Just like the prices of wheat, those of grain maize are also under great worldwide pressure. Growing conditions in the US are favorable to maize crops. The export engine is running at full throttle, but stock traders continue to look down.
It has now been almost a year since stock traders in the US were positive (bullish) for the grain corn price in Chicago. New, favorable yield calculations in the country do little to change this. The growing conditions are good, the area is immense.
Export is going well
The export engine is not to blame. Exports even reach a record at this stage of the season. Half of all US soy and corn goes to China. Yet traders are betting en masse on a falling price. The new Wasde report from the American Department of Agriculture (USDA) will be published on Wednesday, August 12. Analysts expect record yields, which could increase ending inventory by 7% compared to the previous estimate.
There are showers on time and it is sunny. Ideal corn and soybean weather in the Midwest. That is why the expected soy yield is also almost at a record level. The ending stock is even estimated to be a quarter higher than in July by traders. Rising wheat stocks also have a negative impact on the CBoT for this commodity.
Brazil is doing well
American grain exports are not the only ones that are doing well. This also applies to agro-power Brazil. A weak currency helps their position in the global market. In addition, there is also a lot of demand for corn and soy meal in the country itself. So much so that the country will have to import corn in the coming months to meet the need. This product mainly comes from neighboring country Paraguay.
Arable farmers in the country are currently threshing their second maize crop for the 2019-2020 season. The so-called safrinha corn. It is sown immediately after the first soy cultivation and accounts for 70% of the total Brazilian corn production. Favorable prices have ensured that arable farmers have already sold more than 40% of their corn, according to the Mato Grosso Institute of Agricultural Economics (Imea).
Less biofuel
The demand for biofuel ethanol has clearly decreased due to the corona crisis. Ethanol production in Brazil is expected to be 2020% lower for the 21-18,4 season. The vast majority of ethanol is extracted from sugar cane (91,4%). The rest from grain corn. This is bad news for the sugar sector, because more cane sugar will be produced for consumption.
In Europe, the corn contract on the Matif has been switched from August to November. The old contract ended at a hefty €182, but the first contract for the new harvest is considerably lower at €164,50. The wide availability of grain maize worldwide also has an effect on the availability of feed grains in our country. It places a ceiling on the market for feed wheat. If it prices itself out of the market, it is cheaper to feed more corn. Looking at the world balance for this commodity, there will be no shortage of cheap corn during the 2020-2021 season.