USA Makes Large Corn Sales to China

Insight Focus

  • 600k tonnes sales reported for 4 consecutive days.
  • Black Sea grains corridor extended.
  • Worst Argentine corn crop in 22 years.

Forecast

No changes to our Chicago Corn average price forecast for the 22/23 (Sep/Aug) crop in a range of 6 to 6,5 USD/bu. The average price since Sep 1 is running at 6,7 USD/bu.

Market Commentary

Rally in grains on the back of big sales of US Corn to China and now news about the extension of the grains corridor in the Black Sea.

Despite a weak macro environment, Corn in Chicago finally reflected some of the short term tightness after three weeks of a downward correction.

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Increasing sales of US Corn to China helped to boost prices: four consecutive days was week we had sales of more than 600k ton to China. The rumor we advanced the previous week has now been confirmed.

Russia revised upwards their Corn production from last year by 4 mill ton to 15,85 mill ton which is now their official number.

In Argentina, production was lowered again by BAGE and is now down to 36 mill ton vs. 37,5 before. This would be the worst harvest of the last 22 years.

In Brazil, the Soybean harvest continues to run slow just 53,4% complete vs. 63,1% last year. The second corn crop made a big weekly progress and is now 72,5% planted but still behind last year’s pace of 87,4%. The first Corn crop is 26,3% harvested vs. 33,7% last year.

In the Wheat front, Russia reduced their official Wheat production number from last year to 104,2 mill ton just 200k ton lower than their previous number and this is now the official one. The USDA stubbornly has only 91 mill ton pegged for Russia.

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French Wheat condition was stable last week at 95% good or excellent.

In the weather front, rains are expected to return to Argentina which will certainly help but is too late to improve Soybeans and Corn production. Brazil is expected to have heavy rains in the center-west while light rain is expected in the South-east. Europe is expected to have dry weather, as well as in the US Wheat regions which could have a negative impact to crop condition again.

Russia agreed last week on a 60 day extension of the deal for the grain corridor starting last Saturday March 18. The problem is that the extension periods contemplated in the agreement are for 120 days and the other signatures of the agreement did not agree on the Russian proposal. We start the week with no extension of the agreement which if effective, should cause a rally. But Russia is interested in exporting their huge Wheat crop thus we think sooner or later the extension will be official during this week.

The rally last week hast left Chicago Corn not very competitive for export market thus further strength in prices is unlikely. But we have two major factors influencing the market: the Black Sea corridor and the macro environment. Fundamentally prices should trend lower.

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Alberto Carmona

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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