Insight Focus
Grains have continued to rally due to bad news from Europe and the US. However, the market remains well supplied, meaning the low-price environment is here to stay for now.
Grains are up for a second week in a row on the back of lower European yields and deteriorating conditions in the US. After two positive weeks following a long period of negativity, the market is now focusing on dry weather in the US potentially impacting corn and soybeans. Dry weather in the Black Sea region is not new but is supportive.
Wheat quality continues to worry both in France and Germany due to excess moisture. And spec funds are still holding a sizable net short that leaves the market vulnerable to the upside.
However, the big picture has not changed: we have ample supply globally. We may see some short-term price spikes due to dry weather, but the low-price environment is here to stay.
There is no change to our forecast for Chicago corn for the 2024/25 crop (September/August) to average USD 3.9/bushel.
Corn Rallies with Wider Market
Corn was pulled higher by wheat and soybeans, which rallied on the back of a poor European wheat crop and again it triggered spec short covering. But by the end of the week the reality of ample supply weighed on the market, and we had a negative Friday – although the markets still closed the week positive.
The US corn condition was 65% good or excellent, unchanged week on week and compared with 53% last year. The area under drought condition rallied to 13%, up from 8% a week earlier. The French corn condition was 79% good or excellent, unchanged week on week and on par with 80% last year.
Brazil’s safrinha (second) corn crop is almost fully harvested, ahead of 89.2% last year, virtually finished. Conab confirmed their estimate of 115.7 million tonnes for the crop that just finished.
Russian corn is 3.9% harvested with a yield of 2.95 tonnes/ha. This is significantly lower than last year’s yield of 6.98 tonnes/ha. Ukrainian corn is 2% harvested.
Poor EU Harvest Boosts Wheat
On the wheat side, US and European prices continued to trade higher on the back of the poor European harvest.
US spring wheat is 70% harvested – in line with 68% last year and the five-year average of 70%. Russian wheat is 68% harvested with a yield of 3.4 tonnes/ha, just shy of the 3.79 tonnes/ha recorded last year. The Russian agricultural ministry has kept its production forecast of 82 million tonnes unchanged.
Hot and dry weather is expected in US corn growing areas, as well as in Eastern Europe and the whole Black Sea area. Northwestern Europe is expected to experience warm temperatures. While rainfall will be normal in France, it will be above average in Germany. Brazil is expecting to receive rains in the south while the rest of the centre south is expected to remain hot and dry and Argentina dry but cold.
