Insight Focus
Grain markets rally as WASDE and weather support prices. The July WASDE boosted prices by cutting US corn stocks and signalling stronger demand than expected. Weather risks remain elevated, with French corn condition down nearly 30 points in two weeks, another heatwave threatening crops during flowering and Black Sea export uncertainty adding further support to grain markets.
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The July WASDE surprised the market, and grains rallied in Chicago and Europe, the latter due to increased weather concerns and Russia threatening to halt wheat exports.
Last week’s price action was the result of several bullish developments, including higher old-crop US corn consumption reported in the July WASDE, as well as weather risks to the current corn crop. The latter is most evident in Europe, where French corn condition has fallen almost 30 points in two weeks. Adding to the bullish sentiment was the rumour that Russia could close the Azov Sea, through which around 25% of Black Sea wheat exports pass.
Another heatwave is threatening France, and the majority of the corn crop has reached the critical flowering stage. We could see some profit-taking after last week’s rally, but there are enough weather risks remaining to support a period of consolidation.
There are no changes to our forecast for Chicago corn to average USD 4.4/bushel during the 2025/26 (September/August) crop year. The average price since September 1 is running at USD 4.35/bushel.
Corn Rallies on WASDE Surprise and Heat Risks
Corn in Chicago opened very strongly last Monday on the back of forecasts for extreme heat later in the week, but by midweek rains were forecast and the market corrected during the second half of the week. However, a Friday rally after the July WASDE surprised the market by cutting old-crop ending stocks, ultimately closing the week more than 3% higher.
The July WASDE surprised the market by reducing old-crop stocks by a sizable 125 million bushels, all of which came from higher feed and residual demand, which were up by 150 million bushels. It also raised new-crop exports by 50 million bushels, and the total impact to new-crop carryout was a reduction of 170 million bushels compared with the June WASDE. Production was left unchanged. New-crop stocks-to-use falls to 11% versus 12.1% for the old crop.
Source: USDA
World corn stocks were reduced by 6 million tonnes, with the bulk of the reduction coming from lower US old-crop carryout and EU production being cut by 3.7 million tonnes, while Canada’s production was increased by almost 2 million tonnes.
Source: USDA
Coceral in Europe downgraded EU+UK corn production to 52.7 million tonnes, or 8% lower than its previous forecast, with French corn production estimated at 9.4 million tonnes, the lowest in 20 years. This compares with 57.4 million tonnes last crop year and is entirely due to the heatwave that northern Europe has experienced and which has still not completely passed. The Coceral figure is slightly lower than the 53.8 million tonnes projected in the July WASDE.
US corn condition is rated 67% good or excellent, unchanged week on week, but still below the 74% recorded at the same time last year. Corn condition in France has fallen to 47% good or excellent, down another 10 points from the previous week and well behind last year’s 75%. Summer corn harvesting in Brazil is 96.3% complete, slightly behind the 97.2% pace seen last year but in line with the five-year average. Safrinha harvesting has reached 28.5%, marginally ahead of last year’s 27.7% progress but still well behind the five-year average of 35.4%.
Wheat Lifted by Heat Concerns, Black Sea Rumours
Wheat followed corn higher at the open in Chicago, also on heat concerns, although only 40% remains to be harvested. The Friday rally was fuelled by rumours that Russia would close the Azov Sea, a key region for wheat exports, although there has been no official statement.
Just like corn, the July WASDE reduced old-crop wheat stocks by 15 million bushels, although the reduction was much smaller than for corn. It also reduced new-crop production by 7 million bushels—an immaterial change—with lower acreage of 42.7 million acres versus 43.8 million previously, offset by a higher yield of 47.9 bushels/acre versus 47 bushels/acre previously.
Source: USDA
World wheat stocks were reduced by 2.6 million tonnes, mostly due to the reduction in US wheat production, with no other material changes.
Coceral in Europe downgraded EU+UK wheat production to 140.8 million tonnes, or 6% lower year on year, also due to the heatwave.
US winter wheat is 59% harvested, versus 51% last year and the five-year average of 51%. Condition is rated 26% good or excellent, unchanged week-on-week, versus 48% last year. US spring wheat condition is 57% good or excellent, down two points week-on-week, versus 50% last year. French wheat is 65% good or excellent, down three points week-on-week, and harvesting is 59% complete versus 32% last year and the five-year average of 16%. Wheat harvesting in Ukraine has started and is 2% complete versus 2.9% last year. Wheat harvesting in Russia is 3.7% complete. Wheat planting in Brazil is 90.4% complete versus 79.5% last year and the five-year average of 82.5%.
Excessive heat was expected last weekend and into early this week across the northern US Plains and parts of southern Canada, while southern growing regions are expected to receive rainfall. Western Europe is expected to remain hot, with France likely to experience another heatwave, while the Black Sea region is expected to be warm and rainy. Brazil is expected to remain dry and cold, as is Argentina.
