The rally in agricultural commodities continues to extend this week on the back of a combination of factors that have served to lift prices.

Markets remain nervous of weather conditions in major growing regions. There are drought fears in the US midwest after an extended spell of hot weather with forecasts for the dry weather to continue.

In South America, dryness in Brazil has negatively impacted the development of its safrinha or second corn crop, with forecast production now cut by 6m tonnes to below 53m tonnes. The opposite has occurred in Argentina where excessive rains and flooding have damaged the country’s soya bean crop.

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And, in Europe, heavy rainfall has led to flooding in central states and particularly around the Paris basin area, a key area for French cereal production.

Added to these weather concerns, many emerging market currencies have rallied this week against the US dollar, especially the Brazilian real which is up by more than 5% in the week. The bounce in these currencies makes it less attractive for farmers to increase production as their produce is less competitive in the global market.

The real boon for grain markets this week has been the positive import data emanating from China, the world’s largest market for commodities. Chinese imports of almost all commodities recorded strong growth for May which has boosted markets. Soya bean demand in particular is surging with imports up by a quarter year-on-year to nearly 8m tonnes.

Europe

On the Euronext exchange (MATIF) in Paris, there were lifts across the board for grain and oilseed prices.

December 2016 delivered milling wheat gained almost €3/t to finish at €177/t, while December 2017 delivered wheat lifted €2/t to settle at €187/t.

European maize prices continue to enjoy a lift with November 2016 delivered maize increasing more than €2/t to finish above €177/t, while November 2017 delivered maize increased by €1/t to settle at €182/t.

Rapeseed prices remained on their upward trend during Wednesday’s trade in Paris. November 2016 delivered rapeseed gained €4/t to settle just below €387/t, while November 2017 delivered rapeseed inched higher by €2/t to settle at €376/t.

Chicago

On the Chicago Mercantile Exchange (CME), the rally in cereal prices continues to gain momentum. Over the last month, wheat prices have shot up more than €20/t while corn (maize) prices have also jumped more than €20/t.

On Wednesday, SRW wheat for December 2016 delivery gained almost $5/t to break the $200/t mark and settle on a closing price of $201/t. December 2017 delivered SRW wheat gained almost $4/t to finish the day’s session below $220/t.

Corn prices from Chicago have improved strongly this week with December 2016 delivered corn gaining $2/t to finish at $172/t (€151/t), while December 2017 delivered corn was flat at $166/t (€146/t).