US corn crop and Black Sea combine attention abroad

While the US corn crop is being planted, the Black Sea wheat crop is expected to begin reaped in June/July. The markets are now between these two priority variables, which can generate volatility on the Chicago Board of Trade and throughout the international market, as is already occurring. The absence of China in the international corn market and Argentina with a strong harvest and export pace are the points of balance at this moment. Lower Brazilian exports for this year are not yet a major point of discussion abroad, as long as the US crop is in good condition.

The main short-term indicator continues to be the progress of the US planting and crop development. Planting had a slower week, given situations such as the risk of regional storms and a little excess moisture from the week earlier. Planting reached 49%, against 60% in 2023 and the average of 54%. Technically, for the purposes of participation in government programs, planting ends on the 30th, so there are two weeks ahead until work is completed. This week, planting is expected to reach 60% or above, as the pace has been strong in recent days.

With good conditions and a perfect window still present, the US crop is off to a good start. Productivity potentials should remain high and only be changed in August, by USDA, or, of course, if any new climate event occurs before this deadline. With the planting expected to be completed within technical deadlines, attention now turns to the effective size of the planted area to be announced on June 30. There does not seem to be a situation of reversing expectations with a corn area slightly above the planting intention and soybeans a little below. In fact, we may have an area with soybeans confirming the estimated planting profile or even higher than projected. The question really is whether corn maintains the cut to 90 mln acres projected by USDA.

The weather conditions for June, in the development phase, and July, blossoming and silking, do not show worrying projections for corn. Therefore, the risks are concentrated only in August, in the final phase of pod filling. Until then, this traditional environment of detailed observation of the planting rate and crop conditions will be the volatility trigger from now on. The week ended with the market in strong readjustment given the perception that planting progressed quickly over the week.

At the same time, the corn market found some support from the wheat environment. On the one hand, the war between Ukraine and Russia appears to be intensifying, a variable that could once again affect Ukrainian ports and trade in the Black Sea. This variable has been present for the last three years, but it could gain a new environment from now on with the expansion of forces on each side. The situation could also affect oil and fertilizer prices again. Ukraine expects a record wheat crop to be reaped in June and July, however, frosts in the middle of spring devastated part of the growing regions in May, and lower production numbers may appear later. Southern Russia is suffering from a drought this spring, it also registered frosts this May, and local consultancies cut the production number to 89 mln tons of wheat, compared to 98 mln in 2023. It is not an absurd cut, but, considering the world’s largest exporter and prices that were low, the information served to generate a price rally this month on the CBOT.

Argentina keeps reaping its crop under very favorable weather and driving volumes for exports. Export registrations exceed 24 mln tons, and there is no government move to limit the volumes to be shipped this year, given the production losses caused by pests. The volume exported this year should contrast with the estimates of exaggerated losses projected by local exchanges. The risk still remains in relation to strikes that may arise in the coming few weeks, given the strong change in laws proposed by the government involving the tax and labor environment. This proposal has already been approved in the Chamber of Deputies and is now in the Senate, which can be divided into several votes. Two strikes in Argentina in May served to boost soymeal prices on the CBOT, besides generating some support for corn and soybean premiums. This possibility still persists until the Senate defines new rules for the country.

A smaller Brazilian corn crop and with lower export potential has not yet become a more tense variable for the international environment.

Tags: crop, Black Sea, Argentina, Ukraine, markets, China, corn, export, planting, Brazil, US, wheat