Tight global corn stocks and another expected deficit this year have moved global prices to almost nine-year highs.
Such has been the price pressure that typically-committed corn buyers are turning to feed wheat to try to limit cost pressures in livestock feeding.
This has supported global wheat prices to levels not seen since early 2013.
Balance sheet tightening, and deteriorating corn production prospects globally - including in Brazil - are expected to keep delivering support for wheat prices out to 2022.
In Brazil, the world's third-biggest corn producer and second-biggest corn exporter, record high domestic prices reflect its low stocks levels.
Livestock producers in southern Brazil are already importing corn from Argentina and Paraguay.
To further expand available supply origins, Brazil's tariff - typically set at 8 per cent - on corn imported from countries outside of the Mercosur (South American) trade bloc has again been suspended - after a temporary suspension expired last month.
Along with this, expectations for new corn crop supply are falling.
Ongoing dry conditions have already reduced the yield potential of the safrinha (meaning little crop in Portuguese) corn crop, which will start to be harvested in about six weeks.
No longer the little corn crop in Brazil, the safrinha crop now accounts for 70 per cent or more of Brazil's annual supply.
The corn crop, depending on where it is in Brazil, is being further downgraded by an early end to the summer rainy season - or low-to-freezing conditions in areas where the corn was planted late.
The US Department of Agriculture (USDA) continues to forecast 109 million tonnes for Brazilian corn in 2021-22, but some suggest that this could be at least 10 million tonnes more than what will ultimately be available.
Domestic corn prices in Brazil are about double the values from a year ago, and food and fuel inflation is already running high.
So, its government is looking for further options to ease the pressures on Brazil's domestic corn balance sheet.
Low interest government loan limits for producers will increase by between 16 and 25 per cent, depending on farm size, starting in July. This will be too late for any near-term boosts in supply.
After the imminent safrinha corn crop harvest, the next planting is in October. So, any boosts in production will not be available until February 2022 at the earliest.
Brazil's tight corn supply situation would be less exceptional for world markets, but the US is set to finish 2020-21 with its lowest corn stocks since 2013-14.
And there are concerns about the size of its upcoming harvest.
Dry conditions and slow planting progress mean production is likely to be below the five-year average.
As much as the Brazilian government might be trying to increase corn supplies, there is no escaping the fact that there will be no stock rebuilding globally - or in Brazil - this year.
This means we forecast Chicago Board of Trade (CBOT) corn to trade above US600 cents a bushel during the coming year, which is more than 60 per cent above its five-year average.
This is great news for wheat prices, and we forecast CBOT wheat to trade above US700c/bu into Quarter One of 2022, which is 40 per cent above its five-year average.
