BEARISH DRIVERS
- Concern about possible recession;
- Signs that contractionary policy should continue;
- Concern with the level of Chinese economic activity and a possible reduction in demand for grains;
- Progress of corn harvest in the US;
- Logistics problem and weaker-than-usual US export sales for this time of year.
Bullish DRIVERS
- Questions raised by Russia about the Ukrainian grain export corridor;
-
Rise in oil prices;
- Expectation of lower production in the EU due to drought;
- Quarterly position of US stocks below market expectations;
- Concern about the impacts of La Niña on the South American crop.
Last week, corn futures ended the Chicago session slightly higher. The contract expiring in December 2022 ended Friday (7) at 683.25 cents/bu, accumulating a weekly appreciation of 5.75 cents/bu, or 0.8%. On the bullish side, it is worth noting the support provided by the energy market. In the previous week, Brent futures rose more than 11%, a movement motivated by the reduction of OPEC+ production quotas by 2 mpbd, as well as the weekly drop in US oil, gasoline and diesel inventories.
Intraday (15 min) - December/22 (CBOT)
Conab releases first estimates for the 2022/23 crop. On September 6, Brazil’s National Supply Company (Conab) released its first estimates for the 2022/23 grains season. For the first corn crop, the Company estimates production of 28.69 million tonnes, while the second crop would reach 96.28 million and total output would be 126.94 million tonnes.
Good prospects for the US harvest pace. According to the USDA follow-up report, as of October 2, 52% of US corn crops were in good or excellent condition, the same level as the last two weeks. With most of the cereal having already gone through maturation, crop conditions are not subject to further changes. Harvest reached 20%, 2 points below the agents' expectations and the five-year average for the period. There are no forecasts of a volume of rain that would hurt the harvesting pace until the last half of this month, which should maintain good conditions for field work.
StoneX revises estimate for the 2022/23 US crop. On October 4, StoneX released its new numbers for the 2022/23 corn and soybean season. In the case of corn, yield estimates were raised to 10.91 t/ha, up from 10.87 in September and against the USDA's figure of 10.83. However, this increase in productivity was not able to offset the reduction in the corn area, which resulted in lower production, at 357.04 million tonnes, 2.84 million less than estimated last month, but nearly 3 million more than expected by the USDA.
USA faces logistical problems. If on the one hand the lack of rain is favorable for US harvest to progress, on the other, the low volume of precipitation has caused problems for grains transport, with stranded barges in the Mississippi River blocking the flow of goods and raising the cost of freight, which has been a factor of pressure in the market.
Ethanol production rises in the US. According to data from the Energy Information Administration (EIA), US ethanol production rose again in the week ended September 30, to 889,000 barrels per day, 34,000 more than a week earlier. Despite this drop, the average weekly production year-to-date is in line with last year. On the other hand, ending stocks dropped significantly, from 22.69 million barrels on September 23 to 21.69 on the 30th.
US export net sales level surprises negatively. The USDA reported that net sales for the 2022/23 crop totaled 227,000 tonnes in the week ended September 29, less than half the amount recorded a week earlier (512,000 tonnes), and well below the 1.3 million tonnes traded in the same period of 2022. The volume was below the range expected by the market, between 350,000 and 800,000 tonnes. Commitments from all destinations rose to 13.2 million tonnes, against 26.6 million in the same period last year.
Weekly US export sales - 2022/23
Source: USDA. Design: StoneX.
