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Jul 19, 2021

Price Direction Hinges on Hot/Dry Weather

Brazil corn export cancellations; heavy rain affects EU wheat

Brazil Corn Export Cancellations

  • Weather-related problems with Brazil's second corn crop are causing companies to exit their export contracts using the washout clauses.

  • In a grain contract, a party can get out of it by paying a settlement amount to the counterparty.

  • According to grain marketers a lot of the corn is being redirected to the domestic market due to high premiums.

  • Contracts set at 40-45 reais per 60-kilo bag are being turned over to domestic buyers paying 90-95 reais.

  • Pork and poultry processors are also importing corn from Argentina thanks to a favorable exchange rate.

  • Brazil's second corn crop, being harvested now, is forecast to be 8 million tonnes lower than last year, with imports likely to increase 58%.

  • Brazil's corn exports may fall from 34 million tonnes to 29.5 million this year.

FBN’s Take On What It Means: Brazil’s reduced safrinha corn crop is making it more costly to perform on earlier contracts and firms are doing what they can to adjust commitments. Brazil is currently still lower priced to Asian destinations than the US. However, Brazilian premiums will likely remain high due to the short crop and drive additional demand to the US later this year.


Heavy Rain Affects EU Wheat

  • As of July 12, soft wheat in France was rated 76% good to excellent condition compared to 79% in the previous week.

  • The crop is still above last year’s 55% good to excellent when France was harvesting one of its smallest wheat crops due to drought.

  • Harvest progress stood at just 4% complete versus 1% a week earlier and 42% last year.

  • France's farm ministry recently forecast a 27% increase in wheat production from last year, 11% above the average of the past five years.

  • Heavy rain so far this summer has raised concern about late losses to yields and particularly a decrease in grain quality.

  • Severe flooding in western Europe last week led to many fatalities in Germany and part of northeastern France was on flood alert.

FBN’s Take On What It Means: Crop damage will need to be assessed in coming days as the weather forecast calls for a period of dry, warm weather. Much of France’s soft wheat may escape serious damage as the crop has been slower to develop than normal this season. Quality issues will be difficult to determine until more of the crop is harvested. Especially when combined with problems for HRS in the US and Canada, lower production can be expected to support prices.

FBN Market Advisory services are offered by FBN BR LLC, dba FBN Brokerage, FBN BR and FBN Market Advisory (NFA ID: 0508695)

The risk of trading futures and options can be substantial and may not be suitable for all investors. Past performance is not necessarily indicative of future results.

This is not an offer or solicitation in any jurisdiction where we are not authorized to do business or where such offer or solicitation would be contrary to the local laws and regulations of that jurisdiction, including, but not limited to, persons residing in Australia and Canada.

Kevin McNew

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Marketwatch: Dec, 04

cmdty National Corn Price Idx: ZCPAUS.CM

open: 5.6684
high: 5.7321
low: 5.6559
close: 5.7046

cmdty National Soybean Price Idx: ZSPAUS.CM

open: 12.266
high: 12.366
low: 12.2585
close: 12.34

cmdty National Hard Red Winter Wheat Price Idx: KEPAUS.CM

open: 8.1277
high: 8.243
low: 7.9921
close: 8.0144

cmdty National Soft Red Winter Wheat Price Idx: ZWPAUS.CM

open: 7.6225
high: 7.7249
low: 7.4749
close: 7.5391