Miller Magazine Issue: 138 June 2021

94 MARKET ANALYSIS MILLER / june 2021 for grain production have also been re- duced. Some uncertainties still could come from the Pakistanian side where imports interest could reach 4MMT which is still lightly covered. The mar- ket is steel in deep backwardation and weather concerns doesn’t over. The downward adjustments in corn production in Brazil continue. The insignificant precipitation did not im- prove the condition of the crops. Pro- duction forecasts are at 91-96MMT, the most pessimistic are below 90MMT, while there was no signifi- cant adjustment in the May WASDE report and expectations were at 102MMT. China tem- porarily pauses bulk purchases and ends the plant- ing campaign by increasing corn acreage. Last week Brazil's Ministry of Mines and Energy an- nounced that the water level at the country's hydro- electric dams is dangerously low and that measures to reduce electricity consumption may be required. The Electricity Sector Monitoring Committee indicat- ed rainfall from September 2020 to May 2021 was the lowest since registration began 91 years ago. Hydro- electric dams in west-central and southeastern Brazil received 63% of their normal rainfall during this period. In northeastern Brazil, precipitation makes only 38% of the norm. The forecast for corn production in Brazil is extremely pessimistic, the market expects that in the next WASDE report the production figure will be ad- justed downward to 95-97MMT. Low temperatures in southern Brazil may further damage crops, Soybeans and Corn Advisor reports. The Brazilian National Me- teorological Service indicated that the coldest air of the season resulted in a bit of frost in western Parana, and there could be more frosts on Wednesday nights in southern Brazil, especially in the highlands of the states of Santa Catarina and Rio Grande do Sul. The closest date for the revaluation of the planted area in the United States is June 30, and the market expects that the area under corn will be larger than it was announced in the March report, which said that farmers intend to plant 91.1 million acres of corn and 87.6 million acres soybeans. During the sowing cam- paign, the ratio of the value of the last soybean and corn contracts in the calendar year pushed farmers to sow primarily the latter. Given the high planting rate, the market expects up to 94 million acres of corn to be planted. In addition, the Soybeans and Corn Advisor suggested that the USDA's 179.5 bush/acre corn yield trend line may be optimistic given the current drought in the northwest corn regions and estimates that there is now a potential of 177.5 bush. /acre. A "floating" duty has come into effect in Russia. For the current week, for wheat, it is $28 per ton, since the con- tracts that are included in its calculation were concluded at prices from $230. Next week, the duty may be $30-31 per ton and goes higher. Wheat production in Turkey could be well below WASDE estimates. According to local analysts, the wheat harvest in the new season may not exceed 16 MMT, which will cre- ate an additional 2-3 MMT deficit amid a gradual recovery in demand for processed products. To date, a harvesting campaign has been started in Turkey and it is possible that import duties will be canceled in the nearest future. Russian analytical agencies have again started to raise forecasts for wheat production in Russia. Today they range from 79.5 to 82MMT, while WASDE has estimated potential at 85MMT. The actions of the Russian govern- ment aimed at lowering the domestic price had a nega- *CBOE Skew Index. Source: Bloomberg