July 15, 2022

Grain Corridors and Recession Fears

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Weekly Highlights

Despite a short-lived bounce in wheat markets at the end of the week, the rally has failed to translate into a continued push higher. Meanwhile, soaring temperatures in Central US and potentially record-breaking heat in the EU continued to be a cause of concern for corn.

This week’s WASDE report detailed a broadly bearish global grain outlook due to production in North America. On a global scale, projected corn ending stocks for 2022/23 were increased to 312.94Mt, up from 310.45Mt in June.

The major changes were to US corn, with production estimates increased to 368.44Mt (up from 367.3Mt). Moreover, US wheat production estimates were also increased this month to 48.47Mt, up from 47.26Mt in June with ending stocks marginally higher. In Canada, production estimates were up 1Mt to 34Mt, with an expected knock-on increase in exports.

Offsetting the US and Canadian production gains were trimmed projections for EU wheat production, down 2Mt to 134.1Mt as ongoing dry weather lowered yield prospects primarily in Spain, Italy, and Germany, while estimates for Ukraine were also trimmed by 2Mt on the back of a reduced area to 19.5Mt.

While grain markets, especially in the US eased, oilseed markets tightened as US soybean production estimates decreased to 122.61Mt from 126.28Mt in June, resulting in a cut to export projections and tighter ending stocks.

Released this week was our Monthly Global Grain Outlook report, covering our latest price forecasts and market analysis. As the harvest season progresses in the Northern Hemisphere and news of ships arriving at ports in Ukraine in early July supply confidence rose. Moreover, recession fears started to build at a rapid pace. Read the full report on GrainTab.

Adding to market pressure were encouraging talks between Ukraine and Russia aided by Turkey about the creation of grain export corridors, raising the chances of a healthier Ukrainian export supply in the near term. Positive progress has been stated by the U.N. Secretary-General and negations have apparently reached a critical step forward. Read our full assessment and overview of Ukraine exports and EU & UK import impacts on GrainTab.

Further fueling market volatility and somewhat insulating EU and UK markets from the same level of sell off in US wheat markets has been currency moves. The euro continues to be under pressure having briefly fallen below parity this week before a marginal push higher. The annual inflation rate in the US accelerated to 9.1% in June, the highest since November of 1981, up from 8.6% in May. In this month’s Global Economic Outlook report we cover the impacts of inflation and the potential economic downturn on grain and oilseed markets. Read the full report on GrainTab


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July 15, 2022