By: Bill Dixon
While we’ve pumped the breaks a bit on the recent selloff, July corn futures continue to struggle to mount any rallies. For the week, July futures are down a tad over six percent with a few hours of trading left. Concerns over late plantings are starting to die down, and that premium is being taken out of the market. Seasonal usually take us lower the second half of June, but we have jumped the gun a bit this year. Weather for the next couple weeks appears to be cooperative across the US, which should allow for farmers to finish off whatever they’ve got left unplanted. For those that have already planted, consensus is that the crop is off to a good start. Traders are expecting next week’s initial crop conditions ratings to see good to excellent ratings in line or above the five-year average of 68%. Piling on the bearish news, Brazil is potentially sitting on a record second crop. Finally, there is some optimism that Russia will allow for safe export of grain through the Black Sea.
In regard to the war in Ukraine, there is little reason to believe that a resolution will be reached in short order. Russia wants relief of sanctions in exchange for safe passage, and color me skeptical that the international community is going to cave. Even if they did, it’s not as easy as Russia just deciding to let ships pass. There are mines throughout the routes. Ukraine would like Russia to remove them, but Russia claims they’re unable to do so due to the presence of Ukrainian mines. Ukraine has little interest in removing mines protecting their ports, and Russia doesn’t want to remove their ships that have effectively choked off Ukraine’s access to the world.
According to US Secretary of State Anthony Blinken, there are nearly 85, fully loaded ships in Odessa that are stuck due to Russia’s blockade. There is obviously plenty of stored grain behind that too, which Blinken estimated to be 20-25 million tons. There are currently no sanctions on Russia dealing with exports of food and fertilizer, but Russia won’t just give up one of their biggest bargaining chips for nothing. While efforts are underway to move that grain via other avenues, there is just no way to fill the void left by lack of travel through the Black Sea.
Weather and developments in Ukraine will continue to be monitored closely. Traders will also be interested to see Monday’s crop progress figures and the USDA figures on Friday, June 10th.
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