BEARISH FACTORS
- Expectation of less tight US and global stocks in 2021/22;
- Concern about new Covid-19 cases and lockdown measures in China;
- Reduced concerns about US planting.
BULLISH FACTORS
- Advancing vaccination roll out against Covid-19;
- Expectations of a record grains crop in South America;
- Conflict between Russia and Ukraine and expectation of lower planting in Ukraine.
Corn futures opened last week higher on the CBOT, with the contract expiring in July 2022 closing Monday's trading session (23) with an intraday appreciation of 7.5 cents/bu. One of the reasons for this movement was the release of the US export inspection report, which showed a considerable volume shipped by the US.
According to USDA data, the country exported 1.7 million tonnes of corn in the week ended May 19, which was 639,000 tonnes more than the volume shipped the previous week, but 47,000 tonnes lower than the same period last year. Cumulative exports totaled 40.83 million tonnes, 8.24 million less than recorded at the same time of the previous season.
Later in the day, the USDA released its weekly crop progress report. According to data from the Department, sowing reached 72% by May 22, a weekly advance of 23 points. In the same period of 2021, planting had reached 89%, while the average for the last five years is 79%.
Intraday (15 min) - July/22 (CBOT)
On Tuesday, reflecting the crop progress data released by the USDA the day before, futures posted significant declines in Chicago. July/22 ended the session losing 14.5 cents/bu in the daily comparison.
Another fundamental that contributed to the decline seen on the day was a phytosanitary agreement signed between China and Brazil to release corn exports to the Asian nation. Expectation for this agreement has existed for a long time, but it should be noted that exports do not start to occur immediately, as China needs to rate exporting establishments, and transgenic regulations still need to be defined.
China has increased corn imports in recent years, a movement motivated by the swine herd recovery and problems faced in the country's domestic crop. Another point to note is the concern with food security, since China has the largest population in the world. With the conflict in Ukraine and uncertainties about exports from the nation, one of the main sources of corn imported by China, the release of Brazilian imports would be a way for the Chinese to protect from moments of lower corn supply.
On Wednesday, July/22 ended the session practically stable, with an advance of only 0.5 cent/bu, while the other contracts posted slight drops.
The Energy Information Administration (EIA) reported that US ethanol production rose to 1,014,000 barrels per day for the week ended June 20, up 23 mbpd week-on-week. Ethanol inventories fell to 23.71 million barrels, a contraction of 80,000 from the previous week.
On Thursday, because of data released in the weekly US export sales report, which pointed to weaker demand for the nation's corn, prices retreated. The contract maturing in July/22 dropped 7.25 cents/bu compared to the previous close.
The USDA reported that net sales for the 2021/22 crop totaled 151,600 tonnes in the week ended May 19, which was 262,000 tonnes lower than the previous week and 404,300 tonnes lower than in the same week of 2021. The volume was at the lower limit of the range expected by the market, between 150,000 and 500,000 tonnes. Commitments from all destinations increased to 59.1 million tonnes, against 68.6 million in the same period last year.
Weekly US export sales - 2021/22
On Friday, futures rose again in Chicago, recovering a considerable part of the losses recorded in previous days. July/22 accumulated an appreciation of 12.25 cents/bu in the daily comparison. As a result, the contract in question ended the week quoted at 777.25 cents/bu, losing 1.5 cents/bu (-0.2%) in the period.
On Wednesday this week, June 1st, StoneX will release its monthly grains crop estimate. In early May, we estimated the total crop for 2021/22 at 116.45 million tonnes, with the first crop estimated at 26.25 million, the second at 88.14 million and the third at 2.05 million tonnes.
SPOT PRICES (USD/60kg-bag)
