Corn prices rise in Eastern Europe as drought threatens crop yields

Corn prices in Romania, Bulgaria and Ukraine have been rising due to a decline in production estimates for the new crop caused by dry weather since the beginning of July.

Market participants have anticipated a 10%-15% decrease in production for the upcoming October 2024-September 2025 season, leading to tight supply conditions. S&P Global Commodity Insights' forecast for Ukraine's corn production is at 27.2 million mt for MY 2024-25, down from 31 million mt for MY 2023-24. The combined estimates for Romania and Bulgaria have dropped by 4.5 million mt during the same period.

As such, current offers for new crop corn for FOB Constanta-Varna-Burgas delivery have increased 3% between June and July.

The region is experiencing hot dry weather surpassing 30 degrees Celsius. The drought and elevated temperatures have affected corn's pollination process and reduced crop yields.

"Corn is toasting, and sunflower seeds are not doing much better," a Romania-based trader said.

In Romania, most fields are not irrigated due to the high cost of irrigation equipment. To support farmers, the government is currently subsidizing a sizable portion of the power costs for water used in irrigation. The agriculture ministry allocated EUR1.5 billion for primary infrastructure of irrigation.

"Corn and sunflower seeds are suffering in Romania. In the fields, it is more than 55-60 C," another local trader said.

Farmers are anticipating higher prices. Matei Titianu, a farmer at Agrorusava owns 700 hectares of irrigated land in Braila Island, expressed concern about the production as the dry weather has affected the Danube levels and, in turn, the irrigation schedule. All of this has led to questions about the yield for the new corn crop. Most farmers are currently holding their contracts in anticipation of much higher prices.

"We are expecting the price to go up, otherwise we would have already signed the contract," he added.

The production outlook for the new crop is also affecting the market liquidity of the remaining 2023-24 corn. A Ukraine-based exporter said estimates of a smaller harvest have exacerbated the decline in traded volumes of the current crop corn, which is usually low in these final months of the marketing year. Despite several interests in the market, farmers are holding onto their remaining stock in anticipation of lower yields.

Another Ukraine-based trader commented on the persisting market situation, saying that there have been no prices from the country's farmers. In the Ukrainian market, prices for the old crop have increased, with Platts, part of S&P Global Commodity Insights, assessing FOB POC at $193/mt on July 26, an increase of 3.2% since July 1.

Farmers expect Romania to become a significant participant in wheat production with an increase of 10% year on year. They are increasingly focusing on cultivating wheat and the potential increase in popularity for drought resistant crops like sorghum due to the heat challenges with spring crops like corn, soybeans and sunflowers.

Platts assessed the new crop FOB CVB 12.5% and 11.5% protein content at $229/mt and $224/mt respectively on July 26, a drop of 3.4% since July 1.