Insight Focus
- Larger grains crops expected in 2023.
- Corn sell off after poor export inspections in US.
- Wheat under pressure with favorable US weather and ample Black Sea supply.
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 6,7 USD/bu.
Market Commentary
Further correction in grains for a second week in a row but a recovery by the end of the week. New crop prospects continue to weigh in the market.
The correction in grains continued last week contrary to what we thought as profit taking after the USDA planting estimate for 2023 was published two weeks ago. But the sell off last week in Corn was further fuelled by poor exports inspections in the US, falling 8,2% week on week for the week ending Feb 23.
The market found support by the middle of last week and rebounded through Friday. Fund liquidation should have continued in Corn but is difficult to know given the lack of actual COT data.
In Brazil, the Soybean harvest continues to run slow just 34% complete vs. 42,1% last year. The second corn crop is 48,7% planted still behind last year’s pace of 59,6%. The first Corn crop is 16,7% harvested vs. 23,3% last year. In Argentina, The Buenos Aires Grain Exchange (BAGE) said if dry weather persists, there will be another downward revision to Corn and Soybean production.
In the wheat front the selling pressure also continued with favourable weather in the US wheat areas, and ample supply from the Black Sea region. Offers of Russian Wheat fell to the lowest levels in the last year and a half trading below 300 USD/ton.
There is more and more noise in the market that India may have to import wheat while they have been a significant exporter during 2022.
In the weather front, dry and warm weather is expected in the US which should not be good for wheat condition and may reverse the losses of last week. In Brazil there is finally some dry weather expected which will help to speed up Corn and Soybean harvesting, and safrinha corn planting. But southern Brazil is expected to receive rains as well as Argentina. Europe is also expected to have dry conditions.
We have the March WASDE this week and we also have the extension of the agreement of the Black Sea corridor which expires on March 18. The latter could take place any time before the expiry but both events should mark price action this week.
We do expect a downward trend in prices between now and the end of the year based on bigger crops during 2023 assuming normal weather. But in the short term the market is tight and we think the reaction of the last two weeks might have been exaggerated. In any case expect a volatile market debating between a short-term tightness and a longer term oversupply.
