United States corn futures have been staging a recovery since late February, breaking higher through the medium-term downtrend, suggesting the downtrend may be coming to an end if prices manage to hold above this point. Prices are challenging the 50-day moving average which lines up with the established resistance at 450 US cents a bushel.
Supporting recent strength in US corn futures is the WASDE March outlook, which revised corn production from major producers in 23/24 down 1.7 million tonnes from the February estimate, with larger trade and lower ending stocks. This has been driven via a significant reduction in Brazilian production estimates by 3mt. Reporting from CONAB pegs production a further 12mt lower than the USDA.
The Brazilian 23/24 Safrina corn crop has been suffering under limited rainfall over recent weeks, notably in key regions of Mato Grosso and Mato Grosso do Sul. An estimated 35-40 per cent of the Safrinha's corn belt is exposed to worsening yield potential due to low soil moisture.
The crop is in early-late vegetive growth stage; through this period there is a net yield loss of 1-3pc (early vegetive) and 2-5pc (late vegetive) per day as drought conditions persist. This crop will be harvested from Jun-Sep and accounts for 77pc of Brazil's 130+mt annual crop. While there has been some recent rainfall in the region, more will be needed to sufficiently boost soil moisture during this critical period.
There has also been some broad market support for barley based on the planting pace and conditions of the French spring crop. As of early March, only 28pc of the French spring barley crop had been planted with delays caused by excessive wet weather conditions; this is below the average for this time of year (usually 71pc complete). In March it was estimated that 69pc of the crop was in good condition, which is down significantly from 92pc in good-to-excellent condition for the same period last year.
Of note, South American corn is priced relatively cheap in contrast to EU barley. If there are any major surprises to forecast or realised exportable supplies in the coming months, we could see a shift in demand back toward Aussie barley.
While Aussie origin barley is not seen as uncompetitive for export to China, the lower relative corn values have been limiting Aussie price upside. Amid declining global feed wheat prices, and the tendency for China to pivot toward the cheapest feed options, for further local price support to be realised we will need to see some sustained positive momentum in global corn prices.
China has been key to Australian barley exports and price since the tariff on Australian barley was lifted in early August 2023. ABS data shows that between Oct-Jan, China has accounted for 76pc of feed barley exports and 83pc of malt barley exports, with Japan and Mexico listed as the next major destinations.
Although the reported Australian barley export pace over Oct-Jan appears relatively strong, the months of Feb/Mar have seen fewer barley vessels on the local shipping stem - indicating a lower pace. This is reflected in a price decline of about $25 a tonne in SA since the end of Jan. However, the recent turn-around in global corn markets has helped to limit further price declines.
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