Porto Alegre, April 11, 2023 – While US exports are beginning to show the concentration of international demand on this source, the market of corn assumes a position of great attention to the climate in the Midwest from now on. The thaw in the Great Lakes region and the rains this early spring is a crucial combination for the development of planting within the ideal window in 2023. A small adjustment of US stock in this week’s USDA report and the cut already known in the Argentine crop must be the fundamental information in the international market.
The aggravation of the delicate environment involving Taiwan is the information that can bring serious turmoil to the commodities market, in case this becomes a commercial conflict and, in a worse situation, another war. The disruption of trade relations between the United States and China would be traumatic for the Chicago Board of Trade, but it would also bring different variables to Brazilian agribusiness, depending on the Brazilian political posture.
While this situation does not consolidate into new facts, the focus is this month’s USDA report to be released this week. Owing to the slightly more discreet quarterly stocks released on March 31, the market expects USDA to cut US ending stocks by 2 to 3 mln tons in this 22/23 business year. Undoubtedly, stocks today at 34 mln tons, projected for August, reduced to 32/31 mln tons, would be able to support prices until the entry of the 2023 crop, in September, at least.
In May, USDA will release the first projection for the supply and demand framework for the 23/24 business year for the crop that starts to be planted this April. The old crop stocks will be important for the initial determination of this new crop stock projection. However, the initial calibration of the projection of productivity for the 2023 crop will be essential. The record is 177 bushels/acre in local productivity. If the USDA keeps the projection for the new crop adjusted to this record, production could slightly exceed 370 mln tons and put final stocks close to 48 mln tons in the 23/24 season, even considering a recovery in domestic demand and exports. However, a projection above this record could leave stocks fully recovered, and the decline in prices below USD 4.50/bushel could be inevitable in case of normal weather in the Midwest.
April weather in the Midwest started with normal rainfall and a wave of rising temperatures that is expected to accelerate thaw in the Great Lakes region. Excessive rain is not forecast for the beginning of spring and, it seems to us, the planting should start inside the window and with a good climate perspective. The normal trajectory is a percentage of a planted area close to 50% in the week of May 10. So far, the planting has begun in Texas at a normal pace.
Another fundamental point is the expected improvement in US weekly exports. With Argentina without strong shipments, Brazil absent, and Ukraine with little supply, the alternative for major volumes is the US market. Shipments are starting to sustain themselves above one mln tons per week and help corn prices on the CBOT to still maintain technically high levels, that is, above USD 6.00/bushel. Until August, at least, the market will focus on this climate progress in the Midwest, the pace of planting, the July pollination and silking. A normal US crop could put prices below USD 4.50/bushel for the December expiration on the CBOT.
In this April report, USDA will also adjust its numbers for South America. We do not believe in a big change yet for Brazil’s corn data, but any number between 125 and 130 mln tons is possible. Argentina has the biggest adjustment to be made. Safras & Mercado adjusted its corn production data for Argentina to 35 mln tons, below the Buenos Aires Cereals Exchange due to the low initial yields of the local crop. USDA is considering a crop of 43 mln tons and will adjust the data in this April report, which is expected by the market at 37/38 mln tons. The adjustment would not bring news to the corn market, which already projects Argentina with exports of at the most 20 mln tons this year.
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