million tons for the 2019/20 campaign, 8.5% higher than projected in the previous month's report and 35% higher than expected by private companies. .

The impact of these figures on the Chicago Stock Exchange futures market is evident and intuited, especially under a pessimistic scenario, amid concerns about the behavior of the climate (excessive rainfall and floods) in the first half of the year and also the commercial war with China.

Due to USDA's optimistic figures, the tension between the federal entity and the corn producers grew during August; US farmers say that the actual production for the 2019/20 campaign is far from what was projected by USDA, due to heavy rains that hinder crops.

The influence of USDA figures in the corn market, which is now down, has led to distrust of producers.

Thus, on August 21, this entity reported that it had withdrawn its personnel from a tour that they were taking through the State of Illinois, as part of the Pro Farmer (Pro Farmer Midwest Crop Tour) to assess the status of the crops of corn and soy; because one of the entity's officials received a telephone threat from a producer.

Chinese tariffs rise

Another important factor in this scenario is the tariff increase imposed by China on US products as of September 1, among which are soy, corn, wheat and sorghum; in retaliation for protectionist measures adopted by the Trump administration in early August (Granar, 2019).

As of September 1, US soybeans will enter China with an additional 25% tariff of 25% already established, as will beef, pork and poultry.

Imports of corn, wheat, sorghum and soybean oil will have an additional 10% to the 25% effective as of December 15, 2019 (Granar, 2019). Faced with this situation, President Donald Trump seeks to build an agreement with Japan, who hopes to be the buyer of surplus corn product of the trade war with China.

Crisis of trust and credibility

In summary, corn is in the midst of a bearish price due to USDA optimistic figures, protectionist barriers to Chinese trade for US grain, and a crisis of trust and credibility between producers and the maximum agricultural authority of the world's largest producer : U.S.

For Colombian farmers, these types of contingencies (price drops) have been killed by the coverage that was launched last month by the Ministry of Agriculture.

"Those who were covered are going to see favored; it is here where the hedges fulfill their role, because they assured a sale price of their crops so that the prices have fallen to minimum suspicions. Fortunately we were covered," concluded Henry Vanegas, manager of Fenalce

It is worth noting that Colombian agriculture is taking prices of these agricultural raw materials and, therefore, depends on its international behavior.

From the editorial team of ElSitioAvícola