Porto Alegre, August 25, 2020 – Last week the traditional Pro Farmer’s Crop Tour in the United States brought its assessment to the 2020 season. The corn output was indicated slightly below the USDA’s data, by almost 460 million bushels, in productivity assessment, and already doing a prior assessment of losses in Iowa. These losses were caused by the storm, with strong winds, that occurred in a section of Iowa in the second week of August. Now, the market awaits the USDA’s report next September.
USDA forecasts the 2020 U.S. production at 15.278 billion bushels or 388 million tons. A record crop that put the stocks projected for 2021 at 70 million tons, a very high level. However, on the day of the report’s release, August 12, a heavy storm with strong winds hit much of Iowa and Illinois. The largest corn-growing state was affected by the storm in almost 40% of its area.
From this climatic event, the market started to project some potential losses. USDA released a pre-assessment report measuring the losses at 150 to 250 million bushels, that is, 8 to 12 million tons, which are significant indeed and bring down the local record crop and stocks. The final assessment must only be disclosed in the September report or in the future, after growers apply to insurance companies, and more accurate data are disclosed. The consensus is that there are some losses, which will be corrected by USDA in September.
Some satellite-assisted companies, in turn, estimated that a larger portion of the Iowa crop would have been affected, which caused some tension in markets. As ‘affected’ is one thing and ‘lost’ is another, the market expects the USDA’s report.
Last week, the traditional Pro Farmer’s Crop Tour released its results. For corn, a U.S. crop of 14.82 billion bushels or 376 million tons, 12 million tons below the USDA’s forecast. The first highlight is that this report is historically below the general figures from USDA because it does not cover all growing areas of the country, but an important growing area in the Midwest. So, it is normal for the data to be lower, but the highlight is that average productivity was 177.5 bushels per acre, while USDA projected 181.8 bushels per acre, and all other private sector companies followed the official figure.
Without a doubt, the losses in Iowa affected the overall number of the Crop Tour. USDA does not have to follow the Crop Tour data, but there is a consensus: the losses in Iowa. Losses of 8/9 million tons in Iowa may be possible for the next report in September, and a cut in stocks as well. However, if USDA cuts stocks from 70 to 62 million tons, they will still be large. If the cut is larger, support for prices above USD 3.45/bushel on the CBOT may be real after the U.S. harvest.
The United States today has the cheapest corn in the international market. FOB prices are between USD 150/155 a ton, against USD 165/168 a ton from Argentina. However, there seems to be an international resistance to purchases of U.S. corn, perhaps due to quality or some other indicator not yet evaluated. The fact is that this inhibits local sales, and CBOT prices are unable to react. Not even heavy purchases from China in July and some deals past week helped prices in this pre-harvest period.
Argentina, for example, is breaking export records this year, despite the low prices of U.S. corn.
Agência SAFRAS Latam
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