Exchange prices for corn have not yet reacted to the decrease in the harvest forecast in Ukraine
Strong heat and lack of rain have a negative impact on corn crops, which are in the critical phase of flowering and crop formation, so market participants are lowering production forecasts.
Analysts of the PUSK agricultural cooperative at the All-Ukrainian Agrarian Council allow a repeat of the situation in 2020, when the sunflower and corn harvests decreased by 35% due to the drought.
Yesterday, the long-awaited rains passed in the northern regions of Ukraine, which will spread to the southern and eastern regions and lower the air temperature from 35-40 o C to 30-32 o C. However, scattered rains will not be able to replenish the soil moisture reserves.
The heat is also negatively affecting corn crops in Romania, Bulgaria and the Russian Federation, which has already led to an increase in prices for new-harvest Black Sea corn, although it did not affect quotations in Chicago.
According to the State Customs Service, in the 2024/25 financial year (as of July 17), Ukraine has already exported 1 million tons of old-crop corn, compared to 728,000 tons last year. The country will enter the new season with the lowest corn stocks in the last three years, which increases the export demand for grain. Forward prices for corn deliveries in October - November to Black Sea ports increased from $160-165/t to $170-175/t.
December corn futures in Chicago for the month fell by 12.8% to $162.1/t against the backdrop of increased planting areas and production forecast in the US. The weather improves the condition of crops, and on July 14, 68% of crops were in good or excellent condition (57% last year), and 41% of crops entered the flowering phase (32% on average over 5 years).
The report of the EIA association did not support the quotation, although for July 6-12 the production of ethanol in the US increased by 52 thousand barrels to 1.106 million barrels/day, and its reserves decreased by 443 thousand barrels to 23.16 million barrels. This week marked the second-highest amount of corn used for ethanol production in US history.
Increased corn supplies from South America are also putting pressure on prices. According to AgRural data, as of July 11, second-harvest corn in Brazil was harvested on 74% of the area (36% last year), so grain exports will significantly increase already in July. The National Association of Corn Exporters Anec increased the forecast of grain exports in July from 3.4 to 4.09 million tons.
We will remind that in Brazil, the production of corn of the second crop makes 75% of the total grain production, which, according to Safras&Mercado estimates, will amount to 125.56 million tons in 2024 (140.06 million tons in 2023), which will significantly exceed the USDA's July forecast in 122 million tons. At the same time, corn exports will decrease compared to 2023 from 54.59 to 40.18 million tons.
