Insight Focus
Wheat dropped as Black Sea disruptions faded, and corn traded sideways. The northern hemisphere corn harvest is nearly complete, with minimal risk. The market is expected to trade sideways, with more impact from geopolitics than fundamentals.
The week started on the defensive for both corn and wheat, driven largely by fading concerns over Black Sea supply disruptions. Low trading volumes in the US due to the Thanksgiving holiday also contributed to subdued activity.
Wheat prices plunged in Chicago and on Euronext as no significant supply disruptions from the Black Sea materialised. Corn followed wheat’s decline on Euronext but traded sideways in Chicago, ending the week with minimal losses. Meanwhile, Russia reduced its wheat export quota.
No changes to our forecast for Chicago corn for the 2024/25 crop year (September/August), which we project to average USD 3.9/bushel with an upside bias. The average price since September 1 has been USD 4.15/bushel.
Corn Market Subdued as Forecasts Rise
The European Commission raised its corn production forecast for 24/25 by 1.6 million tonnes, now estimating 59.6 million tonnes compared to the previous projection of 58 million tonnes.
In France, 75% of the corn crop is rated good or excellent, unchanged from the previous week but lower than last year’s 82%. The harvest is 89% complete, up 7 points from the prior week, though progress remains slow compared to 99% at this time last year and the five-year average of 98%.
In Ukraine, 93% of the corn crop has been harvested, up from 85% last year. Russia’s corn harvest is at 91% completion. In Brazil, summer corn planting is 58.7% complete, slightly ahead of 55% at the same time last year.
Russia Reduces Wheat Export Quota
The dissipating fears over Black Sea supply disruptions – anticipated in last week’s report – and improved US crop conditions weighed heavily on markets early in the week. US wheat conditions improved significantly, up 6 points week-on-week.
The highlight of the week was Russia’s announcement of a wheat export quota of 11 million tonnes for February to June, down sharply from last year’s 29 million tonnes. Although the market expected a quota between 9 and 12 million tonnes, Friday’s market reaction suggests that the consensus estimate leaned closer to 9 million tonnes, explaining the day’s bearish sentiment.
The European Commission marginally revised its wheat production forecast for 2024/25 to 112.3 million tonnes, down from 112.6 million tonnes.
In the US, winter wheat planting is 97% complete, on par with last year and just shy of the five-year average of 98%. Crop conditions improved to 55% good or excellent, a 6-point increase from the previous week and up from 50% last year.
In Russia, winter wheat planting is nearly unchanged at 96.7% complete, while last season’s harvest is effectively finished at 99% completion. Ukraine’s winter wheat planting is 98% complete, compared to 96% last year. In France, planting is 93% complete, ahead of last year’s 81% and the five-year average of 91%.
Weather, Geopolitics Shape Market Outlook
In Brazil, favourable rainfall continues across the central-southern regions, supporting crop development. The US is also expected to experience favourable weather conditions. Northwestern Europe is forecast to receive beneficial rainfall, with Eastern Europe finally expected to see much-needed precipitation after an extended dry period since mid-summer.
Last week was somewhat unusual due to the Thanksgiving holiday midweek, which likely influenced the mixed price movements. Corn and wheat diverged on Friday, with Chicago corn rallying unexpectedly while wheat fell. The market reaction seems unjustified; although Russia’s wheat export quota reduction was smaller than expected, it remains a significant cut compared to last year.
The risk premium from the conflict in Ukraine has diminished as no immediate supply disruptions are occurring. However, with rising geopolitical tensions, a renewed risk premium could emerge at any time. Further compounding uncertainty, former President-elect Trump announced plans to impose tariffs on imports from Mexico, Canada and China, raising concerns about potential retaliation against US exports. The situation remains fluid.
From a fundamentals perspective, the northern hemisphere corn harvest is nearly complete, with France’s slower pace catching up quickly and presenting minimal risk. In South America, weather conditions are ideal, and planting progress is within seasonal averages. The primary risk ahead lies in the northern hemisphere’s winter season, where insufficient winter protection could expose wheat crops to frost damage.
We expect markets to trade sideways, with geopolitical developments likely having a bigger impact than underlying fundamentals.
