American crop conditions remain bad, and prices rise – 06/26/2023 – Vaivém

This is a defining period of the year for American crops, and the climate becomes one of the main points to be observed. Ten days ago, crop conditions, due to lack of rain, were the worst since 2012. That year, the country recorded a sharp drop in production, caused by weather problems.

The crop monitoring report released this Monday (26) by the USDA (United States Department of Agriculture) points to an even worse picture. The temperature is normal, but the rain is still low for the period, which makes the sector sensitive in terms of productivity.

Evaluating data from the USDA, AgRural found that the “good and excellent” conditions of corn crops dropped from 55% last week to 50% this week. It is the lowest percentage since 2012.

The same occurs with soybeans, which maintain the worst conditions since 2012. The USDA report this week indicates that the “good and excellent” conditions of the oilseed dropped to 51%, below the 54% of the previous one.

The occurrence of little rain this month and the forecast of continuation of this picture in July could still affect the American production. It is a scenario that generates volatile prices, but, for now, there is no indication of a large drop.

The most recent data on the behavior of investment funds show that they took advantage of the climate effect to increase positions, which favored the rise in prices last week.

The first soybean contract was up 1.8% on the Chicago Board of Trade this Monday, rising to $15.15 per bushel (27.2 kg). The November contract reset by 1% to hit $13.23. Corn gained 1%, with the July contract rising to $6.37 a bushel (25.4 kg).

Wheat, which maintains good production prospects in the main world producers, fell by 1.1%, with the September contract price falling to US$ 7.38 per bushel (27.2 kg).

World estimates of grain production for 2023/24, which do not consider possible problems in the American crop, have been showing good performance so far. The world soybean harvest could reach 411 million tons, bringing world stocks to 123 million.

This increase would largely come from Brazil, which, after a record 156 million tons this year, should reach 163 million next year, according to USDA estimates.

Crops in the United States and Argentina, after falling this year, recover next year. Americans are expected to produce 123 million tons, after 116 million in 2022/23.

Argentina, which obtained only 25 million tons of the oilseed this year, could reach 48 million in the 2023/24 period, according to the US government agency. Chinese imports would remain at 100 million tonnes.

Based on estimates this month made by the USDA, corn production rises to 1.22 billion tons, above world consumption of 1.21 billion. The greatest evolution in cereal use occurs in the feed segment, which has an increase of 2.6%, according to FAO (Food and Agriculture Organization of the United Nations). Human consumption increases by 0.8%.

As for wheat, production increases in several of the world’s main producers. The European Union is recovering and has a production capacity of 140.5 million tons in 2023/24, the same volume as China. India raises production to 113.5 million; and Russia, to 85 million. With that, the final stocks of the crop will be 271 million tons, points out the USDA.

The Brazilian market follows this price movement in Chicago. The current level is far from what the producers imagined, but when the American stock market rises, domestic sales react.

Prices have as a limiting factor, however, the exchange rate, which is at a lower level, and premiums, which are negative. In addition, there is still a lot of soybeans to be sold.

Corn, whose total 2022/23 harvest is expected to reach 127 million tons in Brazil, has the slowest safrinha harvest this year. Due to humidity, the machines advanced only 9.3% over the areas ready for harvest this year in the center-south, below the 20.3% of the same period of the year, according to AgRural.