Insight Focus
- Rally fuelled by missile strike on Ukrainian grain terminal
- USDA forecasts sharp rise in Ukrainian corn stocks
- US winter, French wheat quality substantially lower on year
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 6,5 USD/bu.
Nixal’s Market Commentary
Grains rallied after the big correction of the previous week as there is still no safe corridor to export grains out of Ukraine. The June WASDE was neutral with a 5m-tonne upward revision to Ukrainian Corn production.
Corn in Chicago had big gains of more than 6% and wheat made gains of around 3% both in Chicago and Europe.
The rally started with news of a missile hitting a grain terminal in Ukraine. But during the week President Vladimir Putin said again Russia would allow grains exports if Ukraine were to demine its ports. Russian Foreign Minister Sergei Lavrov agreed Turkey would help to demine Ukrainian ports and escort ships carrying Ukrainian grains creating a safe corridor. But Russia insisted they would only allow exports if sanctions end.
We had the June WASDE published last Friday with world ending stocks for gains increased by 2,4 mill ton most of it coming from Corn as Wheat ending stocks were slightly lower but basically unchanged from their May forecast.
On the corn side, the WASDE increased US old crop (21/22) stocks by 45 mill bushels due to a combination of 5 mill bu of higher demand but 50 mill bu of less exports. Stock to use moved from 9,5% before to 10% now. New crop production was left unchanged with no changes whether to acreage or yield, and demand was increased by just 5 mill bu so all the increase in ending stocks came from the changes done to the old crop. New crop stock to use moved from 9,3% to 9,6%.
World corn stocks were increased by almost 5m tonnes entirely coming from Ukrainian production revised to 25m tonnes from 19,5m.
US corn planting is now 94% complete vs. 98% last week, now above the 5-year average of 92%. The corn’s condition started to be reported showing 73% good or excellent vs. 72% last year. French corn’s condition is 88% good to excellent vs. 90% last year.
On the wheat front, the WASDE increased US ending stocks to 627m bu vs. 619m before all of it coming from higher production with yield increased to 46,9 bu/acre from. 46,6.
World wheat stocks were marginally lower by 170k tonnes with the increase in US production offset by a decrease in EU production and Russia producing 1 mil tonnes more.
US winter wheat condition is 30% good to excellent just a 1-percentage-point rise on the week and far from 50% last year. Winter Wheat is now 5% harvested vs. 2% last year. French Wheat condition was 66% good to excellent vs. 81% last year.
We continue to be in the same situation: weather market and the possibility or not of exports out of Ukraine.
May exports out of Ukraine did increase significantly with 1,7m tonnes of agricultural products exported via all modes of transport vs. just 607,1k tonnes exported in April. But this is shy of the normal export month and despite efforts and words of a safe corridor for seaborn exports, this is not occurring yet.
On the weather front, Northwest Europe is expected to stay dry this week with dryness persisting in France. Also, dry weather is expected in the US growing areas with only Canada expecting some rain. Same thing in Brazil’s Center South which is expected to remain dry.
Expect the market to remain supported with the only downside risk being the opening of any safe corridor that allows Ukrainian exports by sea.
Other Insights That May Be of Interest…
EU Pork Output, Feed Grain Demand Fall on ASF Outbreak
Explainers That May Be of Interest…
Czapp Explains: Why We Should Care About Corn
