Red harvester harvesting grain on field, blue sky
1269854823
Harvesting stock photos from iStock, purchased by BCC.

Mother Nature can be cruel. The promise of an El Niño return, which typically means a wetter US, should have heralded a bumper summer cropping season. Early forecasts of 388mmt corn with a record yield of 181 bushels/acre were an early crow of that optimism. The weather forecasts have been hinting at the developing wet phase but always within the next 10 days. Unfortunately, those forecasts kept getting pushed back.

As it stands today, 57% of the US corn belt is now classified as in drought, up a substantial 12% week on week.  Forecasts are not promising any significant rain for the next week which will be critical as the temperatures will also start to ramp up. 

 

Corn is the cornerstone for the US (and global) feed market.  It is also an essential component of the US ethanol industry which consumes about 40% of the corn produced in the US.  If the US feed market were to find corn supplies tight, the next available feed source is Soft Red Winter (SRW) wheat, the class that CBOT prices.  That would put unprecedented demand on SRW which would see the price explode.  Without a meaningful rain within the next 2 weeks, all those short speculative trades are going to look ugly.

 

Last night we saw corn up 20c/bushel (+4%) and wheat lift limit up (31c/bushel) as some of those spec trades look for the exit. Is this the start of a bull run?  Or will a forecast materialise that dashes the hopes of price bulls?  So much is riding on each and every rain forecast.

 

Northern Hemisphere is about to get busy with harvest.  Europe has endured a dry finish which may knock some of the potential back a bit, but overall, the EU27 is looking at a big crop of 131mmt (+3% year on year).  Russia too is forecast to produce 88mmt, down from the 103mmt produced last year, but still a historically large crop.  This will mean they remain the price setter for wheat exports in the foreseeable future.  Ukraine has also had a pretty good season, although a far cry from their pre-war levels, their Wheat harvest is estimated at 12-15mmt and corn 15-17mmt.

The week ahead….

The next two weeks’ weather in the US Midwest is going to determine price direction.  Crop-saving rains can still happen, with July arguably the key yield-setting month.  It is just that they are running out of time.

Have any questions or comments?

We love to hear from you!
Print This Post

Click on graph to expand

Data sources: Reuters, USDA, Next Level Grain Marketing, Mecardo Mecardo

Make decisions with confidence- ask about our board packs, bespoke forecasting and risk management services

Have any questions or comments?

We love to hear from you!
Grains & Oilseeds

Jack tours Russia

To start the week, the wheat market got a very nice little push courtesy of Russian frosts, a bullish USDA report and technical short covering.

Read More »

Want market insights delivered straight to your inbox?

Sign up to the mailing list to get regular updates to new analysis and market outlooks

Independent analysis and outlook for wool, livestock and grain markets delivered to you as it’s published

Commodity conversations podcast cover image, a illustration of a sheep standing on a cow's back with grain either side
Listen to the podcast

Join the Mecardo team for the Commodity Conversations podcast, where we provide short weekly market recaps and longer conversations with guests to discuss the drivers and trends in livestock, grain and fibre markets.

Photo of a farmer surrounded by Merino sheep in dusty yards
Research: Analysis of the Australian sheep flock

In this report for LiveCorp and MLA, we analysed the historical trends in the demographics of the Australian sheep flock, examining domestic factors that influence farm-level enterprise decision making. 

Image of harvested grain pouring into a chaser bin
SERVICES AND CAPABILITIES STATEMENT BROCHURE

We don’t just bring you the most up to date market insights. Find out more about Mecardo’s services including risk management advisory, modelling, benchmarking, research & consultancy.