Insight Focus
Corn and wheat rallied on dry weather and trade. After last week’s rally, some correction is likely in Chicago, but a China trade deal could trigger another surge. Our forecast for Chicago corn remains at 4.55 USD/bushel, with some downside risk from the ongoing trade war.
Dry Weather Sparks Yield Concerns in Europe
Dry weather in Europe has finally sparked concern about corn yields. But US corn has also been suffering from heat, and we may see conditions deteriorate this week. The Russian wheat harvest could still surprise, as many areas suffered from very dry weather, and we think it is unlikely to reach the 90 million tonne harvest the government is projecting.
This week, weather in the US corn belt is expected to be warm with some storms. Central South Brazil is expected to stay dry, as is Argentina. Temperatures in northwestern Europe will ease, and some rain is expected, while the Black Sea region is expected to remain hot and dry.
There are no changes to our forecast for Chicago corn for the 2024/25 crop (September/August), which is expected to average USD 4.55/bushel with some downside risk depending on the trade war. The average price since September 1 is running at USD 4.40/bushel.
After last week’s rally, we will probably see some correction in Chicago, although progress is also being made between the US and China, and if a trade deal is announced, it will spark another rally. Otherwise, some correction should be expected but limited.
Chicago Corn Rallies on US-Vietnam Trade Deal
July corn in Chicago opened positive last Monday following the rally of the previous Friday and continued positive through Thursday’s close—the last day of the week due to the 4th of July holiday. September corn followed suit but saw milder weekly gains of just 2%. European corn rallied as well, supported by very hot and dry weather in northwestern Europe, risking corn yields.
The bulk of the rally in Chicago corn occurred last Wednesday following the announcement of the US-Vietnam trade deal, where it was agreed that Vietnam would buy USD 3 billion of US agricultural products. The large net speculative position triggered short covering, resulting in a 3.4% rally for the week.
Last Monday, the June 30 quarterly stock and acreage report was released by the USDA. Corn stocks came in at 4.64 billion bushels, down 7% year on year but well within expectations. On-farm stocks were down 16% year on year, while off-farm stocks were up 6% year on year.
Source: USDA
Corn acreage came in at 95.2 million acres, basically unchanged from the 95.3 million acres of the March prospective planting report and slightly below expectations of 95.35 million acres.
US corn conditions are 73% good or excellent, up three points week-on-week and versus 67% last year. In Argentina, corn harvesting is 61.7% complete. In Brazil, Safrinha (second) corn harvesting is 17% complete versus 47.9% last year and the five-year average of 28.2%.
French corn condition was 78% good or excellent, down three points week-on-week and versus 82% last year.
Chicago Wheat Rallies Despite Rising Stocks
Wheat had an expressive rally in Chicago despite higher quarterly stocks, but again the large speculative short position triggered a short covering rally following the announcement of the US-Vietnam trade deal.
The June 30 quarterly stock and acreage report from the USDA showed wheat stocks of 885 million bushels, up 22% year on year and well above the 836 million bushels the market was expecting. On-farm stocks were up 32% year on year, while off-farm stocks were up 20% year on year. Wheat acreage for 2025 came in at 45.48 million acres, below the 46.08 million acres planted last year and very much in line with market expectations of 45.44 million acres.
Source: USDA
French wheat is 11% harvested versus 1% last year and the five-year average of 4%. French wheat condition is 67% good or excellent, down one point week on week and versus 58% last year. US wheat is 37% harvested versus 52% last year and versus the five-year average of 42%. US wheat condition was 48% good or excellent, down 1 point in the week and versus 51% last year. US spring wheat is now fully planted, and the condition is 53% good or excellent, down one point week on week and versus 72% last year.
The Russian wheat harvest has started and, on top of being very delayed year on year, early yields are 30% lower year on year. The Ministry of Agriculture still maintains a 90 million tonne wheat forecast, up from 83 million tonnes last year.
