Porto Alegre, January 19, 2021 – The USDA’s January report involves traditional information on adjustments in the supply and demand picture but also the final production figures for the previous year’s crop. This January, USDA brought a surprise of bigger cuts than those that had already been made for the 2020 season and, consequently, brought a proportional cut of final stocks. The report also cut the demand projection, without which the reduction in stocks could be greater. However, another piece of data also brought impact to the market, that is, the upward correction of the projection for the pork herd in China, an indicator that suggests, as we have pointed out, a greater pork supply for 2022 mainly, as well as higher demand potential for corn and soymeal. This factor establishes an additional expectation of larger imports by China in the corn and soybean segments.
Corn prices on the Chicago Board of Trade (CBOT) easily broke through the USD 5.00/bushel barrier and hit USD 5.30 last week, an extremely high price for the moment in view of the still comfortable US stocks. Two factors led the market to look for these new levels:
– USDA cut the 2020 US crop to 360 million tons. We must remember that the initial forecast for the 2020 season was close to 400 million tons, a new record. The cut in production is not a serious factor for US supply, as it fully meets the growth in local demand;
– Final stocks were reduced to 39 million tons, the lowest since 2013, but still comfortable to meet all local demand and exports. USDA reduced the 2021 demand forecast to avoid a larger cut in final stocks.
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