The USDA June report has set the tone for the corn market. The June-March reduction of 5 million acres in the USDA estimate was the largest in 37 years. Last year’s large prevented plantings were partially repeated this year. Despite plantings being more advanced than normal in most states, more farmers in March stayed on the sidelines than initially expected, as insurance payouts exceeded planting profits last year and both soybean and corn prices remained very depressed in the March-May planting window. Yield will play a bigger role in the determination of corn crop from hereon out. The estimated yield in Friday’s July USDA report will reflect weather models only, as objective yield and farmer surveys will be conducted between late July and early August, to be reflected in the August report. The northern hemisphere wheat harvest is underway in earnest. We expect a seasonal weakening in global wheat FOB prices and a narrowing of the global wheat and corn spread.
While recent rainfall has been beneficial across Europe, benefiting spring crops, the yield loss to northwestern European wheat due to prior dryness was irreversible. While the USDA left Russian wheat production unchanged in its June estimate, it might be lowered in its July estimate. First cuts in southern Russia have indicated a possible 20-30% yield loss, due to a dry spring – though a recent cooler and wetter pattern across eastern FSU has been a stabilizer for the country’s spring crop. US winter wheat’s harvest pace of 56% was in line with the 5-year average and ahead of last year.
On the trade front, while wheat loadings took a dip in June, offtakes in Q2 were a record, likely widening the wheat-corn price spread. It was the 4th consecutive quarter where we saw higher offtakes YoY, signaling stronger feed wheat usage, milling wheat demand and strategic reserve building by key destinations. MENA, sub-Sahara Africa, China and Southeast Asia were the primary drivers. In contrast, world corn offtakes in Q2 were down YoY, according to our tracking, despite rebounding seasonally from Q1. This marks a third consecutive quarter of lower YoY offtakes. EU and MENA offtakes were notably lower YoY as abundant domestic feed sources in these regions lowered corn import needs. China was the only main destination region with consistently higher offtakes YoY, reflecting stronger animal sectors.