- Europe’s natural gas crisis is turning into a fertilizer crisis.
- At least three European producers have shut down.
- The first quotes for nitrogen-based fertilizers are up 190%.
Nixal’s Forecast
Our average price for new crop Chicago corn (Sep/Oct 2021/22) remains unchanged in a range of 4.5 to 5 USD/bu. The average price since the new crop has run at 5.22 USD/bu.
Market Commentary
US grains fell on the back of harvest pressure. European grains, on the other hand, rallied thanks to tight supply in Ukraine following a slow harvest.
As anticipated last week, the natural gas crisis in Europe is turning into a fertilizer crisis; at least three European producers have shut down.
The first quotes for the nitrogen-based fertilizer required for wheat and corn cultivation in Europe are up 190%. With fuel costs also up 30%, European farmers have some tough decisions to make. They may decide to plant less wheat and migrate to less nitrogen intensive crops, such as pulses. Those staying with wheat may decide to use fewer fertilizers with a negative impact to yields. There’s no data yet on area planted as wheat planting is happening as we speak.
The impact to corn is still unknown, so we’ll have to wait and see how prices of fertilizers are next year.
On top of that, the harvest in Ukraine is going very slow and there appears to be large volumes committed to China with sellers not showing offers to other buyers before they have available volumes. Ukrainian corn is now 14.4% harvested, well below last year’s 31%. This has pushed prices higher in Europe.
Russian Corn is 29% harvested with the US corn harvest, on the other hand, going very quick, preventing corn prices from trading higher. The US’ corn condition was stable at 59% good-to-excellent, down 3% last year. Harvesting is 29% complete, above last year and the five-year average.
Conab thinks Brazil will produce 116.3m tonnes of corn in 2021/22, up 33.7% from the actual crop that’s about to finish at around 87m tonnes.
On the wheat front, European prices rallied together with corn, but US prices had weekly loses. European wheat exports climbed to 1.1m tonnes last week, with exports between July and October up 45% year-on-year.
There was again healthy tender activity further helping to boost prices.
On top of the fertilizer crisis, Iran plans to triple its wheat imports in 2021/22 due to extremely hot weather that’s impacted its crop. It appears to have already secured good volumes from Russia, which will not have that much availability for other destinations.
Russia is also discussing its wheat export quota but has not announced a number yet.
US wheat planting is 47% complete, in line with the five-year average, but that was a jump of 13% in a week, pushing prices down.
We have the October WASDE on Tuesday this week. Our biggest doubt surrounds US corn yields, which could be revised down. The lower new crop yield might be offset by lower old crop demand from ethanol, as ethanol production was lower than expected during September. We’re not anticipating many other changes but a confirmation of actual production numbers in the US and elsewhere should continue to put pressure on prices as the harvest progresses.
We may have an upward revision to Chinese imports by the USDA as its local office increased its forecast to 30m tonnes. However, the WASDE doesn’t always include the latest revision of the foreign USDA offices.
All in all, Chicago corn should continue with some harvest pressure if there’s no surprise in tomorrow’s WASDE. EU grains should remain supported due to the slow Ukrainian harvest and the risk premium from the fertilizer crisis.
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