Global feed grain market: crude oil surged, boosting feed grain prices

 

On Friday, May 2022 corn futures on the Chicago Board of Trade (CBOT) settled at around $7.
54 a bushel, up 12.
25 cents, or 1.
65%, from a week ago
.
US Gulf No.
2 yellow corn was quoted at $8.
625 a bushel, up 9.
75 cents, or 1.
1%, from a week ago
.
June 2022 corn futures on the EURONEXT exchange settled at around €338.
75/tonne, up €14.
25 or 4.
4% from a week ago
.
The FOB spot price of Argentine corn in Shanghe was $333/ton, down $8 or 2.
3% from a week ago
.
The May 2022 corn futures on the Dalian Commodity Exchange closed at around 2,895 yuan/ton, up 19 yuan or 0.
7% from a week ago
.

 

　　Crude oil futures rose this week for the first time in three weeks and posted their biggest weekly gain since March 4, as a missile attack on Saudi oil facilities offset pressure on the U.
S.
likely to ramp up the release of strategic inventories
.
U.
S.
West Texas Intermediate (WTI) May contract closed at $120.
65 a barrel on Friday, up 10.
49% from a week ago
.
May Brent crude futures settled at $113.
90 a barrel, up 11.
5% from a week ago
.
International crude oil futures rose sharply, which is conducive to improving the demand outlook for biofuels, and corn is the main raw material for the production of ethanol in the United States
.
One-third of the annual U.
S.
corn production is used to make ethanol
.

 

　　Prospects for South American corn production mixed, Brazil poised for bumper crop

 

　　In Argentina, the 2021/22 corn harvest is 10 percent complete
.
The Buenos Aires Grain Exchange lowered its 2021/22 Argentine corn production forecast by 2 million tons to 49 million tons from an earlier forecast of 51 million tons due to lower-than-expected harvest yields
.
The exchange said that hot and dry weather in January reduced corn production
.

 

　　In Brazil, the second crop, which accounts for more than 70% of the country's corn production, is still growing and is expected to be significantly higher than the previous year's level due to smooth planting and no significant weather damage so far
.
Brazil's national commodity supply company (CONAB) said that as of March 19, Brazil's second-season corn planting was 94.
7% complete, up from 83.
6% in the same period last year
.

 

　　Analyst Safras & Mercado said Brazil's corn production in 2021/22 may be higher than currently expected due to good weather for the second crop and a larger acreage than initially expected
.
The company currently estimates second-crop corn production in south-central Brazil at 83.
3 million tonnes, 44 percent higher than the previous year's crop, which was reduced by drought and frost
.
Brazil's total maize production in 2021/22 is forecast at a record 115.
7 million tons, up from 91.
5 million in the previous year, mainly due to a record corn planting of more than 21 million hectares, despite a drought-reduced first-season corn production
.
It is worth mentioning that Safras may further increase Brazilian corn production in the coming week, as the second-crop corn acreage in Mato Grosso, Goiás, São Paulo and Minas Gerais may exceed initial expectations.
; The Matopiba region (Maranhão, Tocantins, Piauí and Bahia) could record production
.

 

　　Brazil's corn exports could rise sharply, hit second-highest record

 

　　Safras expects Brazil to export 34.
5 million tonnes of corn in 2021/22, up from 20.
8 million the previous year, but still below the 2018/19 record of 41.
17 million tonnes
.
Exports in March, April and May of this year are estimated to reach 2 million tons, as the disruption of Ukrainian exports has led to higher demand for Brazilian corn, which has also led to a tighter supply-demand balance, as the second corn harvest will not be available until the second half of the year, increasing Brazil's available export volume
.
But despite tight supplies, Brazilian farmers have been selling corn even as prices fell, while farmers continued to hold back on soybeans
.
Earlier this year, the average price of corn in south-central Brazil exceeded R$100 per 60kg bag, but it is now below that level, with prices approaching R$90 per bag in several regions
.
Farmers are selling corn for cash, dragging prices lower
.
However, given that this has led to further reductions in supply, the second crop should be able to maintain the current price level when harvested
.
Weather factors, including the risk of frost, are likely to boost corn prices during the transition period, before the second crop arrives
.
In a few areas of Mato Grosso, the second crop should be harvested as early as the end of May, but the bulk of the harvest is between June and July
.

 

　　The intention of spring planting in the United States has become the focus of attention.
Will there be any accidents?

 

　　The USDA will release its Planting Intentions report on March 31
.
The USDA said last month that high soybean prices could help encourage more acreage, while higher production costs such as fertilizers would limit corn acreage
.

 

　　U.
S.
farmers are likely to plant 90.
379 million acres of corn this year, a decrease of nearly 3 million acres from a year earlier, due to high corn costs, according to a survey of farmers conducted by Farm Futures this week
.
The Allendale Company's annual planting intentions survey report shows that the 2022 U.
S.
corn planting area is expected to be 92.
421 million acres
.
For comparison, the USDA forecast at the Annual Outlook Forum in February that the U.
S.
corn planting area was 92 million acres
.
U.
S.
corn acreage in 2021 is 93.
357 million acres
.

 

　　While the current market consensus is that U.
S.
corn acreage could decline by 2 to 3 million acres, planted acreage may not decline as the market expects against the backdrop of high Chicago corn futures
.
Analysts at Safras, for example, pointed out that the $7.
50/bu corn price is enough to absorb any trouble in production costs, making corn still profitable, so U.
S.
farmers are likely to continue to choose corn over soybeans
.

 

　　From the perspective of the soybean-to-corn ratio, as of the close on March 25, the price ratio of CBOT November soybean futures to December corn futures was 2.
24, slightly lower than 2.
27 a week ago, and far lower than 2.
61 in the same period last year
.
The price ratio can be used as an indicator of profitability potential, and close to or below 2.
5 is generally favorable for corn planting
.
For comparison, the price ratio of soybeans to corn averaged 2.
34 in January and 2.
43 in February, but the price ratio has gradually declined since March
.