First commercial indicators for 2022/23 maize

Although the 2022/23 maize commercial year formally begins on March 1st, early corn lots have already begun to be harvested, with yields that are expected to be meagre. The season begins with the lowest volume sold by producers in five seasons, with only 7.4 million MT of new crop maize, to date. This is mainly due to producer’s great uncertainty regarding production, and don’t want to avoid overselling. At the same time, knowing that if rains fail appear for late maize, market pressure will cause a rally, catapulting prices.

In terms of production, 17% of the 42.5 Mil MT expected to be produced in the season has been sold—some 13 percent behind what was traded in the previous season. The percentage of corn with a fixed price barely reaches 8% of this production, the lowest ratio since 2014/15. In total, just a couple of days before the formal start of the 2022/23 season, some 28.8 Mil MT of new crop maize remain to be sold (discounting uses for seeds, farm and other consumption), 3 Mil MT above the average of the last five seasons, and 32.9 Mil MT of maize remain to be priced.

Market: high prices in the available segment, and wide spreads between the early and late corn

The price of maize is around 260 USD/MT in the domestic market (CAC-BCR), hitting a record-breaking level for this time of the year, highest in recorded history.

This is not only due to the good level of international corn prices, but mainly because it falls within the overlapping of campaigns, in which the remainder of 2021/22 Corn is meager, while for the current campaign, the highest influx of cargo is expected during late corn harvest.

If we look the curve of Futures expiration date, and compare it to the situation at the same time last year, we see that the March Corn position, with Rosario delivery, is trading slightly above the spot position in Matba-Rofex, which is unusual given that in that month the early maize threshing begins to pick up the pace. If we go further, the April position is trading almost at parity with the available delivery, while last year at this time, April was trading about 4 USD/MT below spot shipments (~ 1.5%).

This season is extremely particular due to the drought and low soil moisture, in addition to the poor harvest that preceded it and the political uncertainty in which this all falls under. Producers adopted conservative sowing decisions in this scenario, reducing, on the one hand, the area allocated to maize and turning mostly to soybeans, but also prioritizing the planting of late-sown crops, to the detriment of early maize, seeking to benefit from a projected reversal in the weather pattern towards the end of the summer. This generates, in addition to greater complications in crop splicing, a different distribution in the projected arrival of cargo to plants and ports, as well as for local consumption, affecting prices throughout the commercial cycle.

This can be seen in the strongly negative carry that the July position maintains with respect to the April position. Currently, both positions trade with a difference of 25.5 USD/MT in favor of the April delivery, a percentage difference of 9.8% between positions. This difference is above the previous year (8.5%) and well above the last five-year average (5.8%). This temporary carrying cost even surpassed 36 USD/MT by October 2022.

Source: https://bcr.com.ar/

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