Porto Alegre, November 12th, 2024 – The November USDA report was expected to point to an upward correction in annual exports, given the excellent weekly sales that have been made. However, the Department did not change the export bias but adjusted exports slightly downward, which created an environment for cuts in the projection for final stocks. Basically, this barely changes the market in the short term, but we may have surprises in the 2025 reports with the increase in the export projection and a larger cut in final stocks. The situation is starting to limit any new significant decline in corn.
With the US crop expected to undergo small adjustments until January, when the data are finalized, the market is trying to focus on potential demand. Last week, ethanol production grew 2.1%, bringing a good sign to the domestic situation of the sector. Weekly exports also remain very strong. During the week, 2.7 mln tons were sold for the 24/25 season, now accumulating 28.5 mln tons between September and the beginning of November. The issue is that these sales are well above the 14.7 mln tons in the same period last year.
Sales will convert to shipments later on and require USDA to raise its annual projection of 59 mln tons for the business year. This was the market expectation, that is, a cut in new-crop stocks in light of an increase in export projections. The USDA report for November presented this market expectation. However, USDA chose not to modify the export projection due to actual shipments that are still at only 7.4 mln tons. In other words, sales have been aggressive, but the effective flow of shipments has not.
Instead, the Department updated the current crop yield downward. The harvest was 91% complete last week and must be completed this week. Final production data are always set in January. Everything indicates that, as the harvest moves on, yield figures will end up suffering some effective reduction. Yield was cut from 183.8 to 183.1 bushels/acre, still a record number that puts production at 384 mln tons, almost 1.5 mln below the previous estimate. This is certainly not the key point of the corn market for the coming few months. Weekly US exports should remain aggressive for the first half of 2025. USDA will need to update this annual projection at some point, considering that sales are at 14 mln tons and, in the last business year, exports reached 58 mln tons. Therefore, the projection for 59 mln tons may be getting outdated.
Argentina, which is the largest exporter in the first half of the year, has a production projection of 51 mln tons, in line with the current situation. The early crop in northern Argentina is going well, with a low incidence of leafhoppers and better control of the pest by farmers. Now, planting is progressing in Buenos Aires, the largest producer. The initial focus is on the climate and the incidence of leafhoppers in this season.
Ukraine continued with a weaker export projection of 23 mln tons, and Europe maintained imports of 19 mln tons. Brazil, as we have already pointed out, will not have corn supply to meet exports from February to June. This gap, for the international market, leaves the market at the mercy of offers from Argentina and the United States for global supply.
Another point that is beginning to emerge, indirectly for corn in the first half of the year, is the planting bias of the 2025 crop in the United States. The Indonesian government has decided to achieve new biodiesel production goals at a time when electric cars are being introduced globally. Today, production is focused on B30, 30% of biodiesel added to diesel oil. The goal now is to reach B40 and B50. According to the government, 7 to 9 mills need to be installed to reach this goal, increasing regional demand by more than 3 mln tons of palm oil. This scenario caused panic in markets last week, resulting in higher soyoil prices and, consequently, keeping soybean prices above USD 10/bushel on the Chicago Board of Trade. The exchange ratio with corn and the regional demand for soybeans in the United States could prevent a drastic change in the area to be planted in the 2025 crop. If the initial expectation was a 2 mln-acre cut in the soybean area and a resumption of this area by corn, this soyoil scenario could inhibit this transfer. Could this scenario become another positive indicator for corn prices on the Chicago Board of Trade?
The situation in China is confirming our expectations. USDA made another adjustment to the Chinese government’s estimates regarding imports. It has now cut its projection to 16 mln tons, compared to 13 mln tons by the Chinese government. This now seems to be an estimate that is more in line with the potential reality. The USDA’s estimate for the Chinese crop is still below the Chinese government’s figure, and this may be the next adjustment to be made.
Safras News