Insight Focus
The global grains market remains comfortably supplied this week. However, volatility remains as events in the Black Sea continue to be unpredictable. Weather events could be the wild card for prices.
It was a negative week for corn in Chicago, pressured by a strong dollar and ample supply. But on the Euronext, there was positivity following risks in European production and supply out of Ukraine at risk again.
However, there is no change to our view of a comfortably supplied market, but continued rains in Europe could threaten production and give some support to the market. There is more upside than downside risk in the short term, but all is very much weather dependent.
There is no change to our Chicago corn forecast for the 2023/24 (September/August) crop to average in the range of USD 4.15/bushel to USD 4.4/bushel with an upside bias. The average price since September 1 is running at USD 4.56/bushel.
Corn Rallies on Black Sea, Planting Pace
US export inspections were poor last week pressuring corn down during the first half of last week.
Source: USDA
Poor corn sales followed later in the week and the dollar making new gains left the market with no reason to trade higher. But there was a Friday rally on fresh Russian attacks on Ukrainian export infrastructure. One Wilmar terminal was hit by a missile.
The very slow planting pace of French corn published last Friday also added fuel to the rally. French corn is 12% planted – a much slower pace than the 17% recorded this time last year and far below the five-year average of 26%.
US corn is 6% planted, slightly behind 7% last year but up 1 percentage point on the five-year average. In Argentina, the corn crop is 17.2% harvested – significantly behind the 32.2% completion rate of last year. The condition is 20% good or excellent, or 1 point up week on week.
In Brazil, the latest rains have benefitted corn condition. The first corn crop is 51% harvested, behind the 54.8% recorded last year. Safrinha corn – the second and bigger crop — planting is virtually finished.
Russian corn is 16.3% planted, up significantly from 5.8% the previous week. Ukrainian corn planting has started and is 19% completed — a sizable increase on the 3% completion rate of the previous week.
Wheat Follow Brief Corn Rally
Chicago wheat experienced a negative week due to comfortable supply and good condition of US wheat. There was also a Friday rally on concerns about dry weather for the coming days. The number of winter wheat areas suffering from dryness increased by a sizable 6 percentage points.
The US wheat condition was 55% good or excellent, 1 point lower week on week and down significantly on 27% last year. French wheat condition was 64% good or excellent, unchanged week on week but well below 93% last year.
Conditions Diverge Across Atlantic
The US is expected to receive average rains with 23% of the corn area under drought condition, flat week on week. But estimates show that 24% of the wheat area is now under drought condition, up 6 points week-on-week. Brazil and Argentina are both expected to continue experiencing dry conditions.
More rains are expected in the Northwest of Europe. As the northern hemisphere spring progresses, we start to see some divergence between the Americas (with benign weather favouring wheat development and corn planting) and Europe, where excessive rain is having a negative impact on wheat quality and delaying corn planting.
We may see some disruptions out of the Black Sea after the latest Russian attack.
