Corn Weekly Report

Last week, the concerns about the weather and the crop in major corn producers weighed more on the market and offset some bearish factors that have been present in current discussions, such as the concern related to Chinese demand. The contract maturing in September 2022 ended Friday (26) at 668.75 cents/bu, accumulating a weekly appreciation of 42.75 cents/bu, or 6.8%. 

Intraday (15 min) - September/22 (CBOT)

US corn shipments rose in the week ended August 18. According to data released in the USDA's weekly export inspection report, the US shipped 740,500 tonnes of corn in the week ended Aug 18, 201,200 less than in the same period in 2021. The volume was in the upper range of market estimates, which ranged between 475,000 and 800,000 tonnes. Cumulative exports totaled 53.8 million, 11.7 million less than at the same time of the previous season. 

US crop conditions retreat again. Last Monday, the USDA released its weekly crop progress report. According to the numbers, 55% of corn crops were in good or excellent condition by Aug 21, 2 percentage points below the previous week and 5 points lower than the same period last year. The worsening good/excellent conditions surprised the market, as agents generally expected the percentage to remain at 57%, which contributed to the upward movement seen in the week. 

Weather models point to a wetter pattern in the US Midwest over the next few days. Weather models have reduced the expectation of a dry pattern to the 6-10 day horizon and started to point to wetter conditions for the US Midwest. However, its effects on corn prices are becoming increasingly limited since as the days go by the rains have less potential to benefit yields. 

Further reductions in estimates for the European Union crop. The European Union Crop Monitoring Service MARS once again lowered its estimate for the bloc's corn productivity, to 6.63 t/ha this month, against 7.25 t/ha in July. If reached, this yield would be 21% lower than that seen in 2021 and 16% below the five-year average. According to the service, the exceptionally warm and dry pattern observed in much of the European continent continues to harm corn crops. Another institution that reduced its estimates for European Union production was the European Commission, whose number went from 65.8 million to 59.3 million tonnes, supporting a more negative outlook for the bloc. Amid lower corn supply, the EU is also expected to increase its import demand, an issue that has had an upward influence on international prices. 

Drought in China is also a cause for concern. A wave of severe drought and heat continues to stress crops in the Asian giant's Yangtze River Valley. Drought-impacted regions increased to 2.2 million hectares in nine provinces in the region, much of which are in the South and West of the country's main corn and soybean producing areas. 

Weekly ethanol production in the US. The Energy Information Administration (EIA) reported that US ethanol production rose to 987,000 barrels per day in the week ended Aug. 19, up 5,000 from a week earlier. Ethanol stocks, on the other hand, rose to 23.81 million barrels, against 23.45 million the week before. 

Weekly US export sales - 2021/22 

Last week, the new USDA export sales reporting system was launched. However, the transition was marked by great confusion. The Department did release data for the week ending September 18, but they were later removed from the system. As a result, the latest export sales data refer to the week ended on September 11, when net sales for the 2021/22 crop had totaled 99,300 tonnes, against 191,800 in the previous week. In the same week of 2021, US net sales stood at 216,500 tonnes. Commitments from all destinations rose to 60.9 million tonnes, against 70.9 million in the same period last year. 

Conab expects growth in 2022/23 corn production. Conab released its first estimates for the 2022/23 crop, showing total corn production at 125.5 million tonnes, an increase of more than 10 million tonnes compared to what the Company previously expected for this season. For the first crop, despite forecasting a reduction of 0.6% in planted area compared to 2021/22, to 4.52 million hectares, largely motivated by competition with soybeans during the crop summer, the trend is for productivity to be above this year, as major producing regions were affected by drier-than-normal weather. As such, Conab expects growth in the summer crop production, to 28.98 million tonnes, an increase of 16% in the annual comparison. For the second crop, Conab expects both an increase in area, to 16.94 million hectares (+3.5%), and in productivity, to 5.58 t/ha (+4.5%), boosting production to 94.53 million tonnes, up 8.2% compared to the estimate for 2021/22. The third crop was estimated at 1.99 million tonnes, against 2.31 in 2021/22. The Company argues that the market does not show a significant downward trend in corn prices, which should guarantee attractive margins for producers, despite the high costs, stimulating the crop's strengthening. 

Crop tour also indicates problems in the US crop and moves the market. Over the past week, the Pro Farmer Crop Tour, which runs through several producing regions in the US Midwest, has been a hot topic as field samples are released, generally having a bullish influence on the market. The market estimated a national yield of around 10.8 t/ha, 0.25 t/ha above the figure released by Pro Farmer (10.55 t/ha) late last Friday. That would put production at 349.49 million tonnes, 15.21 million below the USDA estimate, the biggest drop for Pro Farmer compared to the Department's figure in the tour's history. 

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