Port strike and weather in South America move the CBOT of corn

While the US harvest advances toward full production, the market tries to focus on indicators that can take prices away from the bottom level of this 2024 season. Prices on the Chicago Board of Trade (CBOT) are trying to rally within the variables such as a weaker dollar, attempts to send wheat higher, focus on weekly exports, and confirmation or not of the productivity indicated by USDA for this crop. During the week, however, the possibility of a general strike in the ports of the Gulf of Mexico moved prices on the CBOT, as well as the beginning of spring in South America, with irregular rains, set a heavier tone in an attempt to recover prices at the beginning of the harvest in the United States.

The corn harvest continued with only 14% until last week. Of course, the US harvest capacity is significant, and work must accelerate from this week, especially with the forecast for drier weather in the next fifteen days. Therefore, the movements on the CBOT over the week are not due to supply problems but to other indicators assessed by the market as having bullish potential. Weekly exports, which had been causing greater concern for higher volumes, have not yet taken off at the beginning of the harvest. Sales in the last two weeks have been below one mln tons a week, which is not a volume considered optimistic by the market.

Thus, prices continued to try to stay above USD 4.00/bushel supported by factors outside the corn market. The possibility of some highs in wheat, based on export decisions from Russia, the devaluation of the dollar that makes the US product more competitive, the appreciation of the Chinese currency, which could bring more demand to the United States, and the initial difficulties in advancing planting in South America. The market was between USD 4.15 and 4.50/bushel between the December and July maturities, prices considered high when considering local stocks and weak exports. In fact, the concern about the Argentine crop in the first half of next year may justify firmer prices on the CBOT for the period, but it does not justify a Chicago scenario above USD 4.00 in the middle of the US harvest and still with poor weekly sales.

The new fact, but one that has been commented on for a few days, is the possibility of a rare strike in the ports of the Gulf of Mexico.

– Nearly 200 agriculture groups called on the White House on Friday morning to address major issues in the U.S. agricultural supply chain in the face of a potential strike at ports on the east and Gulf Coasts that could begin as early as Tuesday.

The groups said the industry is facing “imminent and severe shipping disruptions” from a potential work stoppage, snarled rail lines and historically low river levels backing up grain barge shipments and impacting trade with Mexico. The groups asked the federal government to direct the U.S. Army Corps of Engineers to dredge the lower Mississippi River to maintain 12-foot-deep channels, and step in to reopen the movement of grain by rail from the U.S. to Mexico. They also asked the Transportation Department to consider issuing an emergency hours of service waiver for truck drivers at East and Gulf Coast ports.

The letter, from a wide cross-section of the nation’s food and farm supply chain, said such disruptions are already happening ahead of a potential October 1 strike at ports that handle roughly half of the country’s ocean trade, including consumer staples like coffee, meat and eggs. On Thursday, employers negotiating a labor contract at U.S. East and Gulf Coast ports filed an unfair labor practice complaint against the union, saying those leaders refuse to resume talks ahead of the threatened strike. The United States Maritime Alliance (USMX) said it filed the complaint with the National Labor Relations Board, due to the repeated refusal of the International Longshoremen’s Association to return to the bargaining table. The six-year master contract between USMX and the ILA expires on Monday, and the two sides appear to be deadlocked on wage issues.

Friday’s missive underscores the growing worry among the nation’s agricultural sector. U.S. farmers are beginning to harvest what is expected to be a record soy and large corn crop, at a time when global supplies are already hefty and prices are hovering near four-year lows. The letter also comes just two days after some of the same organizations asked the Biden Administration to take action to avert the potential labor strike, in order to prevent damage to U.S. agriculture and the economy.

Meanwhile, low water conditions on interior rivers have led to barges running aground along a key stretch of the lower Mississippi River and forcing barges to carry lighter loads, exactly as the busiest U.S. grain export season gets underway.

With the risk of shipment delays in the Gulf, market participants are taking defensive positions on the stock exchange, as the market will ultimately pay more for those logistics channels that can move the flow to ports. What would theoretically turn into pressure in the interior turns into higher prices due to the panic to meet shipping commitments.

Closing the month, this Monday (30) we have the quarterly stock report, pointing to the carryover stocks from the 23/24 to 24/25 business year in the United States. The market expectation is 46.8 mln tons for corn, very close to what USDA indicated in its monthly supply and demand projection. The supply and demand numbers for the October report will be adjusted by the stocks released this Monday.

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Tags: corn, prices, US, Production, Market, strike, Gulf of Mexico, ports, harvest