Porto Alegre, July 10th, 2024 – The critical phase for corn crops in the United States has arrived, and all attention is now focused on daily weather updates for the next two weeks. While the weather plays its market speculative role, the week will also see the USDA update the supply and demand picture. This report should not bring any surprises, just the production projection adjustments based on the June 30 report for the planted area. Weekly exports falling sharply appear to signal a convergence of demand for Brazilian corn at this time.
US weekly sales fell significantly at the beginning of July. From an average of one mln tons per week, the average dropped to less than 500 thousand tons per week. Could this movement determine a cut in export expectations for the current business year and generate a higher final stock? Weekly sales would likely continue at this pace until the end of August. This movement of falling local sales suggests a global movement to purchase Brazilian corn from now on and then, later, be shifted to the USA again with the harvest starting in September.
This week, pay attention to wheat production data from France and harvests in the Black Sea. Additionally, falling U.S. oil stocks helped support ethanol, corn and soyoil. Apart from these cyclical indicators, the climate environment takes precedence at this moment. We have drawn attention in our editions to the US climate, which has so far been healthy for crops, despite crop condition indicators having weakened in the USDA’s weekly reports. We must remember that data on crop conditions are not necessarily the only point for increasing or cutting productivity estimates, so it cannot be assumed that USDA will cut productivity projections based only on this indicator.
Rainfall over the past 14 days in the US Midwest has not been uniform. Very concentrated in the Central region and less in the Eastern Corn Belt, that is, it rained very well in Iowa, but little in Indiana and Ohio, all of them major growing regions for corn production. We must remember that in 2023 there was an extreme drought in Illinois, in particular, the second-largest producer in the country, with crop conditions much worse than today. Final yields were records in the 2023 harvest. Therefore, we must be careful with comparative information that tries to suggest anticipated problems with production potential. The fact is that, for now, there is no indicator that can determine a deteriorated harvest in the United States.
For this week, the climate shows some regional reduction in rainfall with a more significant increase in temperatures. In the following week, meteorology points to regular rainfall and normal temperatures for the Midwest. The heat wave that reaches the USA will settle in the west and south of the country, not in the growing regions of the Midwest. Now, the picture boils down to regional climate monitoring and the local situation in growing states.
Corn prices on the CBOT managed to remain above USD 4.00/bushel during the week. Concerns over France’s wheat and corn crops and rising oil prices helped. As the US crop is not defined yet, price rallies are normal at this period of the year and should extend until the productivity report in August. This week, USDA will update supply and demand data in its monthly report. There do not appear to be any indicators for USDA to change the profile of domestic demand in the USA, it could only suggest a cut in the export projection, with a consequent improvement in the current final stocks.
For the 24/25 crop (new season), USDA will update the production projection based on the adjustment in the planted area. On June 30, the area report brought 91.475 mln acres planted, a number that should still have small adjustments until January. This area will be placed in the supply and demand framework and, if the initially projected productivity is maintained, production could be approximately 385 mln tons. It is not common, in normal crop situations, for USDA to change the productivity projection in its July reports; it basically only makes this adjustment in August. Of course, if there is any cut in projected productivity, currently at 181 bushels/acre, this picture could be more balanced. Otherwise, new-crop stocks could jump to more than 60 mln tons, compared to the current 51 mln. And this situation becomes problematic for corn prices without a major “new fact”.
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