- It was frosty again in Brazil last week.
- Corn rallied as a result.
- Agrural has not yet reported any crop damage but is worried about quality going forward.
Nixal’s Forecast
Our 2020/21 average price forecast for Chicago corn (Sep/Oct) remains unchanged in a range of 5.1 to 5.5 USD/bu.
The average price since the start of the old crop (Sep/Aug) has run at 5.29 USD/bu.
Our initial outlook for the 2021/22 crop (Sep/Oct) is unchanged, with Chicago corn averaging 4.5 USD/bu. A lot could happen with the weather though, and we think the USDA’s yield forecast too optimistic. Instead, we think it should be more towards 177 bushels per acre (bpa), which would increase our forecast towards 5 USD/bu.
Nixal’s Market Commentary
Chicago corn closed unchanged week-on-week, trading in a narrow range of 8 c/bu. All the weekly gains were cancelled out with a Friday selloff on the back of favorable weather forecast in the Midwest.
It rallied in EU with the August contract expiring this week.
It also rallied in Brazil, surpassing 100 BRL/bag. This happened even though Agrural said there’s no relevant crop damage, despite a third week of frost. They are anticipating quality issues, however, and will review their crop forecast this week.
The US’ corn condition dropped to 64% good-to-excellent, down 8% year-on-year.
The European Commission upped its corn production forecast. Europe received plenty of rain since the previous report meaning yields should improve.
On the demand side, China appeared again in the US line up after recent cancellations. There were rumors last week that China had bought between 1.5 and 2m tonnes of US corn. The majority was supposedly new crop.
Chinese feed demand could increase by 3.6% in 2021/22 according to CNGOIC, as it attempts to re-establish its pig herd following the outbreak of Swine Fever.
On the wheat front, prices rallied 3% in Chicago and 5% in Europe. The Black Sea region is on for record production (18.5mmt) with Romania showing strong yield development.
Russia lowered its wheat production forecast for 2021/22 by 2.5% year-on-year on the back of this season’s dry weather during planting. Production should therefore total 78m tonnes, down 7m tonnes from the last WASDE.
The European Commission increased its wheat production forecast to 127.7m tonnes, up 10.5m tonnes year-on-year.
The US wheat harvest is 84% complete, up 4% year-on-year.
Going forward, corn development remains dominated by weather volatility. We have the August WASDE next week, in which the focus should be on corn yields. The USDA may wait until September before it makes any changes, however.
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