Porto Alegre, January 16, 2024 – The 2023 US crop was statistically completed in the January USDA report, as is traditionally the case. The previous number was already being estimated at a new record. In this final update, production was put at 389 mln tons of corn, and, considering that it was a year of climate problems, the conclusion is that the potential would be above 400 mln tons. Of course, the consequence is a very comfortable picture for stocks despite the USDA’s efforts to increase domestic demand. Finally, the Department also corrected China’s production number, in line with Chinese government data. Now, Argentina is setting a new production record in 2024. A year in which oversupply could prevail?
This January report from USDA has the characteristic of bringing the final crop number, in addition to ordinary supply and demand data. The 2023 US crop coped with problematic weather conditions particularly in the two-largest producing states, Iowa and Illinois. The climate situation in 2023 was really problematic for the US Midwest, and consulting companies tried to project the losses resulting from this visual loss profile, including the famous crop tours in August.
Eventually, what really prevails are the USDA data with its direct source from the production generated by growers themselves, within the programs offered by the department. So, there is no contestation over the final data. The 2023 crop, despite the climate situation, brought a record production of 389.7 mln tons, above the record forecast in November. And, of course, while the market brought a vision of lost production, the final data came with a record yield of 177.3 bushels/acre.
With such production, USDA made an effort to increase the projection of domestic demand so that stocks remained projected at nearly 54 mln tons for this business year. The reduction of area planted with corn in favor of soybeans is already a consolidated bias, the only thing open to consideration is the volume of area to be switched from one crop to another. Some balance for the 24/25 corn season? Perhaps, limited due to yield potentials above 180 bushels per acre.
Another important piece of data, which we had been drawing attention to in the USDA reports, was the adjustment to China’s crop. There was a serious divergence between the USDA and the Chinese government’s estimate for the Chinese crop: 277 mln tons against 288 mln. This divergence was corrected by USDA in this report, placing the Chinese crop at 288.8 mln tons, a new record. However, projected imports remained at 23 mln tons this season, and perhaps this will be the next adjustment to be made to China’s data.
Europe and Ukraine numbers remained unchanged in this report. The focus now is on the flow of wheat sales through Russia in the semester and the planting profile in Europe next spring.
For prices on the CBOT, the US and global picture is not bullish in the medium term. There is a need for a strong increase in demand to bring positive variables for the resumption of highs on the CBOT. Weekly exports and wheat sales flow through Russia would be indicators of attention. The initial expectation for the planting of the 2024 US crop will be a factor that will create some price volatility, besides the climate situation for spring/summer, which is something seasonal every year.
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