Prices on corn continue with difficulty in reflecting the arrival of the US crop


     Porto Alegre, October 11, 2021 – Until last week, the harvest of the US crop was 29% complete. Over 100 million tons have entered the local market for the last thirty days. Despite this, corn prices on the Chicago Board of Trade are unable to reflect this crop arrival and seasonal harvest pressure. Besides wheat, which is one of the main support points for corn at the moment, oil above USD 80/barrel again brings back the possibility of a strong recovery in the ethanol and biodiesel industry, which is a new demand indicator ahead.

     The USDA’s October report, which will be released this week, will estimate the ending stocks for the 20/21 business year. As quarterly stocks came higher than expected, but USDA cut nearly 2 million tons from the 2020 crop, ending stocks should be projected slightly ahead of 31 million tons. Therefore, above the 30.1 million tons predicted in the last report. This correction is already in prices, and there is nothing new about it.

     The key point now is the update on the stocks for the 21/22 crop. If there is no change in the production and demand data already forecast, stocks for the new crop could rise to 37 million tons. The market, however, has its estimates and expects a slight yield cut from 176.3 to 175.9 bushels/acre, production slightly below 380 mln tons, and stocks of 36 mln tons. Minor corrections that should not change the trajectory of market prices. The surprise will be if USDA brings better-than-expected productivity and a larger crop.

     The other point is the US domestic demand. Oil tries to break the mark of USD 80/barrel. Oil-producing countries do not accept to increase production beyond what has already been planned. Would there be new highs? This picture of the energy sector, without a doubt, can reach biofuels and contribute to expectations of growing demand for corn ethanol and biodiesel with soyoil. Would this be the new factor influencing corn prices in this 21/22 cycle?

     China has returned from its long holiday, and there has not yet been time to assess its share in the international commodities market. Its harvest of a record corn crop is taking place, and the evaluations for the week will be centered on domestic prices, since if there is no price decline at full harvest, China must resume corn imports this year.

     US exports now accumulate sales of just over 25 million tons for this business year, compared to the USDA’s forecast of 62 million tons. The weekly pace started to improve, with Mexico returning to more significant purchases. This still seems a discreet pace for the current USDA’s forecast and considering the slow Brazilian shipments.

     Agência SAFRAS Latam

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