Insight Focus
- Attack on Port of Odessa lowers hopes of Ukrainian grain exports resuming.
- Concerns about corn demand as Chinese imports down 38% on last year.
- Lower global grain production due to the extreme heat in Europe.
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 6,58 USD/bu.
Nixal’s Market Commentary
Grains were sold off last Friday after Russia and Ukraine signed a deal to resume exports out of Ukrainian ports. But on Saturday Russia attacked one of the key export ports risking the execution of the agreement.
Three ports were included in the agreement, among them the port of Odesa which was attacked by Russia on Saturday erasing hopes export flows will resume anytime soon.
Despite the attack, Ukrainian officials said they continue to work on preparing everything that is needed to restart exports of the some 18 mill ton of grains that are waiting to be exported.
There will be a coordination center in Istanbul with members of Ukraine, Russia, Turkey and the UN. The center will monitor ships in and out of Ukrainian ports. The main concern for Russia is that there is no supply of arms to Ukraine. The agreement is just for 120 days, after that it must be renewed.
Exports out of the Black Sea will not happen immediately as some areas need to be demined and shipowners and crews will probably think twice before they take that route.
Besides trade flows out of the Black Sea, we had another week of hot and dry weather in the US and in Europe.
Chinese Corn imports in June fell 38% yoy raising concerns about demand. Overall imports in H1 2022 were -11,1% yoy.
The IGC council reduced global grain production due to the extreme heat in Europe having a negative impact on yields. Wheat production actually improved 1 mill ton but is still 11 mill ton lower year on year. Corn production was reduced by 1 mill ton and is 2,5% lower yoy.
US Corn condition was unchanged at 64% good or excellent vs. 65% last year. In Brazil, safrinha Corn is 49,2% harvested vs. 30% last year.
In the Wheat front, the Russian harvest continues at a good pace and is now 17,4% complete with yields 25% higher yoy. The big doubt continues to be the final production number projected by the USDA at 81,5 mill ton while local analysts and the European Commission are forecasting some 88 mill ton.
US Winter Wheat is now 70% harvested vs. 71% last year. French Wheat condition was one point lower at 63% good to excellent vs. 76% last year. Harvesting is 84% complete.
Weather is expected to be hot and dry again in the US while some rains are expected in Europe. The very hot weather seen in north western Europe in the past couple of weeks will most likely have an impact on wheat yields and protein content. Brazil is also expected to see dry weather which will continue to benefit safrinha harvesting pace.
We will probably see good volatility this week as the market is struggling to find direction with three keys factors influencing: weather, harvest pressure and export flows out of Ukraine.
We may have a strong start of the week if the market understands last Friday’s agreement is dead after the attack on Odesa. But if both sides give signals they are making efforts to allow exports flows out of Ukraine, there should be some more downside risk. The market needs to understand the pace of the flow through the Black Sea otherwise volatility will remain. On the other hand, continued hot weather should have an impact on Wheat quality and probably on Corn yields. Although Corn still has some months to recover if rains return.
