Cut in quarterly stocks of corn in USA changes 20/21 supply and demand outlook


     Porto Alegre, October 5, 2020 – The quarterly stocks report released by USDA last week brought a new change in the pattern for corn and soybean prices on the CBOT. Apparently, the upward movement for corn seems to be exaggerated, considering that the U.S. crop has just begun and is a good crop despite the losses already registered in Iowa. The number, in fact, reflects that demand was stronger than expected by USDA at the close of the business year, which is still a good sign for this new business year. The harvest progress and the supply and demand report on the 9th will be important factors next week.

     The quarterly stocks report released by the USDA is important in September by bringing the carryover stocks from 2019/20 to 2020/21. In other words, the supply and demand report will have as final stocks for the 2019/20 business year these data on quarterly stocks released on September 30.

     USDA caused some surprise to the market. The expectation was for quarterly stocks of 2.24 billion bushels, but the report brought 1.995 billion bushels or 50.7 million tons. These stocks were also below the USDA’s expectation, or 57 million tons. These data will now close the supply and demand picture, and this adjustment in stocks will be made on the 9th. Then, in the October supply and demand report, USDA will reduce the final stocks for the 2019/20 business year from 57 to 50.7 million tons.

     Consequently, the 2020/21 picture will also have a corrective adjustment. If all production and demand indicators remain the same as in the September report, stocks for the new crop will fall from 63.4 to 57 million tons. As the 2020 crop is not yet defined, since the harvest is just beginning, USDA will still be able to make production corrections in this and in the next reports until January. The market is creating some expectation for cuts in production due to initial productivity results and new information from Iowa. Perhaps a cut with 1 to 3 million tons out of a crop of 378 million tons. It seems little to have a strong impact on the corn market.

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