Over the previous week, the currency pair EUR/USD rose by 0.0010 to 1.2192. The price of US WTI crude oil increased by 2.74 USD/barrel to 66.32 USD/barrel.

Oil prices also rose on Friday given the optimism about growing demand, which managed to offset worries about supply growth following a possible lifting of sanctions on Iran.

Over the previous week, CBOT July SRW wheat futures prices fell by 10 3/4 cents to close at $6.63 1/4 a bushel.

During the past week, Chicago July corn futures prices decreased by 2 3/4 cents to close at $6.56 3/4 a bushel.

Throughout the previous week, July soybean futures prices in Chicago rose by 4 1/4 cents to close at $15.30 1/2 a bushel.

Chicago fund positions (futures + options) for the week ended May 25:

*Source: CFTC

Accumulated US Export Sales for the week ended May 20:

*Source: USDA

There has been heavy rainfall in many places in the Midwestern United States over the past week - US Corn and Wheat Belts. There was precipitation all over Europe, including the Black Sea region. The drought is worsening in Brazil and Argentina. It is not raining in Australia either, but the soil's moisture reserves is good at the moment. Over the next 10 days, temperatures in the US Corn Belt will gradually rise to over +32 degrees and there will be no precipitation. There will be heavy rainfall in Kansas and Oklahoma. Minimal rainfall is expected in Nebraska, Indiana and other states. Temperatures up to over +32 degrees are expected in the coming days. In Canada, temperatures will gradually exceed +30 degrees with almost no precipitation. In Western Europe, weather will be quite cold with almost no precipitation. Good rainfall and low temperatures are expected on the Balkans. In Ukraine, cool weather with light rainfall in the central and south regions. In Russia, precipitation will be mainly in the southern regions and western parts of the country. Light rainfall is expected in the central areas of Russia over the next 10 days. Relatively little rainfall is expected in Indonesia and Malaysia. In Australia, cool weather with minimal rainfall. In the central regions of Brazil, temperatures will be quite high (up to +35 degrees) and there will be no precipitation. However, good rainfall is predicted in the southern regions. There will be almost no precipitation in Argentina with slight exceptions in the southern parts of the country.

GRAIN EXPORTS:

* US (September - August)
* Russia, Ukraine and EU (July - June)

Corn exports from the United States are relatively good. Wheat and soybean exports are also good. The weekly export sales of wheat from the old crop are already stopping. Sales of wheat from the new crop are good and are 30% higher compared to last year. Sales of the new corn crop were 5.69 million tons for the week and since the beginning of the new season they reach 14.6 million tons (3.89 million tons a year earlier). Sales of soybeans from the old crop are already weak, ie. there is nothing more to sell. Accumulated sales of the new soybean crop add up to 7.27 million tons (2.33).

Last week, IGC analysts published their May report on the state of the world's grain balance in 2021/22. Key takeaways:

IGC  -  May 2021

One of the key highlights of the report were the reduced world's wheat stocks, including:

• China - 130.6 million tons (135.6 and 129.8)
• the United States - 20.4 million tons (21.1 and 23.5)
• the EU - 11 million tons (12.9 and 10.9)
• Russia - 11.6 million tons (10.7 and 12.8)

The wheat production around the world will reach:

• Canada - 32.3 million tons (34.1 and 35.2)
• the EU - 134.6 million tons (136.1 and 124.5)
• Australia - 26.3 million tons (25 and 33.3)
• Russia - 79.3 million tons (77.9 and 85.4)
• Ukraine - 27.8 million tons (27.2 and 25.4)

Wheat exports are projected at:

• Australia - 18 million tons (17 and 22)
• the EU - 31.6 million tons (30.6 and 30)
• Ukraine - 19.6 million tons (19 and 17)
• Canada - 23.1 million tons (24.6 and 26.7)

World's total grain production will exceed consumption by 5 million tons. However, wheat has traditionally been left with overproduction and growing stocks. As for corn, production is usually less than consumption, which lowers stocks. For the first time in four years, the world's soybean stocks will rise. Overall, the report is assessed as slightly bearish.

