A large portion of the corn crop in Brazil 🇧🇷 hasn't seen any rain during the entire month of April. Furthermore, no rain in the forecast, when 50% of the corn is already flowering and harvest should start fully in June. We now see a production level at just 95 Mt (-14Mt vs USDA), with possible further downgrades. This is not only tightening the world corn balance sheet further, but it will also add pressure and risk premium to the US 🇺🇸 and Ukrainian 🇦🇷 crops. In the latter, corn crops need to be bumper, to avoid an unprecedented world maize supply shortage. This is a highly buoyant situation that will continue to support all grain and oilseeds prices until more is known. Two key crop reports are released next week (USDA & CONAB) to help provide clarity.
As anticipated, US farmers took advantage of half-decent planting conditions by powering ahead with spring corn & soybean seeding. The USDA report 46% of the corn crop is now in the ground, as well as 24% of the soybean crop. For corn, this is roughly in-line with the 5-year average, but soybeans are ahead of average. Temperatures in the Midwest are forecast to be cooler than normal in the week ahead, but widespread rains are also anticipated, promoting timely germination. Traders expect US corn/soy plantings will be completed ahead of the 5-year average. A bumper crop is needed to help replenish very low stock levels.
While more than 50% of the Safrinha (2nd corn crop) is already silking, weather conditions remain extremely dry in Brazil 🇧🇷. There is now little doubt that the corn crop will again need to be revised down. We already lost 10Mt versus the USDA forecast. Bullish to very bullish corn and thus all other grains.
While April was dry and cold, it looks increasingly likely that May could be much warmer and wetter. Weather forecast for both Europe 🇪🇺 and the US 🇺🇸 have changed quickly and should provide much needed relief to crops across both regions. As expected, prices reacted strongly to the downside, on improved yield/production prospects. Volatility will likely remain highly elevated until all N. Hemisphere crops are in the shed.
Just after Brazil 🇧🇷 canceled her corn and soya import tax (very unusual for one of the major exporting country), Argentina is talking about increasing her export tax on all ag commodities, to limit domestic price inflation. This, combined with ongoing weather risks is driving prices to record levels. As planting conditions in the US 🇺🇸 should improve in the coming days, we expect volatility to remain at very high levels.
Global corn fundamentals remain continue to direct world grain prices. There is scant rainfall in the forecast for the Central and Southern parts of the Safrinha growing area in Brazil 🇧🇷. We consider that production levels will soon need to be downgraded. In the US 🇺🇸, low temperatures should slow drilling operations (tonight’s planting report will be scrutinised). Closer to home, forecasts now indicate very little rain in France 🇫🇷, Germany 🇩🇪 and UK 🇬🇧 for the week ahead. Some rainfall is now needed, soon! Plantings are slow in Russia too, compared to previous seasons, as 2.4 Mha of spring cereals were planted out of a total of 3.5 Mha for all crops.
The current high prices and volatility are the consequence of weather risks. But financial prices are now de-correlating from the physical markets where the activity is not reflecting this price surge (basis are poor). This is due to a massive injection of speculative money into our markets, increasing price moves. Our markets have entered into a speculative bubble where the rise leads to more rise. Margin calls on the financial markets are also pushing some players to reduce their short positions. We could soon consider these levels as opportunities to hedge these profitable prices.
Continental grain traders are reporting that China 🇨🇳 has already purchased around 0.5Mt of wheat from France 🇫🇷, for delivery in July-September. The news raises the prospects of China being a major wheat (and also corn) importer again next season. If this comes to fruition, then more reliance is placed on the major grain exporters, at a time when global [particularly corn] stocks are already very tight and amid mounting concerns about N.hemisphere growing conditions and crop potential. Bullish news.
Following on a few days of consolidation amid improving weather conditions in the US and Europe, grain and oilseed prices are back to the one-way trend initiated 6 months ago. Markets are now pricing a major risk materializing in Brazil...Read more
|t-ice||WHEAT||May '21||207.00s||207.00||s||0.00||207.00||207.00||207.00||21||1606||ICE||05/07/21||12:00:00||LONDON FEED WHEAT||LONDON_FEED_WHEAT|
|t-ice||WHEAT||Jul '21||205.20s||205.20||s||0.20||204.00||205.00||204.00||75||176||ICE||05/07/21||12:00:00||LONDON FEED WHEAT||LONDON_FEED_WHEAT|
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|t-ice||WHEAT||Jan '22||192.65s||192.65||s||0.15||192.65||192.65||192.65||ICE||05/07/21||12:00:00||LONDON FEED WHEAT||LONDON_FEED_WHEAT|
|t-ice||WHEAT||Mar '22||192.65s||192.65||s||0.25||192.65||192.65||192.65||ICE||05/07/21||12:00:00||LONDON FEED WHEAT||LONDON_FEED_WHEAT|
|t-ice||WHEAT||May '22||192.95s||192.95||s||0.35||192.95||192.95||192.95||1087||ICE||05/07/21||12:00:00||LONDON FEED WHEAT||LONDON_FEED_WHEAT|
|t-ice||WHEAT||Jul '22||186.25s||186.25||s||0.45||186.25||186.25||186.25||ICE||05/07/21||12:00:00||LONDON FEED WHEAT||LONDON_FEED_WHEAT|
|t-ice||WHEAT||Nov '22||170.55s||170.55||s||0.55||170.55||170.55||170.55||423||ICE||05/07/21||12:00:00||LONDON FEED WHEAT||LONDON_FEED_WHEAT|
|t-ice||WHEAT||Jan '23||174.15s||174.15||s||0.55||174.15||174.15||174.15||ICE||05/07/21||12:00:00||LONDON FEED WHEAT||LONDON_FEED_WHEAT|
|t-ice||WHEAT||Mar '23||176.00s||176.00||s||0.55||176.00||176.00||176.00||ICE||05/07/21||12:00:00||LONDON FEED WHEAT||LONDON_FEED_WHEAT|
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