- US ethanol margins hit an all-time high last week.
- This bodes well for US corn producers as demand should increase.
- La Niña remains a very real threat, though, and is now 70% likely to occur.
Nixal’s Forecast
Our 2021/22 price forecast for Chicago corn (Sep/Oct) remains unchanged in a range of 4.5 to 5 USD/bu. The average price since the start of the new crop is running at 5.28 USD/bu.
Market Commentary
Chicago corn traded positive every day last week as demand from the ethanol sector held firm.
US corn is 66% harvested, down 4% year-on-year, yet 13% above the five-year average. Russian Corn is 60% harvested, but the Ukrainian corn harvest remains very slow (44%).
One of Brazil’s largest Farming Associations has asked members to use less fertilizer amid the ongoing energy crisis. 53% of the country’s first corn crop is now in the ground, up 7% year-on-year. 38% of the soybean crop has also been planted, marking Brazil’s second fastest soybean planting on record.
Both US and EU wheat rallied last week and the back of continued supply worries. Turkish authorities reduced their wheat forecast for a second time, now suggesting that production will be down 14% year-on-year. Turkey is a small producer, providing around 17.65m tonnes, but the tight wheat market means prices are sensitive to even the small changes to supply and demand at present.
Russia has already exported 14.7m tonnes of wheat. This is down 12% year-on-year as exports are now subject to a higher tax, but this still leaves just 2.3m tonnes of quota space. Its spring wheat harvest is 93.5% complete.
The fertilizer crisis is still ongoing. Two weeks ago, we saw China limiting its fertilizer exports and Russia is now thinking of doing the same thing to ensure domestic supply.
The future looks more positive for wheat than it does for corn. In the short term, however, US corn should remain supported by higher demand for ethanol production as ethanol margins hit an all-time high last week. Production could increase and remain high through to the end of the year, which will tighten corn closing stocks.
It’s still wet in the US, Brazil, and Europe (favouring grains crops in all three regions). However, La Niña still poses a threat and currently has a 70% chance of occurring.
We have the November WASDE next week, which will reveal whether the USDA has changed its stance on anything. We think we’ll see more corn diverted toward ethanol production, as well as another reduction to global wheat production. Prices should remain supported.
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