Insight Focus

• Russia has pulled out of the Black Sea Grains Corridor.
• It has since bombed Ukrainian port infrastructure.
• Market attention will now focus on how successfully Ukraine can ship grain.

Forecast

No changes to our Chicago Corn average price forecast for the 22/23 (Sep/Aug) crop in a range of 6 to 6,5 USD/bu. The average price since Sep 1 is running at 6,45 USD/bu.

Market Commentary

Corn made losses in Chicago while rallied in Europe. Wheat made gains in both markets. The Black Sea export corridor continues to concentrate market attention.

The Russian attack on Ukraine’s export infrastructures took the market higher by the beginning of last week but price fell during the second half of the week on profit taking and expectations Ukraine will be able to fulfil their exports by train.

Since our last report published mid-July, two major events have occurred: the July WASDE and Russia pulling out of the agreement for the Black Sea export corridor.

The July WASDE was very “political” as they changed many things to leave ending stocks basically unchanged (5 mill bu higher). They introduced the higher acreage of the June 30 acreage report, a 2,2% reduction in yield (177,5 bpa now vs. 181,5 they had before), and lower initial stocks, somehow expected also after June 1 quarterly stocks showing a tighter number. In summary, a nonevent.

Russia pulling out of the grain corridor agreement will have a major impact on trade flows and on supply availability. To signal there is no way back to that agreement, Russia bombed key grain terminals in the port of Odesa and in some other regions. There were hopes exports could pick up through the Danube, but infrastructure there was also attacked. Even if a new agreement is reached, the export flow will continue to suffer disruption.

US Corn condition was flat at 57% good or excellent vs. 63% last year. Corn area under drought is 59% up from 55% the previous week.

In Europe, the EC lowered their Corn production forecast again by 712k ton to 63,2 mill ton still higher than last year’s 52,2 mill ton produced. Corn condition in France was 81% good or excellent down one percentual point from the previous week.

In Brazil, Safrinha Corn is 47,9% harvested vs. 59,6% last year with the slower pace partially due to storage being full. Argentinian Corn is 68,4% harvested.

In the Wheat front, the EC lowered their production forecast by 2,45 mill ton to 127,4 mill ton mostly due to lower yields in northern and eastern Europe.

US winter Wheat is 68% harvested still slow vs. last year’s pace of 76%. Spring Wheat condition was down 2 points week on week at 49% good or excellent vs. 68% last year. French Wheat condition was down two points at 78% good or excellent vs. 63% last year, and is 83% harvested vs. 94% last year.

In the weather front, rains are expected in some areas in the US but most of the Midwest will remain hot and dry. Brazil is expected to have sunny days as well and the Sao Paulo region has had more than 50 days with no rains now which will help harvesting pace. Europe continues suffering very hot and dry weather in the south and ample rains in the north.

The market attention will continue to be on how Ukraine is able to export their grains. Russia seems determined to abort any sea born exports, but since the start of the war Ukraine has also developed inland options which will be maximized now. The doubt is the pace of exports through those inland options and if Russia tries to destroy that infrastructure too.

And then we have the August WASDE next week where we expect no changes to the July one as acreage and yield were already changed. Our doubt is if the lower yield reflected in the July WASDE was enough to reflect the poor level of Corn condition.

Expect some volatility around the Black Sea trade flows.