Porto Alegre, September 6, 2021 – A new consensus, almost in line with the Pro Farmer crop tour, seems to emerge for a US crop closer to 380 mln tons and no longer below this level as USDA pointed out in August. Thus, the market seems to be preparing for a September 10 report with the US production revised upwards to reset prices while the US harvest advances. Parallel data, such as production and potential imports by China, as well as the impact of Hurricane Ida on the flow of exports through the Gulf of Mexico terminals, may also affect this price composition in the coming few weeks.
As we have pointed out, after the Pro Farmer crop tour, some differences seem to have been eliminated. Losses in the Plains and north section of the Corn Belt are still the market’s main doubts. As the US market and consulting firms have given very divergent signals from the USDA reports, from acreage to production, it would not be surprising if in this September report there were also divergences from private numbers.
Now, private companies are trying to look for production numbers closer to those indicated by the crop tour, that is, between 380/385 million tons, a number that would be more comfortable for the US stocks and the price context. In summary, a US crop between 375/385 million tons is the consensus. The surprise will be if USDA stays outside of this range.
After these data, the harvest progress and its effect on the regional market are imminent. There are 380 million tons reaching the local market, with prices above USD 5.00/bushel, a level that is exceptional for US growers. It would not be surprising to see some pressure from sales at harvest taking advantage of such prices in the coming few weeks.
The occurrence of Hurricane Ida in the southern United States hit grain shipment terminals at the Gulf of Mexico. Damage has been high, and perhaps within three to four weeks these terminals can resume operations. The soybean harvest must occur by the end of September, so the effects for soybean shipments are more discreet and may be switched to Brazil and/or Argentina. Even so, there is still little time for this kind of change. In the case of corn, there may be some greater internal pressure, as the harvest is already starting and September is a month of greater volume of exports. Brazil, in this case, would be an alternative quite limited because of prices and availability but that may occur. Alternative shipments with Argentine corn would be more obvious, but there is the limitation of the draft of the port of Rosario, which hinders the flow of larger ships. This scenario could generate a profound change in premiums and, perhaps, even help Brazil to have additional sales for immediate shipments to destinations that will not be served by the United States in September by some shippers.
Other data may also affect prices from the September report. At first, the US exports in July and August were not very favorable and may have been below the USDA forecast, although there was already a downward correction in the August report. Another strong point going forward, as we have evaluated, is the data on China. Expectations for Chinese production are still good, and the harvest must start at the end of September. Prices rose in China last week as a reflection of structural problems at the Gulf of Mexico. Could this be a sign that China was really planning to resume US corn imports? The fact is that China has been almost 120 days without making new purchases of US corn, there are no signs that its stocks are high, and the great hope is the crop arrival in October.
At this point, the USDA signs in its upcoming reports for Chinese production and imports will be fundamental for the direction of prices on the Chicago Board of Trade. A cut in the import forecast could put corn below USD 5.00/bushel and looking for new support at USD 4.70. The resumption of purchases by China could collaborate to further support prices on the CBOT.
Agência SAFRAS Latam
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