09 July 20216 min reading

Despite the continuing decline in expectations for corn production in Brazil, stock prices tumbled on news of an increase in the forecast for corn production in Argentina and rain in the United States. The fall in wheat also supported the positive sentiment in the EU and the Black Sea region. The absence of China in the market also strengthened the bearish trend.

Elena Faige Neroba Business Development Manager Maxigrain


The market reacted sharply to precipitation in the US. Farmers hope that they will partially compensate for the previously lost moisture. The assessment of crop conditions has not changed since last week, and at this stage, the amount of moisture received is critical. If this does not happen, then in conjunction with the Brazilian news, the bulls will rise and can drag off the wheat.

July is usually the month Brazil starts to ramp up its corn exports, but Brazil's corn exports this July are expected to fall far short of initial expectations. Brazil was expected to export around 33MMT in 2021, with almost all of the exports coming from the safrinha corn crop. Sadly, safrinha corn was planted much later than usual and then suffered a historic drought, hitting three consecutive nights of sub-zero temperatures last week. Production expectations of pattern analysts at 82-87MMT, USDA attache -95MMT, WASDE still ignores weather disasters and showed 98MMT in the last report. As a result, the export of corn from Brazil in 2021 may approach 20-22MMT. Brazilian ports are slated to load corn on 39 vessels in July, up from 85 in July 2020, according to Maritime Agency Cargonave. Brazil may export 2.5MT of corn in July, up from 5MT in July 2020. Brazil will export corn in July, August and September, according to the Brazilian National Association of Grain Exporters (Anec), but corn exports are expected to decline significantly after that as much of the grain will remain in the domestic market. High prices could prompt Brazilian farmers to significantly increase their acreage for the 2021/22 safrinha corn crop, Soybean & Corn Advisor reported.

According to Safras & Mercados, 7.8% of the Central South Region has already been harvested, up from 20.2% YoY and 17.9% on average over 5 years. 49.1% of winter corn of the Central-South region has already been sold, in Mato Grosu ~ 60% sold, in Goias ~ 50%

The Argentine government expects corn production in 20/21 to hit a record 59MMT, private analysts estimate that harvest is nearly 50% complete. A number of local analysts are pessimistic and expect lower production figures - around 48MMT. Exporters report that new sales are practically on hold. In addition, reports have emerged that the cost of shipping grain from an agricultural power plant in Argentina will rise due to the government's proposal for cargo ships to pay the duty to the state, rather than a company that deepens the Parana River.


Against the background of a decline in the cost of wheat as harvesting approaches and favorable weather conditions, tenders were again held by Egypt, Iran and South Korea, and a tender was announced in Turkey. The decline in prices in the Black Sea continues. Durum shortage expected in the market.

In the summer months in China, due to low demand for flour products, the demand for flour decreases, China Oilseeds reports. Many factories stop processing, as well as the purchase of new raw materials due to significant residues of the old crop. All these factors put pressure on the price, but the main factor for future price growth is the fact that the quality of Chinese wheat this season is quite low, so the price of quality wheat will still be high. The average price for a new crop is around RMB 2,570 per tonne or 315 USD CIF China port. China was the second-largest destination for Australian wheat in June, just behind Indonesia, which exported 370kMT, or 13% of total 2.77MTT exports in June, according to Advance Trading shipment data. The country's total exports to China in the current 2020-21 marketing year, covering the period from October 2020 to September 2021, were around 1.68 MMT, Platts reported. China has booked four to six vessels for August loading, and in recent weeks another 200-250kMT have been sold to Chinese buyers off the east coast of Australia for September-October shipment. Chinese feed manufacturers have increased the proportion of wheat in their compound feed since 2020, following the government's recommendations to reduce dependence on expensive corn and soybean meal by diversifying towards cheaper alternative feed, thereby stimulating demand for wheat imports.

According to local experts, wheat production in Moldova can reach 1.2-1.3 MMT, which is two times higher than last year. Due to the lack of sufficient capacity, a significant part of the harvest, which has already started, will enter the market in the coming weeks. The official forecasts of wheat production in Bulgaria at 5.8 MMT, the average harvest for the country. Romania expects 10 to 12MMT and is actively trading wheat.

Production in Ukraine, where harvesting is lagging behind due to weather conditions, is expected to be record high - above 29MMT. Russia, as of 07/06/21, harvested almost 700 thousand hectares of wheat, also with a significant lag from last year's rates. Threshed 2.2MMT versus 8.39MMT on the same date last year, the average yield is slightly lower, which is explained by the lag in the pace of harvesting.


Uncertainty in the oil market is holding back oilseed prices. Potentially good soybean and sunflower harvests also contribute to bearish sentiment. According to official data, about 4 million hectares of soybeans have been planted in the Chinese province of Heilongjiang, but in fact, soybean acreage is about 3.4 million hectares, which is 1 million hectares less than last year, according to China Oilseeds. Taking into account the weather factor, namely the relatively low temperatures and high rainfall, a significant decrease in the production of non-GMO soybeans is projected. The State Reserve continues to purchase soybeans of the 2020 harvest.

There is practically no demand in the physical market. Many large buyers of non-GMO soybean oil have accumulated large product leftovers, approximately 80-150 thousand tons of oil from each of the companies. Sales volumes of finished products are 15% -20% lower than in the same periods over the past 5 years.

Manufacturers of soy products cannot find buyers for soybean oil, so they are forced to cut production of their products. If such a low demand from end buyers remains, then China can enter the market with the purchase of soybean oil no earlier than December this year.

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