Insight Focus
Grain markets rallied due to supply disruptions from the Black Sea. This was compounded by dry weather in the US and Europe and China’s increased soybean purchases. Corn and wheat have been exposed to heat and geopolitical tensions, which have impacted exports and prices, but any resolution in conflicts will be bearish for grains.
All grains rallied last week on supply disruption out of the Black Sea, dry weather in the US and positive sentiment created by the return of China to US soybean purchases. There were losses in wheat on Friday as Ukraine proposed a ceasefire.
This week, the heat potentially damaged US corn. Extreme heat also decimated corn in Europe with France expected to announce a fall in production to its lowest level in 20 years. Wheat and corn exports out of the Black Sea are fully disrupted and the war in Iran took Brent back to the 100 USD/bbl region.
Given current market risks, the risk premium is still justified. As soon as trade flows from the Black Sea are restored, we will see a sell off, especially in European wheat. And as soon as tensions ease in the Middle East, most commodities will turn bearish. But European corn has been hit by extreme heat. The loss of production is now priced in and there are talk of lower yields in the US. This should limit corn losses.
There is no change to our forecast for Chicago corn to average USD 4.4/bushel during the 2025/26 (September/August) crop. The average price since September 1 is running at USD 4.35/bushel.
Corn
Corn in Chicago traded positive through the whole week on bullish news, including dry weather in the US and Europe, supply disruptions out of the Black Sea and China’s return to the market to buy US beans.
On top of the longstanding weather market, the increasing tensions between Ukraine and Russia that started two weeks ago intensified last week and attacks are multiplying on port facilities in the Odesa region and on boats loading grain there.
In the US, the USDA showed in its daily weather report that high temperatures across many areas of the corn belt are having a negative impact on corn development, and the market is now expecting an impact on crop condition this week.
The USDA also announced fresh new sales of soybeans to China, fuelling a rally in soybeans and pulling the whole grains complex higher.
US corn condition is 67% good or excellent, unchanged for a third week in a row and versus 74% last year. Corn condition in France is 38% in good or excellent condition, down two points week-on-week and significantly behind the 69% recorded last year.
Summer corn harvesting in Brazil is 97.9% completed – on par with last year and the five-year average. Safrinha harvesting is 49.8% complete, slightly behind the 55.5% recorded last year and the five-year average of 56.7%. Corn harvesting in Argentina reached 66.8%.
Wheat
Wheat rallied too but Friday losses were enough to erase early week gains following comments from Ukraine that it was willing to find a solution to the increasing hostilities in the Black Sea.
Russia has restricted its shipping access to certain Sea of Azov and Kavkaz ports while continuing its own strikes on Ukrainian port infrastructure. This region accounts for some 30% of global wheat exports. Commercial shipping to Ukraine’s Black Sea ports has been suspended. But on Friday Ukraine was considering options to negotiate with Russian and resume shipment through the Black Sea.
US winter wheat is 74% harvested – slightly ahead of last year and the five-year average. US spring wheat condition is 53% good or excellent, down one point week-on-week and year-on-year. French wheat is 65% good or excellent, unchanged week-on-week and harvesting is 99% complete – well ahead of last year and the five-year average of 58%.
Wheat harvesting in Russia is 21.8% complete versus 49% last year. Wheat harvesting in Ukraine is 12% complete. Wheat planting in Brazil is virtually complete – on par with last year and the five-year average. Wheat planting in Argentina is 97.7% complete.
Above-normal temperatures are forecast to build across Europe throughout this week, again targeting France, Germany and southern UK. Also, in the US, temperatures above 40ºC are expected across the whole corn belt. Brazil is expected to remain dry.
