Porto Alegre, August 20th, 2024 – The design of the 2024 US crop was a lower acreage and the bet on yield as a way to compensate for this decline. The weather brought a factor of attention to the end of July, with a brief period of very high temperatures and suggesting less rainfall. However, the maps improved, and the August USDA report brought a record of potential yield, which the market drew on the consensus. Comfortable are stocks and are only not larger due to the compensatory increase in the export projection for 24/25. Competitive US corn now can reduce Brazilian sales, currently USD 20/ton above US prices, a trend that can confirm the Department’s expectations for next season.
A year with a reduction in planted area in the world’s largest producer always generates expectations for future prices, as well as plenty of attention to the climate scenario, since a reduction in area with climate problems is always a very bullish combination. In 2024, the planted area registered a reasonable reduction in the United States from 94.6 to 90.7 mln acres, with a small area revision made in this August USDA report, which is common until the data are closed in January. The confirmation of this area cut, however, has not been enough to boost prices on the CBOT.
Since the first estimate made in May, as we have pointed out, the USDA analyst has been projecting a high yield, of 181 bushels/acre, an indicator that has been offsetting part of the area cuts in this season. In this August report, the characteristic is to bring a new update of this yield weighted by a real field assessment and no longer just by the analyst’s estimates. The market started to project an average of 182 bushels/acre, and USDA did not wait for the harvest to give the market its most realistic view, that is, 183.1 bushels/acre, a new record for yields.
Naturally, higher yield, balanced production, now at 384.7 mln tons, reflecting the excellent conditions in the corn pollination phase and early silking. Harvests should begin on September 10, and there will be a traditional market check about the USDA’s projections. In fact, this week we will have the traditional crop tour by the Pro Farmer group, which carries out a regional sampling assessment and can be used by the market as a point of contrast or not with the official numbers.
The rain has been regular in the last fifteen days and should be spottier in the next 15 days, which should have very little impact on corn and leave some variable of attention to the final phase of soybean grain-filling. Therefore, with a 2024 crop expected to have small normal adjustments until January, the market tends to focus on the demand factor and US exports. At this point, the weekly flow of new-crop exports, the volatility of wheat in the Black Sea, and the planting profile of the 24/25 South American crop, which officially begins in September, should all have an impact going forward.
A high wheat price could inhibit larger drops in corn prices. However, it is clear that the US market will need to see weekly exports exceed 1 mln tons to meet better price expectations, which will at least sustain prices on the CBOT at USD 4.00/bushel. Last week, the September contract approached the US reference low price of USD 3.70/bushel. It is very likely that the December contract, which represents the entire local crop, will also seek this price test, unless demand surprises. The USDA report raised the export projection for the current business year, which is ending, to 57 mln tons, and for the new crop to 58.5 mln tons. Possible projections, given the fact that US corn has once again become the most competitive on a global scale and is USD 20/ton cheaper than Brazilian corn, in particular. It is reasonable to expect that demand will shift to a greater volume of purchases from this origin.
In the European and Ukrainian scenario, USDA cut the European output by 4 mln tons, now to 60.5 mln tons, but did not change the projection for imports, which remains at 18 mln tons, without changing the demand for Argentine and Brazilian corn. For Ukraine, the projection is now 27.2 mln tons of production and 24 mln tons for exports. The limitations on the flow of production through export channels, amid the large flow of wheat, are hindering Ukrainian supplies to importers in the Black Sea and boosting prices in the region. This may bring some demand from the Middle East for purchases in South America, particularly in Brazil.
The scenario for China has not been changed either by USDA or the Chinese government. Therefore, the divergence between the production data and the expected imports remains large between the two estimates. Prices in China and the normal demand in the international environment reveal that perhaps the Chinese government’s data are closer to reality.
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