Insight Focus
EU MARS report shows grains yields hit in Eastern Europe. Prolonged hot and dry weather to blame. This has triggered some spec short covering.
Forecast
Chicago corn finally closed the marketing year averaging 4,42 USD/bu a bit below the 4,6 USD/bu we had projected. Our preliminary forecast for Chicago corn for the 24/25 crop (Sep/Aug) is to average 3,9 USD/bu.
Market Commentary
Grains up in all geographies with lower European yields triggering some spec short covering.
Corn started the week negative continuing with the pressure of the good crop prospect in the US, but it then turned around during the second half of the week, especially in Europe following the August MARS publication as yield in Eastern Europe start to look really bad due to prolonged hot and dry weather.
The MARS report reduced the corn yield forecast in Europe to 7,03 ton/ha or 3% lower than their July report vs. 7,51 ton/ha last year and vs. 7,35 of the five year average. The focus was eastern Europe with 18% year on year fall in yield in Romania. We have heard farms with yields of just 2 ton/ha vs. the 3,83 projected in the MARS bulletin and vs. 4,7 ton/ha last year and 4,89 of the five year average. Hungary is also revised lower to 6,46 ton/ha vs. 8,17 last year and 6,93 of the give year average. Harvesting in Eastern Europe and Ukraine has already started which is sooner than normal and is the result of persistent dry weather.
Later in the week the European Commission reduced their corn production forecast to 61,6 mill ton in 24/25 vs. 62,7 in 23/24.
US corn condition was 65% good or excellent down two points week on week and vs. 56% last year. Area under drought condition was 8% or one point higher week on week. French corn condition was 79% good or excellent or three points higher week on week. Argentinian corn is 99,3% harvested virtually finished. Brazil’s safrinha (second) corn crop is 97,9% harvested vs. 84% last year, virtually finished.
No data yet on Russian, Ukranian and Eastern Europe harvesting progress.
On the wheat side, the week started negative both in the US and Europe on the back of ample supply as Black Sea cargoes continued to be offered lower. But futures turned positive by mid week also after the MARS bulletin was published and then the European Commission lowering wheat production by 4,7 mill ton to 116,1 mill ton in 24/25 vs. 124,5 in 23/24.
In opposition to low corn yields in eastern Europe caused by hot and dry weather, is excess water in northwestern Europe the reason for the poor wheat yields revised lower to 5,68 ton/ha vs. 5,81 last year and 5,86 of the five year average. Is worth highlighting France with 6,2 ton/ha vs. 7,37 last year and 7,3 of the five year average.
US wheat condition deteriorated and helped the positive second half of the week.
US winter wheat is now fully harvested. Spring wheat is 51% harvested vs. 50% last year and 53% of the five year average. And condition was 69% good or excellent down four points week on week and vs. 37% last year. Area under drought conditions was stable at 21% for spring wheat.
In the weather front, northwestern Europe is expected to receive heavy rains and hot temperatures, while easter Europe will continue to remain hot and dry. The US Midwest is expected to have warm and rainy weather, benefiting crop condition. Brazil is expected to continue having dry weather also expected in Argentina.
The sizable net spec short triggered a short covering rally last week simply on the back of bad yields in Europe and worse crop conditions in the US. But we think both the eastern European lower corn yield and the northwestern European low wheat yield was widely known and was more or less priced in. So the big picture has not really changed and supply is ample justifying a sub 4 USD/bu Chicago corn price environment.
Grains up in all geographies with lower European yields triggering some spec short covering. The sizable net spec short triggered a short covering rally last week simply on the back of bad yields in Europe and worse crop conditions in the US. But we think both the eastern European lower corn yield and the northwestern European low wheat yield was widely known and was more or less priced in. So the big picture has not really changed and supply is ample justifying a sub 4 USD/bu Chicago corn price environment. Chicago corn finally closed the marketing year averaging 4,42 USD/bu a bit below the 4,6 USD/bu we had projected. Our preliminary forecast for Chicago corn for the 24/25 crop (Sep/Aug) is to average 3,9 USD/bu.
