The global corn market is a complex and constantly changing landscape, shaped by a myriad of factors ranging from weather patterns to international trade agreements. In this article, we delve deeper into some of the key elements currently impacting corn prices, with a particular focus on the US and Brazil. We also examine the role of various nations in the corn export market.
Weather Patterns and Corn Production
Weather plays a crucial role in corn production, and this year is no exception. Central Brazil has seen an increase in rainfall, improving prospects for a second corn crop. This is a stark contrast to the situation in the US, where high temperatures and lack of rain in the corn belt are adding pressure on corn prices. Safras&Mercado experts, observing these weather patterns, have increased the forecast of corn production in 2022/23 MR by 6.7 million tons to 137 million tons, in particular, safrina corn – by 5.6 million tons to 97.8 million tons.
In the US corn belt, temperatures of 30-33°C without precipitation are expected to persist for another 10-14 days, which may worsen the condition of crops. However, only part of the corn belt is under the influence of drought, with rains and thunderstorms predicted in the Central and Southern Plains. According to the NASS USDA data, as of May 28, 92% of the planned area was planted with corn in the United States, and 69% of crops were in good and excellent condition.
On the other side of the globe, Ukraine has experienced a different set of challenges. As of May 25, 3.682 million hectares were sown with corn, so the harvest is unlikely to exceed 20 million tons. The lack of productive precipitation in May and in the next two weeks will negatively affect crops, even though temperatures in the range of 22-25°C are slowing down the rate of soil moisture loss.
Corn Exports and International Trade
Turning to the international trade landscape, corn exports from the US fell 1% to 1.3 million tons for the week, with the total for the season reaching 28.68 million tons. This is against the USDA forecast of 45 million tons, which seems quite realistic at the current rate of shipments. However, the increased exports expected from Brazil in August may sharply reduce demand for American corn.
Argentina and China have agreed on a new corn export protocol, simplifying grain deliveries to China and increasing competition for this market with the United States, Ukraine, and Brazil, particularly since the latter received permission to export to China last year.
Market Dynamics and Future Outlook
The complex dynamics of the global corn market are evident in the price trends on the Chicago Stock Exchange. Corn prices fell 3-4% during trading on US seeding data and Brazilian weather, but July futures closed unchanged at $233.2/t, up 4% from the start of the week, and December fell 0.7% to $205.4/t, up 3.5% on forecasts of heat in the Midwest in the next 2 weeks.
Despite the myriad of factors influencing the corn market, producers and traders alike must continue to navigate these changing dynamics. As demand prices for corn with delivery to the Danube and Black Sea ports fell amid increased supply, manufacturers intensified their sales, not expecting a rise in prices in the coming months, especially given the likely extension of the ban on supplies to neighboring EU countries.