Insight Focus
- Russia has banned nitrate-based fertiliser exports.
- This could hinder grains crop development in major regions, including Brazil.
- Meanwhile, La Niña has hit soybean and corn yields in South America.
Nixal’s Forecast
Our price forecast for 2021/22 (Sep/Oct) Chicago corn now sits in a range of 5.3 to 5.8 USD/bu. The average price since the start of the new crop is running at 5.67 USD/bu.
The US’ corn export data was released last week, and volumes were lower than expected. By the end of the week, some exports booked to China were cancelled and prices dropped.
In South America, Brazil’s first corn harvest is 11% complete. Its safrinha planting is 14% complete, up 1.5% year-on-year. Its first corn crop will likely be hindered by dry weather, but the second should perform better as rain has been good so far this month. The second crop will account for the bulk of Brazil’s production.
South America’s soybean crops have also been hit by dry weather and prices rallied last week. BAGE, in Argentina, lowered its soybean production forecast by 2m tonnes, so it now sits at 42m tonnes.
As for wheat, prices dropped last week, both in Europe and the US, as tensions in Ukraine eased and some of the risk premium disappeared with spec funds taking profit. Poor demand (no tender activity) and wet weather in the US plains also pressed prices down. Tensions increased again on Friday, so the market rallied, still closing the week negative.
Reduced fertilizer use remains a risk for grains as, last week, Russia banned exports of nitrate-based fertilizers until the 1st April to ensure local supply. Fortunately, Brazil imported 41.6m tonnes of fertilizer last year, up 38.9% from 2020. This should ease fears surrounding reduced use, at least for their soybean and first corn crop. However, the focus is now on the safrinha crop, as well as those in other part of the world that could be impacted by limited fertiliser supply.
La Niña remains an issue too. So far, we’ve seen a strong reduction in South American soybean production due to dry weather. Brazil’s first corn crop will be impacted too, but we think this risk should be priced in already.
We have the February WASDE this week, where the USDA should lower its soybean production number for South America. Expect some volatility around its release, and as the situation in Ukraine continues, but don’t expect major fundamental changes.
Other Insights That May Be of Interest…
Conflict Continues Between Key Grains Suppliers
The Russia and Ukraine Conflict is Bad News for Grains
