During the past week, the EUR/USD currency pair rose by 0.0020 to 1.0713. The price of US West Texas Intermediate (WTI) crude oil increased by $0.81 per barrel to $81.54 per barrel.

The price of oil decreased on Friday but still marked a third consecutive weekly gain amid growing expectations that the Federal Reserve in the United States will soon start lowering interest rates. Crude oil prices rose despite weak short-term fundamentals and an unexpected increase in US crude oil inventories. The rising expectations for an upcoming cycle of monetary policy easing by the Fed sparked a rally in stock markets. According to the CME FedWatch tool, traders now see a 64% probability of the Fed making its first rate cut in September, compared to 50% a month ago. A key economic indicator for the Federal Reserve showed on Friday that US inflation in May slowed to its lowest annual rate in more than three years. According to the Commerce Department report, the core Personal Consumption Expenditures (PCE) price index increased by only a seasonally adjusted 0.1% for the month and rose by 2.6% from the previous year, with the latter figure down by 0.2 percentage points from April's level.

Over the past week, July SRW wheat futures in Chicago dropped by 8 cents to close at $5.53 1/2 per bushel.

Throughout the past week, Chicago July corn futures declined by 37 3/4 cents to close at $3.97 1/4 per bushel.

Over the previous week, CBOT July soybean futures decreased by 10 cents to close at $11.50 1/2 per bushel.

Accumulated US export sales for the week ending June 20.

*Source: USDA

Weather

Last week, rainfall continued in the United States, creating excellent conditions for crop development. In Canada, it remained dry, which is now becoming a new problem. Western Europe experienced rainfall, while the western Balkans had light rainfall. Ukraine and Russia saw moderate rainfall in certain areas. Rainfall has begun in India, but China remains quite dry in the corn-growing regions. Australia had moderate rainfall, while Brazil and Argentina experienced little rainfall.

In the next 10 days, temperatures in the Corn Belt in the United States will be moderate but quite high in some areas. In Iowa and Illinois, they will be below 30 degrees. Rainfall will be moderate in most places, with good amounts in fewer areas. Weather across the southern wheat belt will have hot and dry, which no longer matters significantly. In the northern regions, temperatures will be moderate with substantial rainfall. In Canada, low temperatures and moderate rainfall are expected. Western Europe will have moderate temperatures in France and Germany, high in Hungary and Poland, with minimal rainfall. The Balkans will experience hot and dry weather, as will Ukraine and Russia. A serious drought combined with high temperatures is forming in the Black Sea region. Winter crops are already being harvested, so it does not matter much for them, but spring crops will suffer greatly as it is still late June. India is experiencing rainfall. In China, moderate temperatures and rainfall are expected, providing some relief for the corn. Indonesia and Malaysia will have moderate rainfall. Australia will see moderate rainfall across the country. Weather in Brazil will be dry and temperatures will be high in the central parts, while Argentina will have no rainfall for the third week.

Overall, the problems with wheat in the Northern Hemisphere are mostly in the past except for Canada. The harvesting campaign is progressing quickly. However, spring crops face moisture shortages in the Black Sea region, while conditions are favorable in the United States and Western Europe. Data for China is sparse but indicates problems with corn due to a lack of rainfall. In the Southern Hemisphere, conditions in Australia are good so far, but problems are accumulating in Argentina. 

GRAIN EXPORTS:

* US (September- August)

* Russia, Ukraine and the EU (July- June)

During the past week, wheat and soybean exports from the United States were moderately good, while corn exports were very good. Weekly export sales of wheat were very good for the second consecutive week, but corn and soybean sales from both old and new crop were weak.

This week, the IGC released their June report on the state of the global grain balance for 2024/25. Key changes:

IGC  -  June 2024

The June forecast remains almost unchanged from May. The issues with wheat in Ukraine and Russia are not reflected or more accurately, not considered as problems. The global cereal production is expected to continue its recovery, albeit at a slower pace, driven by barley, sorghum, and oats. Global stocks are expected to decrease by 2% compared to 2023/24, which is not yet considered problematic by the markets. These crops also contribute to the overall 1% increase in production. Global trade is decreasing to 416 million tons due to reduced import needs for wheat and corn.

Wheat – On Friday, wheat futures in Chicago and Paris decreased. SovEcon lowered their forecast for wheat exports from Russia in 2024/25 by 1.7 million tons due to a weaker production but did not adjust their production forecast, keeping it at 80.7 million tons. The condition of spring wheat in the United States is deteriorating mainly due to a lack of sufficient moisture. In their June forecast, StatsCan analysts estimate wheat acreage in Canada at 26.641 million acres (27.05 in March and 26.93 in 2023/24). Expectations were for an area of 26.94 million acres. Canola areas are projected at 22 million acres (21.39, 22.08, and 21.52).

According to an IKAR forecast, grain consumers in Russia may raise prices and be strong competition for exporters due to expectations of a reduced production in 2024/25. The grain production in the country is expected to be 128 million tons in 2024 (144.9 in 2023). On one hand, data from Krasnodar Krai and Stavropol Krai indicate very good yields, but on the other, drought in central regions will be a problem. Another factor is the size of the reserves. As of 01.04.2024, reserves in the country were at an almost record level. However, from April to June, exports were extremely active, and reserves have decreased to the 2023 level. It should be noted that the reserves are not of the best quality. It is important to highlight that in the past two weeks, despite the active harvesting campaign, farmers have not provided any yield data. It is noticeable that the information process suddenly stopped, and all channels are focused on discussing the official positions of the authorities with mass reports.

