The USDA report has reminded the market that the situation should also be very tight in 2021. Soya and corn as market leaders. Wheat a slow follower…

01 Apr 2021

During the entire month of March, prices have been falling on the back of favourable weather conditions all over the globe. Wheat was leading the market weakness as prospects are still very promising for this crop. However we knew and reminded here that corn and oilseeds should keep on playing a major role within the ag. markets story. Yesterday’s USDA report confirmed this. Furthermore and soon, the Brazilian corn safrinha could add some fuel to this very tight stock situation.

The 31st of March US planting intentions report was the 2nd most surprising in history. All traders were expecting record acreage for soya and corn. It just did not happen and some analysts are already skeptical. Indeed, higher prices and friendly weather conditions could still take the acreage higher. The answer will be known in the next report, on 30th of June. Until then, analysts will have to work with the current lower than expected acreage.
Wheat and corn prices are already trading at parity on the old crop market. This very unusual situation is illustrating how tight the corn market is. It is also illustrating that any further support on the corn market will directly spread into wheat prices. As such, even if the wheat S&D is currently looking much more balanced, it should continue to follow corn prices as both crops are substitutable.

All in all, this report has simply confirmed our market view: oilseeds and corn stocks are very tight and it will take time for them to rebuild. In a context of very strong international demand, especially from China, any risks on the supply side will be strongly priced. Markets need to ration demand. At current levels, rationing hasn’t started yet. A more bullish scenario is still on the table and weather conditions in the US and Brazil will be key factors to watch for in the coming 3 months.

Don’t miss our Webinar on 14 April 2021! We will provide a full overview of the corn situation and remaining risks that will most certainly be one of the major drivers for UK grain prices. Please subscribe using this link:

Sebastien MALLET