European grain prices rise on global drought

"The very tight global corn market will have trouble finding the same sort of substitution as last year via wheat markets because exportable stocks by the eight biggest global grain exporters have fallen sharply," experts at the Agritel information provider said.

The US expected a record corn harvest this year owing to a big increase in cultivated surfaces but high temperatures and dry conditions in the past few weeks have stunted the crops.

Similar conditions have baked the grain baskets of Ukraine and southern Russia, meanwhile, with analysts expecting Russian exports of eight million tons this year, compared with a previous estimate of 11 million tons.

Russia expects to harvest about 85 million tons of grain in 2012, far less than in 2011, while Ukrainian government sources were quoted by traders as saying they expect overall grain output of 44.0-47.0 million tons, down from 57 million tons.

The US Food and Agriculture Organisation forecast on 5 July that grain output worldwide would be 23 million tons lower this year at 2.396 billion tons.

Northeastern Brazil is suffering its worst drought for 30 years, while in France, an initial harvest has been hampered by steady rains that have farmers worried about the quality of their crops.

In midday European grain trading, maize contracts had gained up to nine euros (US$11.0) for delivery in August to 259.50 euros a ton, their highest level since September 2007 when they hit an all-time high of 265 euros.

Since mid-June prices have gained an average of 50 euro cents a ton.

The most widely-traded contract, for delivery in November, changed hands for 266 euros, a record that surpassed one set in May 2011.

On the commodities market in Chicago, wheat and corn sales showed solid increases in electronic trading that preceeds the markets opening.

Source: AFP