Porto Alegre, June 25th, 2024 – After the June supply and demand scenario, with no surprises for the US environment, the market is now focusing on the first planted area report to be released on the 28th. After this report, the focus is on the month of July, a critical period due to the pollination and silking phase, a cycle that should begin with high temperatures but favorable rainfall. There are also harvests in the Black Sea region for wheat, a factor that is once again putting pressure on wheat prices on the international market, which is hindering new corn highs. Finally, some attention to northeastern China due to the slightly drier and more delicate period for corn plantations. For now, bullish indicators need to emerge for a change in the price environment on the CBOT, even if the moment imposes seasonal volatility due to the weather.
With planting completed in the United States, the focus is now on improving crop conditions, as well as the weather. This is certainly a very sensitive phase for the market. Daily analyses of short-term climate projection maps, regional situations and suggested yield potentials, and traditional market rumors should prevail. Owing to this seasonal situation, over the next sixty days we will pay close attention to the weather and its variations. Right now, the market appears to be trying to draw attention to a hot start to summer in part of the US Midwest but is not reporting the start of above-average rainfall forecasts for the entire region. Heat and rain are not necessarily problematic variables for crops as long as they occur at the proper timing.
In recent days, the rains have been concentrated in the north-central Midwest, with even some flooding in the state of Minnesota. It is clear that situations can evolve, creating an environment of stress or risk for part of the local crop. Also in the center-south, rainfall has been lower, such as Illinois, Indiana and Ohio, major corn-growing states. In the next fifteen days, the forecasts are for good rains throughout the producing region, also with high temperatures. High temperatures are not abnormal in the local summer, however, they are always an important ingredient in the corn pollination phase.
Another key point for this June closure is the first planted area report, still preliminary, but which captures most of this year’s planting reality. It is very difficult for the market to reach a consensus on this planting. At the moment, the consensus is on a planted area close to that disclosed by the planting intention report, that is, nearly 90 mln acres for corn and 86.5 mln acres for soybeans. Based on the planting profile, it seems clearer that a corn area is actually very close to the planting intention in the June 28 report, with a soybean area well above what was initially projected by USDA. Owing to the characteristics of the data collected, it is difficult for the market to come close to the real data that will be released, especially if the planting has changed a little from the intentions. As for the quarterly stock report no surprise is expected, as demand and export data are in line with projections and without surprises.
Prices on the CBOT returned to levels below USD 4.40/bushel for the July contract and USD 4.50 for the December contract. The variables planted area and weather in July will define the trajectory of prices from now on.
While the weather and USDA data do not emerge, the market will focus on the pace of weekly US exports, as well as the movement in wheat prices. Harvests in the Black Sea are advancing early, and wheat prices are resuming levels below USD 6.00/bushel on the CBOT and removing some possible additional short-term support from corn.
At the same time, China’s corn crop is also developing. The critical phase also occurs from July to August, and the weather is fundamental. The large corn-producing region is located in the northeast of the country, a new region for local agribusiness and where most of the technical crops are located. Some international agencies have released a dry climate in the market information environment for this region of China. Indeed, the end of June will have little rain and the probability of some stress. However, the forecast for the first half of July is for excellent rain across the region.
In general, therefore, in the international market, there is a lack of arguments for price highs in the short term, and the seasonality of the climate will be preponderant in the next sixty days for this definition in international prices.
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