“However, while corn markets have come under pressure and dragged wheat lower, plenty of geopolitical risks remain, especially in the Black Sea,” warn the UK analysts.
Brazil set for record corn harvest
Looking to Brazil, and planting of the 2022/23 second season corn crop - also known as safrinha - has been quickly catching up after a slow start. A record harvest continues to be expected, said the grain and oilseed market specialists.
“While a proportion of the crop will still be planted outside the ideal window, confidence has returned for Brazil’s second corn production. However, with a delayed start to planting, some concerns may emerge over the extent of the crop being exposed to a typical seasonal decline in rainfall and potential frosts later in the growing season,” found the report.
As regards corn market developments in Argentina, the impact of prolonged drought continues to be quantified.
In its latest WASDE, the US Department of Agriculture (USDA) cut that South American country’s corn output estimates by an additional 7Mt to 40Mt, which will be its smallest crop since 2017/18. "However, while large, the revisions were expected."
Drop in fertilizer costs
Markets will soon start to focus more on the prospects for harvest-23 in the EU, US and indeed Ukraine, said the CRM Agri team.
“Fertilizer costs have plummeted, reducing the disincentive to plant corn, and we anticipate a year-on-year increase in planted area and a recovery in US corn production.”
In the EU, 2022’s record breaking drought is unlikely to be repeated this year, they continued. “Factoring in Paris corn’s historically minimal discount to new crop wheat, we anticipate a recovery in EU corn production this year.”
Prospects for Ukraine, however, are less predictable, with war ongoing, they cautioned.
Soybean markets
Soybean markets have continued to buck the trend of pressure on grain markets and, until recently, remained close to contract highs, briefly touching $15.50/Bu before falling back. However, now that the Brazilian soybean harvest is underway, supply pressure is starting to end the bullish trend, said the CRM Agri team.
Providing additional support for soybeans though has been the ongoing drought in Argentina.
While Brazil’s harvest is set to dwarf the size of the drought-impacted crop of its neighbor, the impacts on meal markets are skewed thanks to Argentina being a predominant global supplier, especially for the EU and UK, noted the analysts.
And with the drought having decimated its soybean crop, Argentina will need to import soybeans from Brazil to address the domestic shortfall and provide supplies for the crushing industry this season, they continued.
As Argentina is forecast to import up to 7Mt of soybeans from Brazil, the size of the Brazilian surplus is already being eroded.
Looking to the 2023 US harvest, planted area estimates for US soybeans are at risk of declining due to US farmers favoring corn given the drop in fertilizer prices, they predicted.
Rapeseed imports to EU
While oilseeds overall have felt pressure from factors such as Brazil’s accelerating soybean harvest, and softness in grain markets, rapeseed futures for May-23 have, in sliding to their lowest since September 2021, underperformed peers, reads the report.
“Paris rapeseed futures have struggled more than expected, pressured by burgeoning EU imports, prospects for which have been enhanced by upgraded estimates for Australia’s canola export supplies.”
Australia lifted its 2022/23 export forecast for canola by 640Kt to a record 6.9Mt. The EU is the top buyer.
“Already, with nearly one-third of the season to go, EU imports of Australian canola have reached 2.4Mt, nearly double the year-ago figure.”
Australia’s abundance, and successful imports of rapeseed from Ukraine, in part under the Black Sea export corridor, encouraged the USDA last week to lift its forecast for EU rapeseed imports this season by 550Kt to an all-time high of 6.5Mt, reported the CRM Agri team.