Insight Focus

New reports of dry weather in the Black Sea caused a rebound in grains after the previous week’s sell-off. The market remains stable though as most concerns have been priced in.

Last week was short due to the US holiday on Thursday and very little liquidity on Friday. Grains rebounded after the sell off of the previous week thanks to dry weather in the Black Sea. The high stock environment is expected to be reinforced with the publication of in the WASDE report. However, this could be partially offset by deteriorating conditions again in US corn following two weeks of heat and dry weather.

We think most negative news are already priced in and we should have a strong floor for Chicago corn around USD 4/bushel. Weather volatility should continue.

There is no change to our Chicago corn forecast for the 2023/24 (September/August) crop to average USD 4.60/bushel with a downside bias towards USD 4.40/bushel. The average price since September 1 is running at USD 4.53/bushel.

Corn Rebounds

Chicago corn rebounded from the lows of the previous week on the back of deteriorating crop conditions and after the market digested the higher acreage projected by the USDA on June 28. It was also pulled by higher wheat as dry weather is back in the Black Sea, raising concerns again.

The US corn condition fell four points to 65% good or excellent versus 51% last year. Argentinian corn is 62.9% harvested, ahead of 51.6% last year and the five-year average of 60%.

Wheat Faces Dry Conditions

Wheat started the week on a positive note on the back of dry conditions again in the Black Sea region, but it had already turned around by Tuesday following the very good harvesting pace in the US. The crop condition was also good — albeit slightly worse week on week — but still much better than last year. Wheat then rallied last Friday, most likely on short covering and low volume due to the US holiday.

US winter wheat is 54% harvested, well ahead of 33% last year and the five-year average of 39%. The crop condition was 51% good or excellent, down 1 point week-on-week and compared with 40% last year. Spring wheat condition was 72% good or excellent, up 1 point week-on-week and much better than the 70% expected by the market.

Russian wheat is now 10% harvested and yields are 19% higher than last year. Ukrainian wheat is 10% harvested and yields have risen 1% year-on-year. French wheat is 58% good or excellent, well behind the 81% recorded last year and is 1% harvested versus 8% last year.

Fundamentals Remain Stable

Dry weather is expected again in the US this week, while Brazil is finally forecast to receive rains not only in the south but also in the centre south. Argentina is expected to receive rains and frost. Northern Europe is expected to have hot weather but accompanied by ample rains while the Black Sea area is expected to have a hot and dry week.

The July WASDE report is due this week, and we should expect to see revised acreage in line with the June 28 acreage report. There may also be some small changes on the demand side of the balance sheet, but we don’t expect any major surprise that would change the big picture of a very high stock-to-use ratio.

Alberto Carmona

Alberto graduated at the University of Seville (Spain) and University of Paderborn (Germany) with a Bachelor in Economics and Business Administration and an Executive MBA from Institute San Telmo (partner school of IESE). Worked in Abengoa Bioenergy from 1999 through 2017 when I founded NixAl Commodities, an Ethanol boutique focused on market intelligence, risk management and engineering. Professional background in financial and commercial activities, promoting and financing renewable energy projects in Europe, Brownfields and Greenfields. I have been active in the international development of Bioethanol since 2001 having lived and worked in The Netherlands, Brazil and U.S., the three main markets, while leading global trading operations, risk management and lobbying.

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