Grain Demand May Lead to Higher Prices

The Economist November 14th, 2020 pp68-69 |Finance & economics|Commodities|”Amber wave”. “Demand for American grain is surging”.





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Summary of article


A number of factors have coincided to drive up prices as much as 50-60% from “their 52 week lows” for American corn, and soyabeans which may result in lower domestic supply and higher prices in the grocery store. This follows years of turmoil for farmers having to respond to limits on grain for ethanol production, Trump’s trade war with China, COVID-19 and the resulting decline in oil demand with which to mix in grain-derived ethanol. Prices have also increased in part due to wet weather-keeping some farmers from planting, a dry August or windy conditions that lessened the harvest. Around the world other factors have fueled demand including low production in Ukraine and Brazil and China wanting to rebound hog stocks after they were “decimated last year by African swine fever” and needing to reduce food anxiety by “refilling stockpiles.” “The USDA expects Chinese wheat imports to reach the highest level in 25 years, with total imports of corn and other coarse grains setting a new record. Prices likely will hold until farmers can plant and additionally if whether conditions are favorable.