London, 25 March 2011

The past month saw exceptionally volatile conditions in the world’s major commodity exchanges, with huge price swings in grains and oilseeds. After nearing the peaks last seen in 2008, large-scale speculative selling of futures contracts in the second week of March resulted in a $50 drop in export prices of wheat and maize, followed by a renewed surge in values, recapturing a sizeable portion of earlier losses.

The fall was attributed to increased economic uncertainties following the political unrest in parts of North Africa and Near East Asia, with Japan’s earthquake and tsunami disaster also a factor. The subsequent partial recovery in prices was triggered as the bullish underlying grain fundamentals reasserted themselves. In early March, the IGC’s new weekly Grains and Oilseeds Prices Index (GOI) moved above 300 for the first time since mid-July 2008, but by 18 March had fallen to 283 points.

The past month saw wheat buying activity reduced somewhat and also move from the US and the EU Australia. Northern hemisphere crop prospects mostly remained favourable, with the exception of continued dryness in the southern US Plains, seen as affecting Hard Red Winter wheat yields. The maize (corn) market also recorded enormous price swings, but the generally bullish supply outlook was maintained. Values recently again moved higher on the uncertain prospects for the next US crop, with traders awaiting the 31 March Acreage Report, and rumours (later denied) of buying by China.

Despite the volatile conditions, US soyabean futures posted minor net gains since the end of February, partly reflecting the influence of strengthening energy prices but also worries that US plantings may fall short of earlier expectations and the impact of heavy rains in Brazil. In contrast to the turbulence in other markets, rice prices in Asia weakened steadily in the past month, weighed by improved prospects for Thailand’s second crop and Vietnam’s main crop.

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IGC March 2011

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