In our last issues we have pointed out that the combination of a large acreage with repressed demand is not favorable to prices on the Chicago Board of Trade. The confirmation of the acreage will only be known on June 30. However, a very early planting indicates that producers will seek maximum productivity to equalize low market prices with production costs. Early plantings in the United States generally reveal high yield potentials. The doubt, then, will remain with the weather until August, as well as with demand projections for the next business year.
On May 11th, USDA will update the figures for the 2019/20 business year of supply and demand, but will also disclose the first supply and demand projection for the following business year (2020/21), as it traditionally does in May. Between these two reports there are great negative indicators for demand and great positive indicators for production. The first point is that the current 2019/20 supply and demand picture will still have demand pressure being repressed in the environment of the local ethanol sector and in the food segment. However, in spite of some plants making preventive stoppages due to the presence of COVID-19 in factories, there is still no sharp production cut that implies a projected cut in demand in the animal segment, although this scenario is possible in the coming few weeks. The US government’s decision to require the maintenance of slaughterhouses in operation alleviates this condition of potential decline in demand in the animal segment.
Therefore, the current picture of the business year must still suffer strong negative impacts from the environment of the US domestic demand, which were already signaled by USDA in its April update. Could it accentuate this cut in demand by increasing stocks? Possibly yes for this business year. Therefore, only growing corn exports would be a positive point for the US market in terms of short-term demand.