Insight Focus
The Pro Farmer Crop Tour cemented the US corn crop as a record. Although the prospects for European wheat don’t seem particularly positive, healthy volumes from the Black Sea are pressuring prices.
The weakness continues in the grains complex on the back of ample supply confirmed by the Pro Farmer crop tour in the US. Corn and wheat are lower in all geographies.
The big picture continues to be of ample supply with US weather perfect for the corn crop. The hot and dry weather expected this week may trigger some buying but the reality is that soil moisture is optimal thanks to favourable weather basically during the whole summer.
We think we should be close to a floor in the market as all the positive news for production should be in the market already. Expect some consolidation.
There is no change to our Chicago corn forecast for the 2023/24 (September/August) crop to average USD 4.6/bushel with a downside bias towards USD 4.4/bushel. The average price since September 1 is running at USD 4.44/bushel.
Corn Yields Confirmed as Record
Corn and wheat were on the defensive again last week as the WASDE report from the previous week was followed by the Pro Farmer tour in the US last week confirming record US corn yields.
At the end of the four-day tour last Friday, Pro Farmer confirmed record corn yields in several key states although we haven’t seen yet the final report.
July imports of corn to China showed growth of 18.5% compared with June and year to July imports were up 21.4% year-on-year, fuelling a positive Monday for Chicago corn.
The US corn condition was 67% good or excellent, flat week-on-week and versus 58% last year. The area under drought condition was 7%, or one point higher week-on-week. French corn condition was 76% good or excellent — flat week on week. Argentinian corn is virtually fully harvested.
Russia has begun to harvest corn, which is now 0.4% harvested and shows a yield of 3.29 tonnes/ha — much lower than 5.4 tonnes/ha last year. But is still too early to take this yield as a reference.
Black Sea Wheat Pushes Complex Lower
On the wheat side, the lower production in France and Germany seems to be more than offset by healthy production in the Black Sea region.
There was some risk to Canadian exports last week with the two main railroad companies starting a strike last Thursday, which disrupted logistics, but prices did not react to potential export disruptions of Canadian wheat. The government intervened but during the weekend there were rumours no agreement has been reached yet.
But price action was negative throughout the week with European values pressed by Black Sea wheat being offered at lower prices and the US wheat harvest close to be completed.
US winter wheat is 96% harvested versus 95% last year and the five-year average of 95%. Spring wheat is 31% harvested, just behind 35% last year and the 36% five-year average. The condition is 73% good or excellent, up one point week on week and much improved on 38% last year. The area under drought conditions worsened again to 45% for winter wheat versus 43% the previous week.
Russian wheat is 58% harvested with an average yield of 3.49 tonne/ha or 12% lower year-on-year. The French wheat condition is 49% good or excellent, up two points week-on-week and compared with 76% last year. Harvesting has now finished.
Hot and dry weather is expected in the US this week. Argentina is expected to receive ample rains. Europe is expected to have normal summer temperatures in the Northeast and hot weather in the east. Brazil is expected to continue having hot and dry weather too except in the south and southeast where some rains are expected.
