Insight Focus
Market information last week showed several weather-related issues that will be supportive for grains, such as flooding in South Brazil. However, Ukrainian exports were high in April, suggesting plentiful supply.
It was a positive week for US grains but negative in Europe. Floods in south Brazil will potentially impact soybeans and Argentinian corn was downgraded. Ukrainian exports during April were at an all-time high since the invasion.
We think the potential loss of production in Europe and Brazil will weigh more on the market in the short term and consolidate some of last week’s rally. But we expect weather volatility to continue.
There is no change to our Chicago corn forecast for the 2023/24 (Sep/Aug) crop to average in a range of USD 4.15/bushel to USD 4.4/bushel with an upside bias. The average price since September 1 is running at USD 4.55/bushel.
Corn Rallies on Weather Issues
Corn in Chicago began the week negative, but it rallied by the end of the week on the back of rains potentially delaying planting progress in the US and floodings in Brazil’s Rio Grande do Sul. We also had escalation of the tensions in the Black Sea, but the reality is that Ukrainian exports in April were at an all-time high since the Russian invasion.
US corn is 27% planted, up from 12% the previous week and versus 23% last year and the five-year average of 22%. Corn areas experiencing drought fell to 19% last week, or 4 points lower week on week.
In Brazil, the first corn crop is 59.8% harvested, slightly behind the 63.6% recorded last year. In Argentina, the corn crop is 22.1% harvested. Conditions improved 1 point to 18% good or excellent. BAGE lowered its forecast by 3 million tonnes to 46.5 million tonnes.
Russian corn is 42.3% planted, significantly up from 16.3% of two weeks ago. Ukrainian corn planting continued to make strong weekly progress and is now 50% completed. French corn is 54% planted versus the five-year average of 70%.
US Wheat Planting Accelerates
Rain forecast in the US triggered some wheat selling at the beginning of last week after the rally of the previous week and on expectations US wheat conditions would improve. But continued dry weather in Russia triggered an end of the week rally on concerns of lower production.
The US wheat condition was 49% good or excellent or one-point lower week on week but well ahead of 28% last year. Areas under drought condition improved by 2 points to 28% last week. Spring wheat planting progress rallied to 34%, more than double the 15% recorded a week earlier and compared with 10% last year. This progress, which was also above the five-year average of 19%, put pressure on prices at the beginning of last week.
The French wheat condition is 63% good or excellent, flat week on week and down from 94% last year.
Weather Presents Wildcard
Rains in the south of Brazil caused serious flooding and are expected to continue this week. Two more southern states will be susceptible to high rainfall this week while the centre west and southeast are expected to remain dry again.
Argentina is expected to receive rains in the north along with cold temperatures. Across key European producing regions in France and Germany, as well as the US corn belt, good rains are expected again this week.
The volatility from weather is starting to have an impact on production. We are not worried about US corn as planting progress is running well with room for some delays due to rain. The increasing soil moisture will benefit crop development. But very slow planting in France and Germany could result in less planted area.
The excess rain in Europe is not helping wheat quality, which could also result in lower production. And finally, we need to wait and see the final damage of the flooding in south Brazil.
