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Heat and Drought Threaten Corn Crops, Lowering Production Forecasts
Impact of Extreme Weather on Corn Crops
Strong heat and lack of rain are negatively impacting corn crops, which are currently in the critical phases of flowering and crop formation. As a result, market participants are lowering their production forecasts.Potential Repeat of 2020 Drought Conditions
Analysts from the PUSK agricultural cooperative at the All-Ukrainian Agrarian Council are concerned that the situation may mirror 2020 when sunflower and corn harvests decreased by 35% due to severe drought conditions.Recent Weather Developments
Recent rains in the northern regions of Ukraine are expected to spread to the southern and eastern regions, potentially lowering air temperatures from 35-40°C to 30-32°C. However, these scattered rains will not sufficiently replenish soil moisture reserves.Regional Impacts and Price Increases
The heat is also adversely affecting corn crops in Romania, Bulgaria, and the Russian Federation. This has led to an increase in prices for new-harvest Black Sea corn, although it has not yet impacted quotations in Chicago.Current Export and Stock Status
According to the State Customs Service, Ukraine has already exported 1 million tons of old-crop corn in the 2024/25 financial year, compared to 728,000 tons last year. The country is entering the new season with the lowest corn stocks in the past three years, increasing export demand for grain. Forward prices for corn deliveries to Black Sea ports in October-November have risen from $160-165/t to $170-175/t.Chicago Corn Futures and Ethanol Production
December corn futures in Chicago have fallen by 12.8% to $162.1/t for the month, due to increased planting areas and production forecasts in the US. As of July 14, 68% of crops were in good or excellent condition (compared to 57% last year), and 41% had entered the flowering phase (32% average over five years).The latest EIA report did not support corn quotations, despite US ethanol production increasing by 52,000 barrels to 1.106 million barrels/day from July 6-12, and ethanol reserves decreasing by 443,000 barrels to 23.16 million barrels. This week marked the second-highest amount of corn used for ethanol production in US history.
South American Influence
Increased corn supplies from South America are also putting pressure on prices. As of July 11, 74% of second-harvest corn in Brazil had been harvested (compared to 36% last year), which will significantly boost grain exports in July. The National Association of Corn Exporters (Anec) raised its July grain export forecast from 3.4 to 4.09 million tons.Brazil's second-crop corn production constitutes 75% of its total grain production, which Safras & Mercado estimates will reach 125.56 million tons in 2024 (down from 140.06 million tons in 2023). However, corn exports are expected to decrease from 54.59 to 40.18 million tons.
The current weather conditions and their impact on corn crops underline the significant challenges faced by the agricultural sector. As the market adjusts to these fluctuations, strategic planning and timely responses will be crucial to managing supply and demand. The resilience of farmers and traders in adapting to these changes will determine the stability and success of the upcoming harvest season.
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