Insight Focus
Chicago corn drops on favourable weather and new trade tariffs. Corn and wheat rallied in Euronext, and Brazil’s corn output rose. August prices are seasonally weaker, but September prices typically recover. We expect limited downside below USD 4/bushel in Chicago and more upside after summer.
There are no changes to our forecast for Chicago corn for the 24/25 crop (September/August), which is expected to average USD 4.55/bushel. This will likely be closer to USD 4.40/bushel now that we have just one and a half months until the end of the crop year. The average price since September 1 is running at USD 4.45/bushel.
Corn plummeted in Chicago while wheat saw smaller losses following favourable weather, more trade tariffs on key export destinations, and despite a supportive WASDE. Corn and wheat rallied in Euronext. Brazil’s corn production is up.
We have the expiry of the July futures this week in Chicago, so the focus now turns to the September futures, reflecting prices of the new corn crop. Old crop corn stocks are tight, which should continue to be reflected in the corn basis until harvesting starts in October. The question is whether September corn will trade higher, closing the roughly 8c/bushel gap with the July futures, or if downside pressure will continue.
August prices are seasonally lower than July ones due to anticipated harvest pressure, but September prices are seasonally higher than August. We don’t think sub USD 4/bushel prices are justified in Chicago. We could still see some short-term downside if conditions in the US continue to improve, but European corn may face worsening conditions. We should be close to the floor of the market and see more upside than downside risk from here, mostly after the summer.
Corn Drops in Chicago on Better Conditions, Tariff Fears
Corn in Chicago opened with a bearish tone last week, erasing the rally of the previous week, pressured lower by an improvement in corn condition — for the second week in a row — and new tariffs imposed on Japan and South Korea, key importers of US agricultural products. The July WASDE, despite being supportive, came in within expectations and did not provide any upside.
Trump announced a 25% tariff on imports from Japan and South Korea, and the market feared retaliatory tariffs as both are major buyers of US agricultural products.
The July WASDE reduced US old crop corn stocks by 25 million gallons, in line with the June 30 quarterly stock report, and thus expected by the market. It also reduced acreage for the new crop as per the June 30 acreage report to 95.2 million acres vs. 95.3 million acres before, also as expected.
However, the WASDE did make a bigger cut in harvested acres, now at 86.8 million acres vs. 87.4 million acres before. Yield was left unchanged at 181 bushels per acre (bpa), resulting in a production drop of 115 million bushels. Feed demand was also reduced by 50 million gallons, resulting in 90 million bushels of lower ending stocks for the new crop. Stock-to-use for the new crop falls to 10.8% vs. 11.3% before.
World stocks were reduced by 3.2 million tonnes, all coming from 1 million tonnes of lower initial stocks and 2 million tonnes of lower production — all of it from the US, with all other countries left unchanged.
Source: USDA
US corn conditions are 74% good or excellent, up one point week on week and vs. 68% last year. In Argentina, corn harvesting is 74.7% complete.
Conab in Brazil increased their corn production forecast to 131.9 million tonnes, up from 128.5 million tonnes before, with all the improvement coming from the second corn crop — safrinha — which is currently being harvested.
French corn condition was 75% good or excellent, down three points week on week and vs. 83% last year.
Wheat Falls in Chicago but Rallies in Europe
Wheat fell in Chicago but rallied almost 2% in Euronext despite the very high pace of harvesting in France.
The July WASDE reduced US wheat ending stocks by 8 million bushels through a combination of 10 million bushels of higher initial stocks, 8 million bushels of higher production (lower acreage but higher yield), and 25 million bushels of higher exports. Global wheat stocks were reduced by 1 million tonnes entirely due to higher demand.
French wheat is 36% harvested vs. 4% last year and the five-year average of 15%. French wheat condition is 68% good or excellent, up one point week on week and vs. 57% last year. US wheat is 53% harvested vs. 62% last year and the five-year average of 54%. US wheat condition was 48% good or excellent, unchanged week on week and vs. 51% last year. US spring wheat condition is 50% good or excellent, down three points week on week and vs. 75% last year.
The Russian wheat harvest has started and is 5.8% complete, very much delayed year on year. Yields continue to be well below last year, down 15.8%. The Ministry of Agriculture still maintains a 90 million tonne wheat forecast, up from 83 million tonnes last year.
US Sees Rain, France Corn Suffers in Heat
On the weather front, rains are expected in the US Corn Belt this week. Centre-South Brazil is expected to stay dry and seasonally warm, with warmer weather and rains also expected in Argentina. Needed rains are forecast in northwestern Europe, while dry weather is expected in the Black Sea region.
In Europe, corn condition in France has fallen six points in the last two weeks, reflecting the hot weather since the start of the summer — something wheat has not really felt.
