Porto Alegre, July 2th, 2024 – The US planted area report in June always has the characteristic of bringing some small unexpected variables to the market. In 2024, it was no different. The corn area actually fell compared to 2023 but less than the Planting Intention had indicated. Soybeans confirmed the increase in area, but slightly below expectations. Quarterly stocks were also above market expectations for both corn and soybeans. Now, in the July supply and demand report, USDA will update the picture with the new areas and revise production and stocks. New-crop stocks could rise above 60 mln tons. The market below USD 4.00/bushel is justified by this environment surrounding the July report.
June presented some important characteristics for the 2024 US crop. There was a very evident situation of excess rain on the center-north side of the Corn Belt and a situation of more discreet rain in the center-east. Illinois, Indiana and Ohio did not receive good rainfall but suggest July will have good rain. On the north side, from Minnesota to South Dakota, the rain was torrential for much of the month, beginning to decrease in intensity this week.
Corn is beginning to enter the pollination phase in the earliest crops and it will take July and August to define the size of this 2024 crop. Expectations for rain in the first half of July are still comfortable, with forecasts for normal rainfall throughout the region and temperatures even more comfortable, which is very favorable to pollination. USDA is projecting this crop’s productivity at 181 bushels/acre, a new record, but for this to be confirmed, the weather will need to be perfect for the next sixty days, that is, until pod filling. Otherwise, USDA will revise this estimate next August.
To define this crop, the planted area released at the end of June is the first data close to consolidation. The Planting Intention report pointed to an area with a strong contraction, from 94.6 to 90 mln acres. The planted area report at the end of June is always very tense as it has this characteristic of “cleaning” certain market information and signaling more realistic numbers ahead. The planted area was 91.475 mln acres, therefore, above the Planting Intention, but well below the cultivated area in 2023. This figure is not definitive, but the changes will be minor until January, when the crop numbers are consolidated.
The environment demonstrated that the US grower has serious difficulties in switching from corn to soybeans, even with very low prices and a historical exchange ratio very favorable to soybeans this year. We even expected a greater increase in the soybean area, however, USDA pointed to 86.1 mln acres, still the best area since 2022 and slightly below the Planting Intention.
Finally, quarterly corn stocks came in well above expectations, at 4.99 bln bushels, with the market at 4.86 bln. These stocks should not change the July supply and demand picture, but the planted area will have to be adjusted. If all parameters in the supply and demand framework remain the same, the adjustment in the planted area will cause an increase in the forecast for stocks for the new 24/25 business year, from 53 to 61 mln tons. USDA does not usually change the estimated productivity in July, with the current projection at 181 bushels/acre, without a problematic situation in pollination. The planted area will not be a justification for a compensatory cut in productivity.
The market already reached this conclusion last Friday. Prices lost the level of USD 4.00/bushel for the first time since October 2020. We believe that the adjustment in supply and demand in July should align prices in the case of longer maturities of the CBOT also below USD 4.00/bushel.
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