During the week, Egypt purchased 470,000 tons of wheat from Russia, Romania, Ukraine, and Bulgaria. Compared to the previous tender, prices are 25 USD/ton lower. A significant change is that Russia has changed its trading method to sell something. Prices are no longer uniform but spread across a wide range. The competition is very fierce. The wheat production in Russia will be weaker, but not weak enough to take measures to stop exports. It will certainly be slightly below 80 million tons. Ukraine will also see a significant decline. However, Romania's wheat production will be a record at 10.5 million tons, and Bulgaria's wheat production will also be close to 7 million tons.

Corn – On Friday, corn futures in Chicago and Paris decreased. The winter barley harvesting campaign in France has been completed on 1% of the areas, compared to 25% a year earlier.

Soybeans – On Friday, soybean and soymeal futures in Chicago decreased, while soyoil futures increased. Rapeseed futures in Paris and canola futures in Canada also increased. According to EIA data, in April, 1.07 billion pounds of soyoil were produced in the United States, which is 44 million pounds more than in March and the highest level since December.

The first presidential debate in the United States showed us to expect the unexpected and not be surprised by significant market movements in the coming months. On Friday, the USDA published its June report on crop stocks and acreage in the United States. This report is one of the most important for the new season, providing guidance for months ahead. Quarterly stocks of wheat, corn, and soybeans were above market expectations, but the more critical data for prices came from the size of the acreage for the new season.

USDA Wheat – As of 01.06.2024, wheat stocks in the United States were 19.1 million tons (18.6 forecasted, 15.5 as of 01.06.2023). Wheat acreage for the 2024/25 season will reach 47.24 million acres (47.66 forecasted, 47.50 in March, and 49.58 in 2023/24). The acreage is significantly below that of the previous season, but yields are much better. Thus, the total production we can expect is at the level of 2023/24.

Corn USDA – As of June 1, 2024, corn stocks in the United States were 126.82 million tons (123.77, 104.22). Stocks are significantly higher than last season. It is true that exports have been better and internal consumption to some extent, but we will not see a reduction to the levels of a year ago. Perhaps the current production has been underestimated in size, and we may see growth and larger ending stocks. Stocks in the USA will be about 12-15 million tons higher than a year ago. For the new season, corn acreage in the US will be 91.48 million acres (90.35, 90.04, 94.64). What can we expect for corn? A smaller acreage than last year, which is good. However, it is above the March forecast – a concern. What about yields? So far, rainfall has been sufficient, and everything looks okay. July begins, which is the most crucial month for corn. Rainfall during this time will determine the course. The downside is that rainfall continues for now, and the moisture reserves are very good. With a yield of 180 bushels per acre, the corn production will reach 383 million tons, which will increase corn stocks in the United States to about 58-60 million tons. After the report on acreage was released, the question was where so many new acres for corn came from? The largest increases in corn acreage are for Kansas +600,000 acres, Iowa +300,000 acres, Nebraska +250,000 acres, Minnesota +200,000 acres. At the beginning of last week, the condition of corn crops deteriorated moderately.

Soybean USDA – As of June 1, 2024, soybean stocks in the United States were 26.4 million tons (26.2 and 21.7). Soybeans are no exception and hold significantly higher stocks than the previous year. Soybean areas for 2024/25 will be 86.1 million acres (86.75, 86.51, 83.6). Here, yields depend on August rainfall, which is far away, and assumptions will truly remain assumptions. With a yield of 50.5 bushels per acre, the soybean production will reach 117.7 million tons, which is a moderately high level. Soybean stocks in the United States will increase for the new season, but the main driver here is South America. Successful Farming predicts that soybean acreage in the United States could reach 88 million acres, with the difference from USDA being 1.9 million acres, which is significant.

Funds hold significant short positions and bet on large productions and moderate demand. Weather in July for corn and August for soybeans, along with demand intensity, will be crucial factors for a new rally in these crops.

The corn market experienced its worst moments because no one expected simultaneous increases in acreage and stocks above market forecasts. Now, all risk premiums in corn have been removed, meaning we are at the bottom. The weather from July through mid-August is much more critical than in June. It is likely that the lost 20-30 cents per bushel at the end of the week will quickly be recovered. Lower corn prices will trigger purchases in larger-than-usual sizes. The South American production is already in line, but not exceptionally large to shake the market.

Authorities in India are implementing comprehensive measures to stabilize food prices in the country. Despite official data showing a record-high wheat production exceeding 112 million tons, prices are not falling at all. Stringent restrictions have been imposed on wheat traders in the country, with storage quantities exceptionally low. At the same time, duty-free imports of 500,000 tons of corn, 150,000 tons of sunseed oil, and 10,000 tons of powdered milk have been allowed. Food inflation is a significant component of overall inflation in the country. The central bank cannot reduce interest rates in a strong food inflation environment.

Changes in FOB prices of major exporters in recent days:

During the week, FOB prices around the world decreased for yet another week, but there were some exceptions this time.

Wheat
FOB wheat prices fell for the fourth consecutive week. The FOB price of Bulgarian wheat is 226 USD/ton (+$13/ton for the week and -$9/ton the week before). The FOB price of Russian wheat with 12.5% protein is 237 USD/ton (-$1 for the week), and wheat with 11.5% protein content is priced at 225 USD/ton (-$2). The FOB price of Australian milling wheat is 256 USD/ton (+$3 for the week and -$6 the week before), wheat with 10% protein is priced at 253 USD/ton (+$3 for the week and -$7 the week before), and the FOB price of Australian feed wheat is at 231 USD/ton (down from $228 the week before).

Corn
FOB prices for corn decreased significantly. During the week, the price of Brazilian corn dropped by 10 USD/ton to 172 USD/ton (-$6 the week before).

Soybeans
FOB soybean prices decreased slightly. The FOB price of Brazilian soybeans fell by 5 USD/ton during the week (-$10 the week before) to 443 USD/ton.

Oils
Over the past week, prices for oils around the world moved in different directions.

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