Last week presented an important movement in the demand for US corn. Corn sales had been quite slow, and suddenly the numbers advanced to the 22/23 and 23/24 business years. This may offer a clear symptom that the import market is concerned over the exit of Brazil from major volume sales from January onward and the supply gap until the arrival of the Argentine crop. Even with US corn still quite expensive, also due to premiums, demand will begin to shift to this source in the first half of 2023, a factor that could influence stocks and prices on the CBOT.
With the US harvest completed and the Mississippi River level slightly improved, US exports seem to have found a safe way to recover. Weekly sales were meager during the harvest, that is, below 500,000 tons per week when they would normally range from 1 to 2 mln tons. Last week, sales jumped to 1.85 mln tons for the 22/23 business year and advanced into 23/24 with over 600,000 tons.
This movement reflects the conjunction of international factors ahead. Ukraine has its export corridor maintained, but with uncertainties about the volume to be exported in the first half of 2023, not least because Ukraine cannot compensate for the absence of Argentina or Brazil in exports. The point is that Argentina has delayed planting and is not exporting until April, at least, as it has already reached the maximum possible registrations for the 2022 crop, at 36 mln tons. So, the combination of Ukraine with more discreet volumes with Argentina out of sales in the short term keeps the third and fourth largest corn exporters without strength to meet world demand.
Brazil, in turn, as the world’s second-largest exporter, has January a deadline for shipping large volumes. After January, shipments will be restricted to the port of Rio Grande in February and March, a situation that will not meet large volumes of global consumers. So, the United States is left to meet the world demand until April, when the Argentine crop begins, and until July, when the new Brazilian second crop begins.
Thus, global demand will have to be directed toward US corn, and this is one of the fundamental points for US exports to have started to show strength in weekly sales. Another point that favored business flow is that premiums in the Gulf of Mexico have declined in recent days. Premiums at the port reached 180 cents/bushel, and this week dropped to 125 cents. This makes US corn more adjusted to Brazilian corn, with premiums close to 80 cents.
The late week information was a new cut in European production by the government. The data dropped from 54.9 to 53.3 mln tons, confirming a historic decline in production with more than 15 mln tons. The government put the forecast for an increase in imports in 2023 to 23 mln tons, while USDA still suggests 20 mln tons. For now, Europe is managing to supply itself from Brazil and partly from Ukraine. Between February and August, it will need Argentina and the United States.
Mexico seems to try to signal less restriction to GM corn, suggesting accepting some proteins that have been used for a long time. The Mexican government’s proposal was to ban GMOs, a trend that would certainly lead the country to extreme supply difficulties since there is no conventional corn to supply a market of this size.
In this global context, CBOT prices remain firm above USD 6.50/bushel at the end of the US harvest. The symptoms going forward for this volatility involve the delayed Argentine crop, the flow of weekly sales, and the US planting intention for 2023.
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