Insight Focus
- China allows corn imports from Brazil.
- Spring planting in Ukraine making strong progress.
- French wheat conditions deteriorate.
Nixal’s Forecast
The average price since the new crop started is running at USD 6.45/bu.
Market Commentary
It was a bearish week for all grains in all geographies on good planting progress in the US and hopes of Ukrainian supply as Russia offered to facilitate exports in return for an easing of sanctions. However, that proposal went nowhere, and grains recovered some of the losses by the end of the week but still closed the week lower.
India banning wheat exports was bullish for the start of the last week, but last Tuesday China and Brazil agreed on phytosanitary (plant health) requirements which will allow exports of corn from Brazil to China, pushing corn prices lower.
US corn planting progress was again impressive and is now 72% complete compared with 49% last week. This was again a quick catch-up but is still well behind last year’s 89% and the five-year average of 79%. This means the corn yield is at risk but we think the 177 bushels an acre forecast by the USDA is already taking this delay into account.
In Brazil, the first corn harvest is 83.7% complete compared with. 79.1% last year. Safrinha harvesting started last week with just 0,2% complete but ahead of last year when harvesting had not started.
In Argentina, the fertilizer association said they expected a 7% drop in fertilizer use due to high prices, tight supply and political uncertainty.
Ukraine Planting Makes Good Progress
In the Black Sea region, spring planting in Ukraine continues to make strong progress with 89% of the area now planted, but difficulties with fertilizer and fuel supply remain. This is 76% of the area planted last year. The Agriculture Ministry reduced its projected area to 12 million hectares from the previous 14.2 million, less than the 16.9 million planted last year. Corn planting is complete on 81% of the planned area compared with 94% last year. Further progress on spring planting will probably be limited.
Ukrainian traders are focusing on working out supply chains as shipping in the Black Sea remains blocked and they will have to free up storage space containing the old crop before they buy new crop grains. Ukraine is exporting some 1m-1.2m tonnes a month compared with. 6m-7m tonnes before the war.
Some 20m tonnes remain stuck in the country and new crop harvesting starts in two months. Russian President Vladimir Putin said he would facilitate exports of grains and fertilizers in return for sanctions being eased, but the US rejected any such deal.
USDA Wheat Forecast
On the wheat front, the USDA increased its forecast for UK wheat production to 14.7m tonnes or 5% higher on the year. But they also lowered India’s production by 11m tonnes to 99m tonnes due to the heatwave there since mid-March.
French wheat conditions worsened again to 69% good to excellent from 73% last week and 80% last year. Conditions have deteriorated very quickly during the last four weeks due to hot, dry weather.
The weather forecast for this week is for rainfall in the US corn belt as well as in Canada. Dry weather is forecast in Northwestern Europe, especially in France, but some rain is expected in Germany.
Brazil should have rainfall in in the south with the rest of Centre South should remain dry with just some rain early this week.
Grains fell for a second week in a row but the situation for corn and wheat remains tight and there is great doubt about how much grain will be planted in Ukraine and more significantly how much of it will be exported. Dry and hot weather in India and France is also not helping at all.
The Black Sea trade flow is key. It remains blocked despite initiatives to find alternative routes. We continue to expect prices to remain well supported.
Other Insights That May Be of Interest…
US, EU Mull Alternative Export Route for Ukrainian Grains
Explainers That May Be of Interest…
