BEARISH DRIVERS
- Fear about a global recession;
- More favorable weather forecast for grain development in the US Midwest;
- Agreement involving the creation of a Ukrainian export corridor through the Black Sea.
Bullish DRIVERS
- Restriction on grain supply due to conflict in the Black Sea;
- New Russian attacks in Ukraine;
- Uncertainty whether agreement for exporting Ukrainian grains will be fulfilled.
In the first trading session of last week, after the significant losses seen in previous weeks, the corn market had a typical day of technical purchases, with funds taking advantage of lower corn prices. Even with improved prospects for the weather in the US Midwest, corn contracts posted general gains, as September/22 rose by 15.75 cents/bu last Monday. In addition to technical purchases, prices also followed the uncertainties surrounding the Ukrainian grain export corridor through the Black Sea. Less than 24 hours after signing the agreement, Russia attacked the port city of Odessa, Ukraine, last Saturday (23), already raising doubts as to whether the treaty would really be respected.
As pointed out in the USDA's weekly export inspection report, the US shipped 724,000 tonnes of corn in the week ended July 21, 351,000 tonnes lower than the volume exported a week earlier and 530,300 tonnes less than in the same period of 2021. The volume seen was within the range expected by the market, which varied between 584,000 and 1.2 million tonnes. Cumulative exports totaled 51 million tonnes, 10.6 million less than at the same time of the previous season. The accumulated volume is 11.2 million tonnes below the USDA estimate for the current crop. Therefore, to reach the USDA's projection of 62.2 million tonnes, the US would need to export about 1.9 million tonnes of corn per week by the end of next month, about 52% above the average for the last 10 weeks, of 1.2 million tonnes.
Also on Monday, the USDA released its weekly crop progress report. By July 24, 61% of corn crops were in good or excellent condition, 3 points below the week before and in the same period of 2021.
Intraday (15 min) - September/22 (CBOT)
Source: CME. Design: StoneX.
Corn Prices - CBOT (cents/bushel)
Source: CME. Design: StoneX.
On Tuesday, futures rose again in Chicago, with the most recent corn contract ending the session with a gain of 17 cents/bu on a daily basis. The bullish movement in futures was driven by the deterioration of US corn conditions, brought up in the previous day's crop progress report, and by the pessimism surrounding the resumption of Ukrainian exports through seaports in the Black Sea. On the day, the port of Odessa was again bombed, as well as other important ports in the country, which raised even more doubts about the already uncertain fulfillment of the agreement between Russia and Ukraine. The Kremlin stated that only military targets were hit, however, this did not ease the uncertainty related to the agreement.
On Wednesday (27), the corn market had a less busy day compared to the beginning of the week. September/22 gained 3.25 cents/bu from the previous close.
The Energy Information Administration (EIA) reported that US ethanol production declined to 1,021,000 barrels per day for the week ended July 22, 13 million lower than a week earlier. Stocks, in turn, retreated to 23.33 million barrels, against 23.55 million in the previous week.
On Thursday, corn futures had another significant move higher in Chicago, with September/22 accumulating an appreciation of 14.75 cents/bu compared to the previous close. On the day, concerns about the weather in the US, whose corn crops, especially those planted late, are still in a crucial period for productivity, boosted corn prices.
The USDA reported that net sales for the 2021/22 crop totaled 150,300 tonnes in the week ended July 21, against 33,900 tonnes the week before. In the same week of 2021, US net sales were -115,200 tonnes (the number of cancellations was greater than the number of sales). The volume was within the range expected by the market, which varied between 0 and 300,000 tonnes. Commitments from all destinations grew to 60.6 million tonnes, against 69.7 million in the same period last year.
Weekly US export sales - 2021/22
Source: USDA. Design: StoneX.
In the last trading session of the week, corn contracts had a slight increase, with September/22 posting an intraday gain of 1.25 cent/bu. As a result, the nearby corn contract ended Friday at 616.25 cents/bu, accumulating an appreciation of 52 cents/bu, or 9.2%, the highest weekly gain for Chicago corn since early March. US weather was again the main bullish driver for the session.
Over the next few days, it will be important to follow up on the issue of Ukrainian exports via Black Sea ports. On August 1st, a ship carrying grain left the port of Odessa bound for Lebanon. The event brings some relief and hope that trade flows will return to normal. However, it is still not possible to guarantee a complete resumption and, as we have seen over the last few months, the intensity of conflicts could increase overnight.
StoneX today released its 1st production estimate for the 2022/23 summer crop, which stood at 30.3 million tonnes. A cut in planted area is expected, which should be offset by higher productivity. Production of the 2nd 2021/22 crop was increased again, from 90.7 to 93 million tonnes. StoneX maintained its estimate for the 3rd 2021/22 crop at 2.2 million tonnes. Total production for 2021/22 rose to 121.6 million tonnes, while the 1st number for the 2022/23 crop was 125.5 million. Click here to access the full report.
SPOT PRICES (USD/60kg-bag)
Source: StoneX, Agrolink & IMEA. Design: StoneX.
