03 Jun 2021

The first US crop condition report was released this week, showing an excellent start for corn, with 76% of the crop “Good to Excellent”. However traders seem to be focusing only on the warm and relatively dry weather forecast in the US and south of Canada. Traders are pricing a similar scenario to 2012/13, where US corn condition went down throughout the June/July period and the crop failed to meet expectations.

Markets rebounded from their recent sell-off amid continued risks for crops. It is still a corn and soya driven market. World stocks are so low that any risk, even unrealised, is very strongly priced.

In addition, the Brazilian corn harvest is about to start and we now predict a very low 90/92 Mt crop. In this very tight supply situation and with Chinese buying large volumes, markets cannot afford any US production failure that would suggest more demand rationing and thus much higher prices.
We consider it is too soon to bet on a crop failure in the US. But the risk is clearly increasing.

Furthermore, weather conditions are close to ideal elsewhere, with Europe and the Black Sea having received enough moisture until harvest. Wheat markets in our regions are going to be well supplied in 2021/22.

As such, farmers who did not take advantage of the previous price peak, should consider the current rebound to fix some new crop volumes.

For farmers who are more inclined to risk, a very bullish scenario is still on the table. Any significant production issues in North America would inevitably take prices to demand rationing levels. So, market highs might not have been seen, as yet, this season…

Sébastien Mallet