It’s all about the dry weather in the central US corn belt this morning. The “I” states, Iowa, Illinois and Indiana, account for 40% of the US corn crop and 28% of the US soybean crop, so what happens in these three states is important to the US markets.
If corn yields fall 25% in the “I” states that is equivalent to a reduction of roughly 36mt, or over a 10% reduction to US production. The USA corn stocks to use ratio is predicted to be just 13.5% in the last USDA WASDE report. A fall in corn yields of 25% the “I” states, without a reduction in usage could see that ending stocks to use ratio halved. If US exports were to absorb a 25% yield loss in the “I” states, they would need to fall significantly. For perspective in the 2012 drought US corn supplies fell 13% and prices rose 29.8% in Q3. All years are different, but this does tend to emphasise the need to watch the US weather map over the next 2 – 3 weeks.
The central corn belt also produces around 28% of the US soybean crop, so what happens there will have a big impact on world oilseeds. The grain most impacted by that here in Australia is canola. Last night Paris rapeseed futures were sharply higher. The EU market is watching conditions in both the US soybean crop and Australian conditions at present. The Canadian Prairies have also been a bit dry, but the weather map isn’t looking as dire for the main canola districts in Alberta and Saskatchewan as it is for the US central corn belt, or NNSW, over the next 7 days.
This time last year between CW NSW and the QLD border it was being predicted that 500kt of canola would be harvested, the final tonnage estimated was to be closer to 225kt. Last week the forecast for the same area was projected at less than 290kt and falling. There is already some talk of spraying some crops out due to poor establishment. EU markets responded to the sharp rally in soybeans. Taking the move in the AUD / Euro into account nearby futures day to day were some AUD$45.34 higher, the Feb24 slot followed, closing the equivalent of AUD$42.16 higher.