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.
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