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Forecasts of bumper harvests suggest subdued food prices this year

bumper

Source: Wandile Sihlobo, Fin24, 30 June 2020, photo credit: Dean Hutton/Bloomberg

The high-frequency data on both domestic and global markets reinforced our view that grain prices could be under pressure this year and that this, in turn, could lead to subdued food price inflation.

This past week, the International Grains Council (IGC) lifted its estimate for 2020/21 global maize production from the last monthly estimate to 1.2 billion tons, which is the largest harvest on record, and up 5% from the previous season.

The downward swing in global maize prices saw a 21% y/y decline by 25 June 2020, with prices trading around $162 per ton. Low global maize prices are probably going to remain the theme for the rest of the year.

The season is underway in the northern hemisphere, with the crop in most countries reportedly in good condition. Meanwhile, in the southern hemisphere, the 2020/21 production season will start around October 2020. The focus is still on the 2019/20 season, with the harvest process in full swing in all major southern hemisphere maize producing countries such as South Africa, Brazil and Argentina.
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