Tuesday Market Briefing - 8th June 2021

Ahead of Thursday’s USDA report, the grains market is expecting revisions on global crop production. In particular, the US corn area forecast is unusually low, while the corn yield is unusually high at a record 179.5 bu/acre. Current dry weather in the US Midwest is affecting corn development and the national average dropped to 72% good/excellent crop condition. However, some states are reporting corn condition as low as 42% which has not been seen widely since 2006. Spring wheat conditions also fell 5% since last week as the hot, dry weather starts to pinch into yield potential.

The main concern on this season’s global grain production is the heavy dependency on corn given the suspected reduction in global grain stocks. During the Trump administration, the Washington-Beijing trade deal was seriously damaged reducing the amount of corn and soybeans exported to China. The strategy was for China to source their requirements elsewhere, but this proved difficult with reduced production in South America and ongoing political tensions with Australia. It is highly suspected that Beijing had no option but to allow their grain stocks to dwindle lower; last year, a lower risk than normal due to coronavirus consumption disruption and the effects of swine flu. For the 2021/2022 season, China have already bought 90% (14.7 mln MT) of their historic US corn commitments and are likely to surpass last year’s record figure as they rebuild domestic Chinese stocks.

In Southern England, localised rains over the weekend has helped to bolster winter wheat production returning the UK to a quality milling wheat exporter for the Harvest 2021 season. We remain friendly on values in the short-term as late spring dryness in the Northern Hemisphere has the potential to affect global grain output for the coming season.

Have a good week.