The 2020/21 Production Campaign Starts Well for Maize Crops

The 2020/21 Production Campaign Starts Well for Maize Crops

While the beginning of spring was challenging at times, growth conditions are relatively favourable to maize crops in most of the major production regions.

In Brazil, late-stage crop conditions for safrinha maize (second harvest, mostly destined for export) have been particularly good in Mato Grosso, the country’s main production state, which may offset yield reductions in the southern states caused by prolonged drought in first-quarter 2020.

In the EU, the initial apprehensions during the maize plantings were quelled by rainfalls in May and June, which, combined with the heat wave in Central Europe, have allowed for good crop development. Conditions are currently highly favourable particularly in Romania and Bulgaria, as well as in Ukraine and Russia, despite the fact that plantings were carried out in dry soil because of the water deficit last winter. North-western Europe (the north-west of France, the Benelux, and northern Germany) still record a pronounced water deficit. Due to the improved growth conditions in most of the EU, the European Commission has increased its May yield estimates for the EU by 2,6 quintals/hectare, placing them at 82 quintals/hectare.

In the U.S., maize plantings were carried out rapidly and in good conditions, despite an extremely difficult spring in 2019. However, the north-western region of the Corn Belt has started to be affected by drought and heat locally, and weather forecasts indicate that this summer will be hotter than usual. While the U.S. results are expected to be very “heavy” this year because of the area increase, the non-commercial stocks display a highly-saleable net position for this period of time. Weather forecast fluctuations may therefore lead them to cover their position – which is a factor that elicits price volatility.

Difficult Resumption of the Economic Activity

Despite the fact that the coronavirus epidemic seems to be receding in some countries, allowing for lockdown lifts and a resumption of economic activities, the world economy is not likely to avoid a wide-scale recession in 2020. Moreover, markets are concerned about the return of the epidemic in China (as new hotbeds have been reported in Beijing) and its current development in the U.S. (mostly on the West Coast) and Southern Asia (particularly in India).

These developments contribute to capping the raw material price rises. Thus, the current situation exerts pressure on oil prices – which have been struggling to exceed $40/barrel –, with the recent price rise being caused by supply reductions, and not by a net rebound of the demand. In the United States (where corn prices and the ethanol industry – about 40 percent of the U.S. corn production – are closely linked to oil prices), the ethanol production has restarted and stocks have declined, but operators are concerned about the long-term impact of the crisis. Margins remain low in the ethanol industry and some production capacities may be lost. The USDA estimates that roughly 13 million tons of maize have remained unused because of the epidemic crisis; also, the rebound that one was hoping for in 2020/21 may be curbed by the oil producers’ requests to be exempted from incorporating ethanol into petrol. In its turn, the feed industry has equally been affected by the crisis, as slaughterhouses have been heavily hit by numerous cases of contamination among workers. Despite a comeback in the slaughter rates of swine and cattle, they have yet to reach their levels before the crisis.

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