Porto Alegre, August 30, 2021 – The discussion on the size of the US crop will go on until January 2022 when USDA closes the crop numbers. What seems clearer is that production will not be much lower than USDA has already indicated neither much higher than the crop tour indicated. The discussion involves a range of 10 million tons. Over the week, however, news on additional harvests for silage revealed the possibility that a smaller portion of the area to be reaped will be destined for grain. This could affect the total production number and bring a surprise and greater divergence from private numbers. Faced with this scenario, prices on the CBOT resist breaking the level of USD 5.30/bushel even with a strong harvest ahead.
On the north side of the Corn Belt and Plains, more plantations have been cut for silage rather than grain crops. The detail of this movement is that the area to be reaped for grain, calculated by USDA, could be reduced and, with this, the overall production number does not recover from the 374.7 million tons pointed in the last report and remains far from the crop tour number of 384 million tons. In other regions of the center-south and east of the Midwest, conditions are being confirmed for high and perhaps record-breaking yields. So, this fine-tuning between the southern and northern harvests will make the national production number. The discussion, therefore, is between 375 and 385 million tons.
In any case, the harvest must start in September and bring a large volume of production to the market. The first point in this picture is that the market has been resisting pricing the arrival of the crop in September. The crop tour cleared many doubts about the production results. Then, the harvest will come, and prices to US growers at USD 5.30/5.50 a bushel are way above normal and the levels of USD 3.50 seen in 2020. Would it be a trajectory of greater sales at harvest by US growers?
Meanwhile, the market expects some adjustments at global level for the next USDA report in September. Another cut in Brazilian production and a downward revision of exports could boost the US export potential for this next business year. The big question is still about China. A slightly larger but record Chinese crop, close to 275 million tons, could suggest a lower need for corn imports in the coming few months. Perhaps reducing the projection from 26 to 21/22 million tons. These adjustments could deeply change the US export outlook for 2022. The market, however, still has prices above USD 5.00 a bushel for all 2022 maturities, perhaps believing that China will remain a strong buyer of corn in any situation.
Meanwhile, global demand and the change of positions of Brazilian shipments are generating a strong movement of shipments in Argentina. In August, the pace of shipments is setting a record at 5.4 million tons. This flow is due to the conversion of ships that would be loaded with Brazilian corn to Argentine corn, due to the corn shortage in Brazil. Then, new global purchases and a few purchases from Brazil. Brazil now has nearly 164,000 tons shipped or to be shipped in August and 105,000 tons scheduled for September. In other words, the large volume is not being made by Brazilian purchases in Argentina.
Agência SAFRAS Latam
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