Porto Alegre, December 20, 2021 – South America has a weaker effect on the price profile of the international market in the first half of the year. Ukraine is now standing out in exports and Argentina will not be making new sales until the 2022 summer crop is confirmed. Therefore, climate issues in South America have a minor influence on corn for the Chicago Board of Trade. Of course, losses in Argentina could be an additional ingredient for the CBOT. So, wheat is one of the short-term support factors. But not even the December lows in the wheat market have been able to bring additional pressure to corn.
The US crop ended without a bearish seasonal curve out of the harvest. Wheat dropped from USD 8.50 to 7.70/bushel in December, and the corn market appears to have ignored this wheat slowdown as a bearish factor. China seems to be resuming its corn purchases, but from Ukraine, a factor that could put additional pressure on Chicago. Crude oil dropped from USD 85 to 70/barrel in December, but the corn market did not feel a potential negative impact from lower demand in the ethanol segment. US corn exports are doing well, perhaps a little above the trajectory for the 63.5 mln tons projected by USDA for 21/22, but without posing the risk of an abruptly high number to the point of compromising stocks.
So, the market is wondering where all this strength is coming from for corn trying to break the USD 6.00/bushel barrier. Four points can be mentioned as relevant indicators:
– The production costs of the 2022 crop frighten US growers and the whole world as well. There are doubts about the growers’ posture in planting corn in the 2022 crop in the United States, given the high weight of urea in the cost composition of high-tech crops, as is the case of US crops. Could growers reduce the area in favor of spring wheat or even reduce the area planted with corn due to costs without changing to another culture? US growers delayed purchases of inputs for the 2022 crop. As a result, they not selling corn either at the expected speed. They do not buy inputs nor sell corn, a factor that supports the CBOT;
– Wheat, despite recent lows, still has high prices. This scenario also supports greater demand for corn for feedstuff at the expense of wheat. The attention is on the winter crops of the Northern Hemisphere. A good result in these winter wheat crops could significantly ease prices and further affect corn. But, for now, the market does not see a downward bias for corn.
– Expensive oil and gasoline in the United States have accelerated demand for ethanol. It could be just a passing movement of the post-pandemic period or a continued picture of more demand for ethanol and demand for corn;
– China has relatively stable prices at the moment but resumed wheat purchases from Ukraine this year end. If the Chinese demand for US corn shifts to Ukraine, that might be a bearish factor for the CBOT. However, the US market still expects China to make large purchases for the first half of next year, which helps prices at this point;
It seems that the CBOT market is somewhat conditioned to this possibility of a more discreet corn planting in 2022 due to costs and the possibility that China resumes purchases at any time. Still high prices for both soybeans and corn may weigh on US planting decisions in 2022.
Agência SAFRAS Latam
Copyright 2021 – Grupo CMA