European wheat prices are now below the cost of production
After three record crop years throughout the world's main exporting regions, it is clear the market is stagnating.
It all boils down to the fundamentals of supply and demand.
The big demand drivers have faltered. In the mid-noughties ethanol production in the US was a big driver of maize production in the US, where demand has increased from 40mmt in '05/06 to a current ceiling of 130mmt (38pc of the US crop). This increase in domestic demand resulted in the Black Sea and South America producing more corn for the growing global demand. However, that drive towards the renewable fuel is now beginning to plateau and there is a glut of corn looking for demand.
Other key drivers behind demand were new emerging markets such as Asia, but with globally economies beginning to slow and naturally this is having repercussions on prices.
By 2020 there was an expectation that China was going to become the major corn importer with an expectation 20 or even 30mmt of corn, in the last four this has been 2.5/5.5mmt. This growth is will not happen in the near term as 46pc or 115mmt of the world's stocks of corn are also supposed to be in China, as the Chinese government incentive the farmer to produce there.
The potential Brexit from Europe is also having an impact, with UK grain now more competitive due to the weaker sterling. Oil prices have fallen 60pc in 12 months to level last seen in 2003, as production ramps up due to geopolitical tensions in the mid-east. Which in turn adds more negative incentive to the market place.
We've seen it in Europe where wheat prices have fallen below cost of production, and are now the cheapest in the world. Yet it is still struggling to get demand, despite being cheaper than other origins.
Both France and the UK have increased their area of wheat sown - so already the first catalyst is in place for 2017.