Weather risks replace geopolitics, oil falls on negotiations
Grain markets consolidated after yesterday’s European-led weather market rally, as scorching temperatures continue to impact European crops, with highs of over 40°C expected later this week. The ongoing heat and dryness are set to continue, further tightening major exporter stocks.
Oil prices traded lower on news that the US had granted Iran a 60-day licence for oil sales after progress was made during ongoing negotiations in Switzerland.
Markets are closely monitoring vessel flows through the Strait of Hormuz, with early signs positive but the situation still fragile, as discussed in our last Weekly Grain Outlook. Analysis remains a challenge, with ships opting to switch off their AIS while passing through the Strait. Around 700 vessels remain anchored in the Persian Gulf as the conflict enters its 16th week.
USDA crop progress was broadly neutral for corn and soybeans, but still poor for winter wheat. US corn was rated 68% good/excellent, unchanged on the week, while soybeans were rated 66% good/excellent, also unchanged. Corn emergence was 97%, matching the five-year average, and soybeans were 93% emerged, ahead of the 90% average.
Funds are now net short US corn by 46.5K contracts, an increase of 41K from the previous week. Funds will be paying particularly close attention to conditions in the EU and Black Sea, with potential for increased demand for US and South American supplies should yield losses mount. Funds were also net sellers of soybeans.
USDA put the winter wheat harvest at 40% complete, well ahead of the five-year average of 24%, but crop condition remained very poor: only 26% was rated good/excellent, versus 49% last year, with 46% rated poor/very poor.
Overall, harvest pressure continues to battle tightening global stocks, with weather threats remaining the key driver for grain markets.
