Corn Futures Sank 6.5% This Week as Ukraine and Russia Agree to Ship Grains

Corn prices sank 6.5% this week to be down 5% on the year. Selling pressure came from Russia and Ukraine signing a deal that will possibly allow some 20 MMT of grain, moistly corn to move into the world market.  The agreement weighs on futures/CU-CZ spread, September corn settled at $5.66 ¾, down 9 ½ cents on the day. December Corn settled at 5.67 ½, down 6 ½ cents on the day.

US Corn Field
Corn Crop

The June 30 Acreage report showed corn again the largest crop produced in America in 2022. USDA raised 2022 acreage expectations for corn by 431,000 acres from the March 31 report. Much of the pullback in corn futures has been taking pressure off from the speculative surge on record corn export volumes and higher unit values.

Longer term corn prices remain underpinned by possible U.S. planting delays and Ukraine grain unavailable for export. Ukraine’s spring plantings are now 98% complete and will drop 25% from a year ago due to the ongoing Russian invasion, per the country’s agriculture ministry. That includes 10.304 million acres of corn. The USDA last week appeared to be optimistic about Ukraine however.

Corn Futures Highlights

  • Corn dropped 6.5% down 5% on the year
  • Futures prices ended Friday’s trading session with September corn settled at $5.66 ¾, down 9 ½ cents on the day. December Corn settled at 5.67 ½, down 6 ½ cents on the day.
  • U.S. Corn ratings are expected to land 1-3 points lower on Monday afternoon with the crop condition update. This is compared to last week’s rating of 64%, last year at 64%, and 65% for the 5-year average.

Corn Technical Outlook

Corn bounce from its freefall was short-lived, rejected at the 50wma. The Corn rally had topped out at the highest since 2012 in Chicago at +1/8 and corrected with impulse back to break the Tenkan which it swiftly did a spit of a spit after bouncing off 720, which also the price successfully retested the high from April 2021. From here we saw Tenkan fail again, and empowered selling smashed through previous high, Kijun and 7/8 confluence. The 50wma gave no support with the cloud and 6/8 slowing the selling down. All these levels are now resistance.

Corn Futures Weekly via KnovaWave

Domestic Corn Stocks

Domestic ending stocks for 2021/22 increased to 1.485 billion bushels, and 2022/23 ending stocks also moved higher, reaching 1.400 billion bushels. Analysts expected to see a modest decline for both numbers. The season-average farm price for producers held steady, at $6.75 per bushel.

Planted acres and quarterly stocks updates from USDA

Next Thursday’s the USDA releases its planted acres and quarterly stocks updates. This is one of the agency’s most highly anticipated reports of the entire year. This year, with the delayed spring planting it will be interesting to see how the USDA has planted acres for corn.

Currently the U.S. planted acres for corn are pegged at 89.5 million acres, with harvested acres at 81.7 million acres (approximately 91.3% of the planted acre number). Yield has already been adjusted lower to 177 bpa.

Three scenarios via Naomi Blohm, senior market adviser with Stewart Peterson.

“Traditionally the price reaction on this report day can be dramatic; potentially leaving prices nearly limit up or limit down depending on the information received,” according to Naomi Blohm, senior market adviser with Stewart Peterson.

  • Should corn planted acres come in slightly lower at 89 million acres, then ending stocks would be down to 1.321 versus the current 2022-23 estimate of 1.4 billion bushels.
  • If planted acres come in slightly larger at 90.5 million acres, then ending stocks would be pegged at 1.565, and would then likely keep corn futures trading each and every weather forecasts throughout July to get a better handle on yield.
  • Should planted acres come in at 91 million acres, then ending stocks would swell to 1.648 billion bushels, comfortably larger than 1.4 billion bushels estimated now.  

U.S. EPA Blending Targets

The EPA released blending targets after the market close last Month. Biofuel blending targets for 2022 are forecast at 20.63 billion gallons, below the proposed volume. Retroactive adjustments for 2021 blending were above market expectations while 2020 volumes went unchanged.

The EPA added a 250-million-gallon supplemental standard to the 2022 blend mandates. It also denied 69 petitions for biofuel blending exemptions from refineries but will allow small refineries extra time to fulfill 2020 blending mandates.

France

France is Europe’s top grain producer.

Overall, FranceAgriMer’s 2022-23 crop ratings are markedly higher for corn than for other grains — with 83pc of corn rated “good-to-excellent”, compared with 89pc last year.

The French corn crop has two-thirds at the flowering stage in the week ending 11 July, while harvesting continued for soft wheat and ended in most regions for winter barley.

The proportion of corn at flowering stage rose from 30pc to 67pc in the week ending 11 July, compared with just 9pc a year earlier, according to agricultural and sea products agency FranceAgriMer. Development was most advanced in the eastern regions of Auvergne-Rhone-Alpes and Alsace. The northeastern region of Grand-Est, which includes Alsace, had the best crop conditions, with 96-97pc rated “good”.

Temperatures of above 35°C in parts of France this and next week coincide with more than two-thirds of the corn crop reaching the flowering stage. Such temperatures could result in incomplete pollination at a development stage that is crucial in deciding grain yields.

