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;
- Uncertainty whether agreement for exporting Ukrainian grains will be fulfilled.
After the significant corn contract appreciation last week, corn futures had a typical profit-taking day last Monday. Sales were driven by more favorable weather forecasts for corn development in the US Midwest, as models pointed to a wetter pattern in the central and western regions of the corn belt in the 6-10 day horizon, and by the first shipment, after the beginning of the war, of a corn ship through one of the Ukrainian ports protected by the grain export agreement signed between Ukraine, Turkey and Russia. The September/22 contract retreated 9.25 cents/bu on the intraday.
According to data released in the USDA's weekly export inspection report, the US shipped 856,900 tonnes of corn in the week ended July 28, 103,100 tonnes above the volume exported a week earlier, but 610,400 tonnes less than in the same period of 2021. The volume was within the range expected by the market, which varied between 551,000 and 1.2 million tonnes. Cumulative exports totaled 51 million tonnes, which was 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. As such, 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 (1.2 million).
Also on Monday, the USDA released its weekly crop progress report. On July 31, 61% of the crops were in good or excellent condition, the same level as a week ago, surprising agents, who had expected worse conditions.
StoneX released its monthly crop estimate report, bringing the first figures for the 22/23 summer crop, which stood at 30.3 million tonnes, an increase of almost 15% compared to the first 2021/22 crop. A reduction in planted area is expected, which should be offset by higher productivity.
Production for the 2nd crop in 2021/22 was increased again, from 90.7 to 93 million tons, while the third 2021/22 crop was kept at 2.2 million tonnes. Total production for 2021/22 rose to 121.6 million tonnes, while the first number for the 2022/23 crop was 125.5 million. Access the full reports (2021/22 crop and 2022/23 crop).
Intraday (15 min) - September/22 (CBOT)
Source: CME. Design: StoneX.
Corn Prices - CBOT (cents/bushel)
Source: CME. Design: StoneX.
On Tuesday, corn futures had another significant decline in Chicago, with the most recent corn contract ending the session with a contraction of 15.75 cents/bu in the daily comparison. The declines were driven by technical sales, favorable forecasts for the US corn belt, better-than-expected crop conditions in the last week of July, and the absence of negative news linked to the vessel that had left Ukraine the day before heading towards Lebanon.
On Wednesday, corn futures interrupted the downward movement of the previous days, but closed near stability, with September/22 rising only 0.25 cent/bu on the intraday.
The Energy Information Administration (EIA) reported that US ethanol production rose to 1,043,000 barrels per day in the week ended July 29, up 22 mbpd from a week earlier. Stocks, on the other hand, grew to 23.39 million barrels, against 23.33 million the previous week.
On the day, StoneX US released its first estimates for the nation's 2022/23 grain crop. For the 2022/23 corn cycle, a national productivity of 11.05 tonnes per hectare is expected, which, when applied to the area projected by the USDA, results in an estimate of 366.2 million tonnes, about 2.2 million less than estimated by the Department in July.
On Thursday, corn futures had a significant appreciation movement in Chicago, with September/22 accumulating a high of 10.75 cents/bu compared to the previous close. On the day, the appreciation in the wheat and soybean market, the weakening of the dollar, and softer concerns related to the tension between China and the US supported corn prices.
The USDA reported that net sales for the 2021/22 crop totaled 57,900 tonnes in the week ended July 28, against 150,300 tonnes in the previous one. In the same week of 2021, US net sales stood at 68,200 tonnes. The volume was within the range expected by the market, which varied between 0 and 300,000 tonnes. Commitments from all destinations rose to 60.7 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 advanced again, with September/22 posting an increase of 8 cents/bu on the intraday. As a result, the nearby contract ended last Friday (5) at 610.25 cents/bu, accumulating a devaluation of 6 cents/bu, or 1.0%.
On the day, three more ships with thousands of tonnes of corn left Ukrainian ports, and last weekend, four more ships were authorized to leave the country. Over the next few days, it will be very important to continue following the pace of Ukrainian shipments to have a better idea of whether the agreement to export Ukrainian corn through the Black Sea will be fulfilled and what will be the volume offered.
Furthermore, on Thursday (11), Conab will release its grain crop survey and on Friday (12) the USDA will release its monthly S&D report.
SPOT PRICES (USD/60kg-bag)
Source: StoneX, Agrolink & IMEA. Design: StoneX.
