World: Grains and oilseeds S/D balance not changed in a big way over June

The world S/D balance of grains and oilseeds has not changed in a big way; chances of Black Sea shipments of Ukrainian grains are considered better, but are far from certain. Early harvest operations are running well, prospects are for large crops in East and West Europe, the USA and Brazil (safrinha maize crop). Doubts linger about Argentina and China, and India reports a wheat crop calamity, H. M. Gauger GmbH reported earlier in July.

World grain consumption had grown permanently over the past years, stocks were tight in large parts of the world, and price levels had reacted strongly upwards long before the outbreak of the Ukrainian war. The war created fear of a supply hole, especially in the African and Middle East countries, which normally receive large supplies from the Black Sea. In reality, there is enough grain in the world, not even counting the huge corn and soybean quantities used for the production of ethanol and diesel oil. The U.S., Canada, Russia and the EU sit on unsold surpluses of old crop grains. But the supply lines became longer, and prices rose to record levels. Media overstressed the vulnerable situation, and FAO/WFP are fighting for larger funds from national governments in order to finance the food aid for the poorest in the world.

Price levels became high enough to cause a "demand destruction", lower animal numbers, lower flour quality, and less food available for the poorer countries. Even well-to-do China started to work with alternatives and cut down on grain and oilseed imports.

So there were good reasons for lower markets anyway, but the big crash was caused by the fear of a critical economic recession, a strong inflation, most of all in the energy and food sector, caused by the restriction of Russian gas and oil supplies and rising food prices. Investment funds sold their total longs and left the commodity markets over night, with a disastrous effect on the futures prices. Good world crop prospects and hopes for Ukrainian grain exports helped as well. The cash basis is called much more stable than the futures markets, but only the coming week will show, where markets are. In any case consolidation of markets is anticipated at lower levels than at the top prices of May/June.

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