The prospect of a poor French corn crop could further increase the EU-27’s dependency on imports in 2022-23, as producing regions in eastern Europe are also expecting lower corn production as a result of lower acreages and drought.

On winter crops, the week to 11 July ended with half of France’s soft wheat crop harvested, up from just 3pc at the same point last year. Harvesting in the northernmost regions of Hauts-de-France and Normandie began that week, while the southernmost regions had harvested about 90pc. The proportion of crop rated “good-to-excellent” rose by one percentage point to 64pc, but the proportion rated “poor-to-very poor” also rose, by one point to 14pc.

General market sentiment is that wheat crop conditions are better than anticipated, despite adverse weather conditions during key planting and development stages. The early harvest could encourage farmers to sell as silos fill up, but exporters have already sold significant volumes of French wheat ahead of the northern hemisphere’s key exporting period that ranges from 10 August to the end of September, meaning forward supply is tight.

Ukraine Corn Plantings

With exports from Ukraine severely limited at present, the EU may need to seek corn from further afield. And tight European supply could drive corn prices up and help wheat compete with corn for use in animal feed. Euronext-listed corn futures rose for the second consecutive day on 14 July, even as the milling wheat contract returned to losses.

Ukraine’s spring plantings are now 98% complete and will drop 25% from a year ago due to the ongoing Russian invasion, per the country’s agriculture ministry. That includes 10.304 million acres of corn, 2.292 million acres of spring barley and 466,000 acres of spring wheat.

The Ukrainian Agribusiness Club estimates that the country’s total grain production will drop nearly 38% this season. That includes corn production sliding 39% lower to 1.012 billion bushels and wheat production dropping 44% to 661.4 million bushels. Ukraine is a significant exporter of both crops.

Argentina Exports

Argentina is the world’s No. 2 corn exporter and is a top seller of other commodities including soybeans and soymeal.

The BA Grain Exchange indicated the Argentine corn harvest moved ahead 11 points to 67%, trailing the 5-year average by 8 points. Production remains estimated at 49 MMT. This is 4 less than the USDA estimated.

USA Corn Exports

Corn export sales latest 4-week average (old and new) at 12+ per week is double the pace from a year ago it is down more than 50% versus the 5-year seasonal average.

Last week we had Canada again cancelled corn, 2.1 mbu this week after canceling 4.0 mbu last week. Yet, the USDA quietly raised its forecast for 21-22 Canadian corn imports from 150 mbu in June to 212 in this month’s WASDE. Canadian year-to-date purchases from the U.S. total 145 and year-to-date shipments total 134 mbu.

Talk China will approve and buy Brazil corn this summer. Others are of the opinion it will not happen until after the 1st of the year. Also, noted from weekly export sales, origin sales of old crop corn to “Other Asia” (excludes China) are at a 13-year low.

Tight supplies, a strong dollar, and waning demand from top global grains buyer China have played a significant role in keeping marketing year to date weekly corn export volumes nearly 11% lower than the same time last year.

South Korea Imports

South Korea’s MFG and NOFI groups bought a total 204 K MT of South American/South African corn for November arrival.

Effect of Higher Input Costs on Farmers

A recent report by the Agricultural and Food Policy Center (AFPC) at Texas A&M University shows higher input prices are having a larger impact on farmers than originally thought.

  • Net cash farm income on the representative feed grain and oilseed farms is projected to decline by an average of $534,000 from 2021 to 2022 across the 25-feed grain and oilseed farms.
  • Representative wheat farms face an average reduction in net cash farm income of $399,000.
  • Representative cotton farms face an average reduction in net cash farm income of $716,000.
  • Rice farms face the largest reduction in net cash farm income per farm at $880,000 and a per acre reduction of $442.

Compiled by Joe Outlaw, Ph.D., and Bart Fischer, Ph.D., co-directors of the AFPC.

COT on Commodities

COT on commodities covering the week to July 12 saw selling pressure from hedge fund begin to ease. The net long dropped to 900k lots, lowest since June 2020 but the 52k reduction was well below the 190k average seen during the previous four weeks.

Specs turned net buyers of crudeoil, copper and sugar with selling seen in natgas gold soybeans corn wheat and coffee. The gross position (long & short) was cut by 177k reflecting a high degree of uncertainty and vacations lowering exposures

Image

via Ole S Hansen @Ole_S_Hansen

Commodity Round Up

  • Bloomberg Commodities Index rallied 2.7% (up 17.5% y-t-d).
  • Spot Gold recovered 1.1% to $1,728 (down 5.6%).
  • Silver slipped 0.6% to $18.60 (down 20.2%).
  • WTI crude dropped $2.89 to $94.70 (up 25.9%). Gasoline increased 0.3% (up 45%),
  • Natural Gas surged 18.3% to $8.30 (up 123%).
  • Copper rallied 3.6% (down 25%).
  • Wheat fell 2.3% (down 2%), and
  • Corn sank 6.5% (down 5%).
  • Bitcoin surged $1,872, or 9.0%, this week to $22,732 (down 51%).

Source: TC, USDA, Farm Progress

From The TradersCommunity Research Desk