Impact of Dry Weather on Production Forecasts
The ongoing dry weather in the Black Sea region is diminishing the potential for this season’s corn harvest, prompting analysts to revise production forecasts for both the European Union (EU) and Ukraine.
EU Corn Harvest Forecasts Reduced
The European Commission has lowered its forecast for the EU’s 2024/25 corn harvest by 11%, reducing the estimate to 60 million tons. Although this figure exceeds the five-year average by 2%, it reflects a significant reduction from previous expectations.
- The adjustments include a 1.1 million-ton reduction for Romania, bringing its forecast down to 9.5 million tons, which is 10% lower than the 2023/24 marketing year.
- Bulgaria’s forecast was also adjusted, down by 0.4 million tons to 2.6 million tons, which is still an 8% increase compared to last year.
The Strategie Grains agency similarly lowered its forecast for the EU corn harvest, reducing it by 2 million tons to 60 million tons, representing a 4.5% decrease from the 2023/24 fiscal year. Additionally, the USDA’s Foreign Agricultural Service (FAS) revised its forecast down from 64 million tons to 59.8 million tons, after previously estimating it at 64 million tons in June.
Market Reactions and Corn Prices
Despite the downward revisions in corn production forecasts for the EU, market prices have remained relatively stable. This stability is largely due to an increase in the supply of feed wheat, which has restrained price growth, especially given the strong harvest forecasts in the US and Brazil.
November corn futures on the Paris exchange fell by 0.6% over the week to €204.25 per ton, or $223 per ton. The futures are down 1.6% for the month and 12% for the year, reflecting the broader market sentiment.
Ukrainian Corn Production Forecasts
In Ukraine, the Ukrainian Grain Association has reduced its corn harvest forecast for 2024 by 2.1 million tons to 23.4 million tons, a 21% year-on-year decrease. The USDA, which had estimated Ukraine’s corn harvest at 27.7 million tons in July, may revise its figures in the upcoming August report.
Currently, purchase prices for Ukrainian corn delivered to Black Sea ports in October-November remain at $180-185 per ton SRT. However, the drop in export prices for fodder wheat, now at $178-180 per ton SRT-port, is holding back potential price increases.
Global Corn Market Dynamics
In the US, favorable weather conditions are supporting crop development, leading analysts to raise their harvest forecast to 385-386 million tons, up from the USDA’s July estimate of 383.6 million tons. December corn futures in Chicago have fallen below the psychological level of $4 per bushel, or $156.3 per ton, representing a 2.8% decline month-to-month and a 30% drop year-to-date. Only a significant adjustment in global balance figures in the USDA’s August report could potentially support these prices.
The US exported 47.88 million tons of corn in the 2023/24 marketing year, surpassing the USDA’s forecast of 47.7 million tons and outpacing last year’s figures by 36%. Exports are expected to reach 50 million tons by the end of August.
Meanwhile, Brazil and Argentina have completed their corn harvests, and the upcoming USDA report may reflect updated production figures for these key producers.
The current dry weather in the Black Sea region is a critical factor influencing corn production forecasts in the EU and Ukraine, with significant reductions already being made. While global markets have not yet fully reacted to these changes, the interplay between feed wheat supplies, harvest conditions in major producers like the US and Brazil, and upcoming USDA reports will likely determine the trajectory of corn prices in the near future. As stakeholders navigate these uncertainties, staying informed on the latest developments will be crucial in making strategic decisions.