Porto Alegre, February 13, 2023 – USDA lifts US corn inventories. A tense week in the international market in light of the USDA February report. The report did not bring surprises about expectations for this month, it only confirmed some market expectations, which continue to prefer to follow USDA for South America than the data from local agents. The Buenos Aires and Rosario exchanges were very aggressive in cutting soybean and corn production in contrast to the USDA figures, while in Brazil the signs are high productivity in corn and soybeans, except for Rio Grande do Sul, which still suffers with the drought in 2023.
USDA’s February report saw minor changes for the United States. Normal domestic demand adjustments have brought the current stocks to 32.2 mln tons. A volume that barely changes the short-term price picture. As of now, however, the market focuses on two indicators for corn:
– The flow of export demand toward US corn, considering that Brazil and Argentina will lose selling strength from now on;
– The planting of the 2023 US crop.
In the first item, US weekly sales are now managing to position above one mln tons and improve the outlook for weekly shipments ahead. So far, however, sales total 26 mln tons, against 45 mln tons in the same accumulated volume of 2022. So, the rhythm needs to quite improve until reaching at least the export forecast for the business year of 48.9 mln tons.
In the second item, now there will be a sequence of events, namely:
– The USDA Forum at the end of November, when some figures always come up for a future reference of events;
– The US planting intentions report on March 31, with a focus on some recovery in the corn area and maintenance of the soybean area;
– Early spring weather in the Midwest for planting, where climate change from La Nina to El Nino may already positively influence favorable planting conditions;
– US summer weather in the critical stages for crops in July and August, both for corn and soybeans, also with a positive climate bias in a shift to El Nino;
– Normal harvests in the second half of the year in the United States and Europe.
On this last point, there is a version creating doubts. Ukraine’s war crisis deepened last week. Russia has decided to reduce oil production in response to sanctions on its economy. Versions emerged that Russia could also reduce the intensity of wheat sales to reserve internal supplies. Poland would have closed an important flow channel for Belarusian production and fertilizers, which could also affect the fertilizer market, all this amidst the escalation of the war in eastern Ukraine again. The biggest doubt is whether Ukraine will have technical conditions to cultivate the 23 summer crop. USDA cut Ukrainian domestic demand sharply and kept exports at 22.5 mln tons for this business year.
Europe and China without news so far. But they are now two strong buyers of corn in the international market. The next European crop will only reach the market in September and until then it will depend mainly on Argentine corn. China shipped 2 mln tons from Brazil in December and January and now has the strength to spend some time without new purchases. Will some volume be bought in the United States in this first semester or will it advance only with Brazil’s 2023 second crop from July? This is an important scenario for corn in the international environment, since the use of Brazilian corn by China for its supplies takes away strength from US exports, which puts pressure on prices on the Chicago Board of Trade (CBOT).
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