The same market story is ongoing. Never before has world weather kept our markets alive for so long. It all started last summer with the drought in Ukraine, impacting corn production by nearly 30%. Then, La Nina disturbed drilling in South America, downgrading Brazilian corn potential by another 20%. It is now US weather that is keeping traders busy within a context where world demand suddenly surged by more than 10%. China buying huge volumes as she is becoming a structured feed importing country. As a result, feed grain stocks have reached very low and dangerous levels.
Old crop prices have fully reflected this situation and all markets reached demand rationing levels during the first half of 2021. The question now is about new crop.
We know stocks will again be limited. However, will markets once again need to ration demand? A lot will depend on the US grain and oilseed production levels as EU and Black Sea production is mainly known.
Risk and uncertainty are still on in the US. Even where a large part of the Belt did receive some very welcome rain in the past few days. Some States, like Iowa, the major corn producer, are still very dry. The Northern plains, including the South of Canada are still suffering from severe drought conditions. Consequently, spring wheat and OSR production is very much at risk.
Next week, on the 30th of June, the crucial USDA acreage report will provide part of the answer. Traders’ expectation is for a significant increase for both soya and corn. Then the market will focus on the critical July weather. We therefore expect prices to remain highly volatile, with a limited downside until more is known. Any new weather risks will continue to be highly priced, providing opportunities for farmers who have yet to sell their new crop grain and oilseeds.