Insight Focus

• May WASDE forecasts large US corn crop.
• Grains markets fall on the news.
• Negotiations on Black Sea Corridor continue.

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 6,6 USD/bu.

Market Commentary

The May WASDE forecast a bumper US Corn crop, and Brazil Corn production was revised higher by Conab. All grains plummeted. Negotiations to extend the Black Sea corridor deal continue.

We had the May WASDE last Friday with most of the focus being the first forecast for the 23/24 crop.

US Corn 22/23 saw 74 mill bu of higher ending stocks only coming from lower exports. This was somehow expected as Chinese buyers had canceled a good chunk of their purchases opting to buy cheaper Brazilian Corn.

The first 23/24 US Corn forecast brought no surprise in terms of acreage as like always in this May report planted area was taken from the prospective planting report published back on March 31 (92 mill acre planted and 84,1 harvested). Yield was a trend yield but very much in the upper part of the range projecting a huge 181,5 bpa vs. 173,3 in 22/23 which was hit by a drought. Production increased by a whopping 1,5 bill bu and ending stocks are forecast at 2,2 bill bu vs. 1,4 in 22/23. Stocks to use shoot up to 15,3% vs. 10,3% in 22/23 and average farm price is forecast at 4,8 USD/bu vs. 6,6 in 22/23. Somehow expected, but still bearish. The key is in the spectacular yield the USDA is projecting as it is challenging but is true weather is being perfect this year.

Global Corn stocks for 23/24 were projected at 312,9 mill ton vs. 297,4 in 22/23, a nice stock build mostly coming from higher US production.

Besides the WASDE, US Corn planting made a whopping 23 point advance in a week and is now 49% planted vs. 21% last year and vs. 42% of the five year average. The result of the quick pace is that 12% of Corn has already emerged vs. 5% of last year but in line with the 11% of the five year average.

In Brazil, Corn prices plummeted for another week and they have now fallen below 60 BRL/bag vs. 80 just one month ago. Safrinha Corn has been planted already and the first Corn crop is 68% harvested. Crop condition is looking good with soil moisture being perfect and Conab increased its production forecast to 125,5 mill ton vs. 122 before. This will be 9,5 mill ton higher year on year.

In the Wheat front, the WASDE forecast a 42 mill bu reduction in ending stocks for the new 23/24 US crop vs. 22/23 carry out. Production was forecast as per the prospective planting report from March 31 thus no surprise, and yield was 44,7 bpa or a trend yield. No surprise overall.

Global stocks for 23/24 were forecast at 264,3 mill ton vs. 266,3 in 22/23 therefore a stock draw of 2 mill ton.

US Wheat condition improved again but only by 2 point and is now 29% good or excellent vs. 29% last year. French Wheat condition improved by 1 points to 94% good or excellent which is the highest level in 10 years thanks to favorable weather and soil moisture.

The trade flow out of the Black Sea continues to be under discussion with Ukraine accusing Russia of boycotting inspections to a point the flow has stopped. The expiry of the actual deal is this week May 18 according to Russia (60 days) but according to the rest of the signing parties the expiry is in 120 days. We will see what happens this week.

In the weather front, both he US and Brazil continue to enjoy favorable weather. The US is expected to receive some rains in the coming days which will be favorable for Corn and Wheat conditions although could delay a bit field work, which is not a problem as Corn planting is well ahead of last year. Dry weather is expected in Brazil together with a cold wave which will favor Safrinha Corn condition. Europe continues to be very dry in the south but normal conditions are expected in the north.

The July future is now the front month for both Corn and Wheat and in the case of Corn we are now trading 46 cpb lower vs. the expiry of the May future. Corn is now sub 6 USD/bu and the doubt is if July will try to close the gap with the expiry of May or it will continue with a down trend. We may see some recovery this week after the correction of last week, but the outlook is for ample supply and we think there is no fundamental reason to see 6 USD/bu Corn looking forward unless El Niño kicks in during the second half of the year or if the Black Sea corridor deal is not extended.

The May WASDE forecast a bumper US Corn crop and Brazil Corn production was revised higher by Conab. All grains plummeted. Negotiations to extend the Black Sea corridor deal continue. The July future is now the front month for both Corn and Wheat and in the case of Corn we are now trading 46 cpb lower vs. the expiry of the May future. Corn is now sub 6 USD/bu and the doubt is if July will try to close the gap with the expiry of May or it will continue with a down trend. We may see some recovery this week after the correction of last week, but the outlook is for ample supply and we think there is no fundamental reason to see 6 USD/bu Corn looking forward unless El Niño kicks in during the second half of the year or if the Black Sea corridor deal is not extended. No changes to our average price forecast for Chicago Corn for the 22/23 (Sep/Aug) crop in a range 6 to 6,5 USD/bu. The average price since Sep 1 is running at 6,6 USD/bu.