Corn Weekly Report

Weekly overview | Corn futures rose in the week ending last Friday (30). The December contract traded in Chicago accumulated a rise of 2.7% to close at US¢401.50/bu. A deterioration in crop conditions in the US, as well as strong export sales, provided support for the contract. In addition, a macroeconomic context that points to the start of an interest rate cut cycle in the US from September also strengthens risk assets, giving some strength to commodities.

Macroeconomic commentary | Economic agents continue to observe the US macroeconomic context as the next meeting of the Federal Open Market Committee (FOMC) approaches, which, according to the most recent estimates, should point to a 25 basis point cut in the US interest rate. Over the past week, inflation and production data have reinforced the perception of a soft landing for the US economy, with the rate of price growth converging towards the target and with a dynamic labor market. What agents will continue to monitor is precisely the situation of the labor market, as the Employment Situation Report is scheduled for Friday.

While it is true that fears of a US economy heading for recession are weaker today than they were at the beginning of August, it is also true that the possibility of a deterioration in the labor market, and a consequent recessionary scenario, should be a focus of attention in the coming weeks. Fed Chairman Jerome Powell, aware of this concern, has been reinforcing in recent days - as in his speech in Jackson Hole - that the Fed needs to be aware of its dual mandate as an institution that must ensure not only price control, but also the health of the labor market.

US crop | The development of cornfields in the United States continued to be favorable throughout August. Despite a slightly lower level of precipitation, lower temperatures meant that the effects were limited, with an estimated harvest of the second largest crop in the historical series. Even so, concerns about the weather may have inspired some hedging of positions in the middle of the week, delivering some bullish bias at times. In the latest USDA crop conditions update, 65% of the country's corn area was in good or excellent condition, 2 p.p. less than the previous week; even so, the figure is still above the five-year average (58%).

US Export Sales | On Thursday, corn futures received support from US export sales and grain shipments data. The report brought a strong volume of new sales for the 24/25 crop. A total of 1.5 million tonnes of corn were traded, compared to an average of 450,000. Shipments also continued to be strong, with more than 1 million tonnes actually being exported last week.

Intraday (15 min) December/24 contract - CBOT

 

Source: CBOT. Design: StoneX.

Argentina | Last week, the Rosario Grain Exchange estimated a cut of 2 million hectares in Argentina's corn area for the 2024/25 crop. The figure, higher than the 1.3 million hectares that the Buenos Aires Grain Exchange had recently reported, is related to the infestation of leafhoppers in corn crops in the 2023/24 harvest. Argentine producers fear that the pest will return to the fields, making corn less attractive, and causing many producers to favor planting soybeans.

Brazil | In Brazil, as in Argentina, planting of the first corn crop has already begun in some southern states, such as Rio Grande do Sul. StoneX's current estimates point to a reduction in the corn area in this region when comparing crops. Combining Paraná, Santa Catarina and Rio Grande do Sul, it is expected that the 1st crop will be sown on 1.2 million hectares, almost 200,000 less than last year.

Corn B3 | Corn prices on the domestic futures market rose higher, with the November expiration gaining 1.3% to close at BRL 63.15/bag. The movement was strongly influenced by the price in Chicago and FX-related factors, given the relative strengthening of the dollar against the Brazilian real last week.

StoneX Estimates | The updated figures from StoneX point to an unchanged 23/24 2nd crop corn production, which should be 93.6 million tonnes. As for the 24/25 marketing year, the figure for the 1st crop was also maintained at 25 million tonnes. The big news this month was a revision to the S&D balance for corn, with exports being readjusted to 35 million tonnes for the 2023/24 crop. Click here to access the figure for the 23/24 corn crop or here for the 24/25 crop.

FX | The week was marked by a relative weakening of the Brazilian real. Fears over the fiscal policy continue to be a factor in the depreciation of the currency in a week marked by the delivery of the Annual Budget Bill (PLOA), which now forecasts zero deficit, down from the surplus of 0.5% of GDP estimated by the economic team at the start of the year. It is worth remembering that the adjustment to the fiscal target had already been presented in April, after the release of the Budget Guidelines Bill (PLDO).

Also last week, the announcement of a BRL 21.3 billion public sector primary deficit also served as a factor in the depreciation of the Brazilian currency, with the market becoming more fearful about the direction of fiscal policy. Finally, an appreciation of the dollar after inflation data anchored an expectation of a soft landing in the US economy, also caused the dollar to rise. More details on the exchange rate dynamics can be found in StoneX's Weekly FX Overview, available by clicking here.

Intraday (15 min) November/24 contract - B3

 

Source: B3. Design: StoneX.

This week | In a week marked by the Labor Day holiday in the US on Monday, the market will only start operating normally in the daytime trading session on Tuesday (Sept. 3). Even so, agents will be paying close attention to the weekly crop follow-up and export data from the US, which will be posted on Tuesday and Friday, respectively, after a one-day delay due to the holiday. In addition, the market is likely to reflect the data from the US Employment Situation Report on Friday, which could give indications for the level of activity in the US economy, as well as delivering some expectations for the direction of monetary policy in the country.