Photo by charlesdeluvio on Unsplash
 

New December crop prices were up just 1 cent. CME keeps eyeing shaky sessions amid overnight weakness – apparently caused by nothing more than the anticipation of the FOMC rate decision in the U.S. – before rebounding around midday. Finally, the old crop contract ended the day down 2.5 to 4 cents. The move on that day in March was 10 1/2 cents. New crop followed a similar pattern, closing between unchanged and just 1 cent higher.

Meanwhile, the U.S. Department of Agriculture announced sales of 112,000 metric tons of corn to Japan for delivery in the current marketing year that ends on Aug. 31. 

The Ukraine Grain Association recently suggested that a reduction in grain plantings was due to the war. If Ukraine’s weather conditions are normal, they estimate only 18 million metric tons (MMT) would be produced, and if the weather is poor, it would be closer to 12 MMT. These numbers are much lower than the 22 MMT produced last year and the 40 MMT produced the year before the war started. With Ukraine requiring about 6 MMT for domestic consumption each year, the fourth largest corn exporter in the world may have an extremely limited supply next year.

With this massive corn production decrease, Brazil’s second corn crop being planted next month will need to hit current estimates. Otherwise, rationing will be needed throughout the rest of the world.

In the latest world supply and demand report, the USDA cut its estimate for the U.S. domestic corn crop to 13.73 billion bushels, attributing the unexpected production cuts to a reduction in harvested area, which saw futures contracts rising for the two crops. The report also trimmed its outlook for corn production in drought-hit Argentina, where some traders said more cuts could be expected. However, crop weather in Argentina has improved dramatically in recent days amid rainfall in areas that desperately needed precipitation, so we have to admit this factor is transitory.

Ukrainian export data showed grain exports fell a whopping 32% in the week ended Jan. 29, including 607,771 tons of corn. Ukraine has shipped 19 MMT of grain since the trade agreement was signed. China was one of the biggest buyers, with corn the top commodity shipped.

Corn settled at $6.79 3/4 on March 23, down 4 cents, and is now down 3 cents.
 

Summary:

It looks like for the time being corn inventories, production, and demand are roughly balanced. Improved weather in Argentina is offset by grimmer crop forecasts in Ukraine. Shipment security and logistics also remain top concerns which may result in mild upward price pressure going forward.

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