Porto Alegre, September 5, 2023 – The climate at the end of the 2023 US crop of corn cycle shows a situation that may still bring some type of loss to corn and soybean crops. Strong heat in two weeks and almost no rain. For corn, the combination of heat and little rain accelerates the maturation process, and this can speed up the harvest, perhaps with some weight loss in the grain to be reaped. On the 12th, USDA will update its supply and demand estimate, in which the great expectation of the market will be the cut in potential productivity. Until then, the market expects to see corn sustained near USD 5.00/bushel.
The 2023 US crop progress would be fully normal in the second half of August and the first half of September if the climate scenario had not radically changed. There were two weeks of extreme regional heat and very little rainfall in growing regions.
So, on the 12th, USDA will update its supply and demand estimate. The first assessment for this report concerns exports for the 22/23 business year, which ended last week. Weekly exports were very poor in July and August, and we may have a cut in annual exports of the old crop with an increase in ending stocks. For the new crop, it seems natural that the USA will recover exports, but for that, it will have to be more competitive against Brazil.
The point is that Brazilian exports are already amounting to almost 30 mln tons in the current business year and still have the strength to reach 53 mln tons. Without a strong recovery in US exports during the harvest, the market could see prices and premiums drop due to internal pressure from sales and stockpiles.
Besides, USDA will update its production estimate with a more refined view of productivity. It seems logical and normal that a cut of 1 to 2 bushels/acre occurs in the productivity expected today at 175.1 bushels/acre, since the effects of the hot and dry weather for the last two weeks will only be evaluated at harvest, with the effective productivity. So, it seems normal that USDA adjusts expectations a little, waits for the harvest, evaluates the results, and in January adjusts production to the reality of 2023. Until the 12th, the market, however, will try to establish its own estimates that may generate some bullish expectations. This week should already start with a loss of crop conditions, supporting more pessimistic market estimates for the 12th.
The rain forecast has quite improved for the next two weeks. For some crops, it may already be too late. For others, there is the chance to gain a few bushels in the final productivity. As of the 10th, the harvest should start in the Midwest, also because this dry climate is accelerating the maturation of crops. From then on, we will need to measure the effect of this harvest progress on the CBOT prices and premiums in the Gulf of Mexico. We do not believe that prices for the CBOT December contract are sustainable above USD 4.80/bushel in the current season. The market would need a relevant surprise to keep, during the US harvest, prices at this above-average level. Harvest yields and the export flow will be fundamental information ahead.
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