Tuesday Market Briefing - 18th May 2021

Last week’s WASDE report was broadly in-line with mkt expectations regarding stocks, but the USDA production figures are much more optimistic than that of global grain trade participants. In particular, using a corn yield figure of 179.5 bu/acre (3 bu/acre larger than the previous record figure in 2017) is weighing heavily on price and caused UK markets to fall £7/MT last week. Corn production in Brazil needed to be reduced in this report due to dry weather; the USDA forecast shrank from 109 to 102 mln MT while some Brazilian agencies are calling for a figure <100 mln MT. This bearish fundamental tone to the grain markets also persuaded the hedge funds to take profits on profitable long positions resulting in their largest volume sell-off since August 2019.

Weather patterns have improved across the Northern Hemisphere with rain falling across most growing areas in the US, Europe and Black Sea. The Russian wheat forecast was increased by 1 mln MT (SovEcon) prompted by better weather conditions for spring wheat.  In the US, high grain prices have encouraged more areas back into production allowing Informa to increase their planted corn acres forecast to 96.85 mln acres (compared to USDA forecast of 91.1 mln acres). Even with an average yield figure, more harvested acres on this scale indicate a new production record for corn if achieved.

Weather in the UK is staying changeable for the week ahead which has rescued the condition of spring cereals and allowed the winter crops to develop fully as the temperatures increase. As lockdown restrictions continue to ease, we should see new crop demand continue to normalise, restoring confidence in the end-users of feed grains.

Have a good week.