There have not been any significant news on the corn market over the the past week. Weather was the dominant factor and it will determine prices in the future. If there are weather problems, they will probably be related to the drought that started last summer in the western parts of the US Corn Belt. For now, the cold weather stops the growth of plants, but this is a temporary factor. The margins of ethanol processors are moderately good, but corn stocks are low. This happens right at the beginning of the season with active consumption of ethanol, which will certainly increase the demand for corn in the coming weeks. In Europe, the rainfall is good and the condition of the crops is also good.

As for soybeans, the situation is different. The low initial stocks for the new season do not allow for even a slightly lower production. Now, however, the United States is experiencing a weakening of the monetary base (cash prices), which is due to sufficient stocks of processors and their reluctance to pay at the current high soybean prices. Soyoil continues to support the entire oil segment. Palm oil prices in Malaysia also rose on Friday. Coronavirus restrictions also affected plantation labor. The cold in recent days does not seem to worry anyone and prices are declining at the moment. 

As for wheat, there has been heavy rainfall in the US Wheat Belt over the previous week. Much depends on what the weather conditions will be in the new week, because the prolongation of humidity in the air will begin to worsen the condition of crops. SovEcon lowered its forecast for the wheat production in Russia in 2021 from 81.7 million tons to 80.9 million tons given the dry weather in some parts of the country. There has been massive rainfall in the winter wheat areas and spring wheat areas have not received much rainfall. From June 2, 2021, the authorities in Russia will impose a new floating export tax on wheat. In this regard, exports are now almost stagnant, but are expected to intensify in June after stabilizing export conditions.

Argentine farmers are piling up forward contracts to sell wheat like never before. Producers have already sold 2.3 million tons of wheat, which is twice as much as the previous year. High wheat prices and fears that the authorities will intervene in the market are the key reasons for the sales.

After the recent heavy rainfall in Saskatchewan and Manitoba (Canada), crops are recovering and starting to grow well after a long period of drought. There was frost on crops in Manitoba last week and we are now waiting for an assessment of the damage.

In China, control is being tightened with corn import quotas, which no one has complied with in recent months. Chinese feed mills have launched an active campaign to replace corn with wheat in feed. Large quantities of winter wheat are purchased from local producers. This change aims to stabilize the domestic corn market and reduce imports.

Over the last 2-3 weeks, the long net positions of corn and soybeans in Chicago have decreased significantly. The reasons for each investor are different, but in general, it is mainly because no strong rise in prices is expected given the rainfall.

Brazil's government agencies say the country is facing the worst drought in 91 years, which will lead to agricultural problems and more fires in the Amazon Delta. The drought has affected the country's central and southern regions, including the Parana River basin. Forecasts show little rainfall over the period of June - September for five Brazilian states. The lack of precipitation will have negative consequences for agriculture, animal husbandry and electricity production.

The bullish trend on the grain market began in August 2020, when corn price in Chicago was 3.07 USD/bushel and soybean price was 8.7 USD/bushel. Since then, prices have doubled. There have been 30 bull and bear markets over the last 40 years, but this has been one of the most exciting. However, we are unlikely to see a new seven-year low in terms of prices that we had in 2012-2019. The bad news is that production costs have already risen, which will quickly reduce profitability if current prices fall. Most likely, after the harvesting campaigns of corn and soybeans, we will immediately see a jump in prices, which will be followed by declines. Sales during the period of November - December will be the best move for manufacturers. In 2020 and 2021, Brazil had problems with weather and productions. It will be a big exception if this happens again in 2022. We can be sure that the markets will be completely different next year. 

Changes in FOB Prices of key exporters:

Wheat - Wheat prices have already fallen minimally. The cheapest on the market is currently the Black Sea wheat. Australian wheat with delivery in June remained stable at 289.25 USD/ton FOB.

Corn - The cheapest corn on the market is currently Argentinian corn. The FOB price of Brazilian corn with delivery in August fell by 7 USD/ton to 267 USD/ton.

Soybeans - Over the previous week, FOB soybean prices fell the most in the United States. The FOB price of Brazilian soybeans remained unchanged at 555 USD/ton. The rate of decline of the soybean price in the United States is slowing due to low stocks.

Export prices Black Sea, USD/mt (compared to the previous week):

During the week, it rained and it will rain in many places. For the time being, the drought remains only in Brazil and this has had a positive effect on the market.