Insight Focus
- Corn and wheat prices traded lower this week.
- Favourable weather is boosting corn and wheat production in Russia, Brazil and the rest of Europe.
- The latest USDA report showed corn and wheat stocks higher than expected.
Nixal’s Forecast
No changes to our price forecast for 21/22 (Sep/Oct) Chicago Corn to be around 6,6 USD/bu in average for the crop.
The average price since the new crop started is running at 6,57 USD/bu.
Nixal’s Market Commentary
Big negative week for Corn and Wheat in all geographies as supply concerns ease, favorable weather returns to most growing regions and a bumper Wheat crop is now expected in Russia.
The bulk of the losses occurred last Thursday and Friday in all markets due to a combination of two factors: the quarterly stocks report in the US showing higher Corn stocks and lower Wheat stocks but both at or above expectations, and favorable weather forecasted for this week in the US, Europe and Brazil with the potential of better yields for Corn and Soybeans.
The quarterly stock report by the USDA showed Corn stocks by June 1 at 4,35 bill bu within expectations and up 6% yoy.
Corn planting area for this year was estimated at 89,92 mill acres higher than the 89,5 mill acres of the last WASDE.
The EU MARS bulletin forecasted Russian Corn production of 16,7m tonnes vs. 15,5 forecasted by the USDA. The MARS forecast would be an all-time high and +8% yoy despite area being the same as last year. Russia has benefitted from perfect weather and no shortage in fertilizer.
US Corn planting is now finished and conditions fell three percentual points to 67% good or excellent due to hot and dry weather. Still is better than 64% last year.
In Brazil, safrinha Corn is 20,6% harvested much quicker than last year’s pace of 9,8%.
In the Wheat front, if local Russian analysts were suggesting a bumper 89m tonnes crop vs. 81m tonnes forecasted by the USDA, the EU MARS bulletin has increased their estimate to 88,8m tonnes due to favorable conditions. This is a huge jump from the 75m tonnes produced last year and reduces significantly the world deficit of 12,5m tonnes forecasted by the USDA. Like in Corn, Russia had perfect weather and no shortage in fertilizer resulting in this 16% increase year on year vs. just 9% increase in acreage.
US winter Wheat condition stayed unchanged last week at 30% good to excellent vs. 48% last year. Winter Wheat is now 41% harvested vs. 31% last year.
The USDA quarterly stock report showed Wheat stocks by June 1 at 660 mill bu above market expectations but 22% lower yoy.
Wheat area was forecasted at 47,1 mill acres or 1% higher yoy but very low when comparted with historical values.
French Wheat condition stayed unchanged at 64% good to excellent vs. 79% last year and harvesting has started being 2% complete.
In the weather front, the US is expected to have cooler temperatures and some rains in the Corn belt. Europe is also expected to see cooler temperatures and some rains in the northwest. In Brazil the forecast is for dry weather across the center south region.
The focus now turns to the July WASDE which is due Tuesday next week and will probably increase US Corn production (more acres and better yield) and recognize higher Russian production.
With favorable weather and higher supply all is pointing to further downside risk although we are in a weather market so any change in the forecast by the end of the week can change the mood of the market.
The biggest downside risk continues to be a safe corridor finally allowing Ukrainian exports by sea.
