Porto Alegre, July 30th, 2024 – The 2024 US crop progressed well in July. Good rainfall and temperatures very close to normal, in the defining phase of the corn productivity potential. However, we still have August to go, which defines the pod filling and the closing of this productivity potential. Last week, the meteorology surprised us by projecting a phase of very high temperatures starting at the turn of the month and continuing into August. If these climate models do not change, we may still have some influence on corn, but more clearly on soybeans, which are entering the blossoming and pod formation phase. August will be full of information for plenty of volatility in domestic prices.
The July weather was practically normal in the US Midwest. The rains decreased in intensity in the north and returned in the south and southeast, where it was drier. Temperatures did not fall outside the normal average, which represents a passage into the definition phase of the productivity potential in excellent conditions. It should be remembered that in 2023, during this period, crops in Illinois, Missouri, and parts of Iowa suffered from a drought that held back potential productivity, even though the average turned out to be record. Conditions in 2024 are much better than in 2023.
In this environment, this season’s productivity potential is high. Therefore, some consulting firms are starting to project productivity even above the 181 bushels/acre suggested by USDA. Last week, the climate maps changed radically. Rainfall is starting to decrease for August in the western part of the Midwest and Plains, and temperatures are jumping to surprising levels. Excessive heat and reduced rainfall are a combination that could still cause losses in regional crops during this pod-filling phase. If the maps continue to focus on this more discreet rainfall for August and very high temperatures, we could indeed see some change in the productivity environment.
The first major piece of data for August is the field assessment that is being carried out by USDA and will determine an adjustment in the projection for the production estimate. Today, USDA indicates 181 bushels/acre for the potential productivity, a record level. The August assessment will not have time to determine the effects of the heat projected by the climate on the productivity potential. Therefore, we should see USDA with a high projection in this report, with possible adjustments in the following reports as the harvests reflect the real numbers.
Also in August, in the week of the 20th, the traditional Pro Farmer crop tour takes place, which always has an impact on the local and international agricultural media, with potential volatility for the CBOT. Prices on the CBOT gained some strength during the week with this weather configuration maintained by the meteorological service, however, that does not seem to have raised panic with the projections of very high temperatures. As the models still indicate some rain amid the heat, the market was unable to assume the posture of a complete price reversal, supporting highs. August should remain highly volatile based on the weather maps, the USDA productivity projection, and the crop tour.
The other key point is the global demand for US corn. We noticed a profile change over the week. The market is reducing its net long positions with old-crop corn and is already increasing purchases for the new season. The high price of Brazilian corn at this time, almost USD 15/ton above the Gulf of Mexico prices, may affect part of the global demand for US corn in the coming few weeks. Brazil will need to reduce premiums and adapt to US corn prices if it wants better sales conditions in the second half of the year. Premiums in Argentina have also risen considerably, which may favor US corn, which is always very competitive.
If there is still a possibility that corn prices return to below USD 4.00/bushel during the US harvest, exports may be an important variable to prevent more intense declines further ahead. Wheat and oil with no recovery strength are still negative factors for this 2024 harvest.
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