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Extreme flooding in Brazil has unsettled global grain markets, creating huge short-term volatility for soya prices.
Prices surged above £400/t in early May, up from lows of £350/t in late March, with estimates that soya purchased on spot markets this week will cost north of £500/t when delivered on-farm.
Added into the mix is local feed mills operating with limited forward cover, as sales are significantly reduced at this time of year and mills want to avoid carrying excess stocks through summer. As a result, the trade is more reliant on purchasing straights on spot markets, leaving them exposed to price volatility.
Brazil
As the world’s leading exporter of soya, Brazil has a major bearing on global prices and the recent flooding was most severe in the country’s southern regions, where soya and maize production dominate.
Estimates indicate a loss in excess of 2m tonnes of soyabean, with concerns about when the 2024 harvest will be completed.
That has spooked grain traders into a frenzy of short-term buying, to ensure they have adequate cover in place, ultimately resulting in a rapid escalation of prices.
Longer term, analysts from the Agriculture and Horticulture Development Board forecast soya markets should settle, as a bumper US harvest is likely to ease supply fears towards the year end.
Wheat
Weather events are also behind an escalation in wheat prices, with dry weather and late frost causing major crop damage in Russia, following on from US reports downgrading the health of winter crops in key grain growing states. Turmoil within the Black Sea region has also increased and is hindering the safety of shipping routes.
As a result, wheat prices contracted for November delivery have risen above £230/t, which is its highest price level since August 2023.
The rise in grain price will be welcomed by local cereal growers.
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