Grain Market Daily

Peter Collier

 

Peter Collier, Analyst, AHDB Market Intelligence
Peter.Collier@ahdb.org.uk, 02476 478851

 

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US new crop futures bounce, but is it short lived?

So far this week, a bounce in US new crop futures has been recorded. Dec-19 new crop maize is up $6.20/t from Friday, to close yesterday at $152.66/t (14 May). But why? Wet weather has led to delays for US maize planting, which has raised concerns. US corn planting as at 12 May, were 36 percentage points behind average (2014-2018), at only 30 percent complete and states such as Ohio have been even further behind. However, progress could potentially accelerate, with a slight break in the weather forecast this week. 

Maize Planting Progress

Additionally, funds have been in a significant and arguably over sold short position recently and have been reducing their exposure over the last couple weeks. With planting progress of US maize now beginning to be of concern, a likely further reduction in the short position of managed money funds may well have exacerbated the US new crop futures bounce.

So what could be the impact? Currently, the price ratio dictates that there is little incentive to plant soyabeans over that of maize. In addition, with a couple weeks of the maize planting window still remaining, markets could well find that the pace of planting progress has picked up by next week, should favourable weather conditions come to pass.

Maize Soy Incentive

Furthermore, US maize stocks are still at historically high levels. The intended US maize area is likely to be up 4% year on year and the imminent second Brazilian maize crop is set to be a record harvest.

With the fundamentals still pointing toward a bearish grain outlook, this rise in new crop prices could well be short lived. Providing the US maize planting pace picks up prices could drift once more, once funds have reduced some exposure. As a result, the US new crop bound has had a limited impact on UK new crop wheat prices, with Nov-19 up just £1.55/t from Friday's close to mid day today (£143.25/t).

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