Insight Focus
- All eyes on grain flows from Ukrainian Black Sea ports
- Dry, hot weather hitting European corn crop
- Russian wheat yields 22% higher year on year
Nixal’s Forecast
No changes to our price forecast for 21/22 (Sep/Oct) Chicago corn to be around USD 6.6 a bushel on average for the crop.
The average price since the new crop started is running at USD 6.57/bu.
Nixal’s Market Commentary
Big weekly gains after doubts remained around Ukrainian exports and dry and hot weather staying in the US Corn Belt.
The attack on Odesa the previous weekend resulted in a strong start last week. Despite the attack, the coordination center to monitor exports of Ukrainian grain through the Black Sea was opened last week. The first vessel left Odessa on 1 August.
While the market is still waiting for clarity around trade flows out of the Black Sea, hot weather continues to weigh on yields. This is now a corn issue once the wheat harvest is well advanced and only spring wheat can be damaged by dry weather.
The July MARS bulletin from the European Commission lowered its yield forecasts for EU spring crops due to the very hot and dry conditions across Northern Europe while the Baltic region had favorable conditions. Corn production was reduced by 6.6m tonnes or 9% lower than a year earlier.
The EC also proposed a temporary derogation on rules on crop rotation and maintenance of set aside land with the intention to maximize grain output. They expect around an extra 1.5m hectares will be available for grain production; but this is something for the next crop.
To make things more challenging in Europe, Romanian corn output should fall as area was lower and less fertilizer is being applied. On top of that we had less rain and hot weather. The EC is forecasting 13.9m tonnes but some analysts are forecasting a crop of around 8.5m tonnes.
US corn condition fell 3 points to 61% good or excellent from. 64% last year. This was more or less within market expectations given the hot and dry weather of the last couple of weeks. In Brazil, safrinha corn is now 60% harvested.
The corn’s condition may deteriorate further as hot and dry weather lingers and we are now in a period which is key for yield formation.
In the wheat front, the Russian harvest is continuing at a good pace and is now 24,4% complete with yields 22% higher on the year.
The EC also lowered its spring wheat production forecast by 6.5m tonnes due to the impact of dry, hot weather.
US winter wheat is now 77% harvested compared with. 82% a year earlier.
The weather is expected to be hot and dry again in parts of the US corn belt. Northern Europe is expected to receive rains which are very much needed. Brazil is expected to remain dry with risk of frost in the south but no damage is expected to crops.
The absence of a clear export program out of Ukraine has brought prices back to where they were before the Turkish agreement was signed. This will continue to be the focus of the market together with weather. Rain returning to Europe will be a relief to corn yields but very hot temperatures are expected in parts of the US Corn belt which should reduce corn yields.
We expect the market to remain supported unless there is real clarity about exports out of Ukraine.
Other Insights That May Be of Interest…
Fertilizer Prices under Pressure from Plunging Sulphur Prices
Explainers That May Be of Interest…
