Porto Alegre, August 3, 2021 – While the weather promotes the production curve for the 2021 US crop, consulting companies and brokerages must release their productivity projections for this month of August. USDA is expected to make a correction to the forecast in the upcoming 12th report and then assess crop yields from September. Meanwhile, the corn market tries to stabilize at a high level between USD 5.00/5.50 a bushel following a loss in wheat production and the Brazilian absence of new corn exports.
Corn crops in the US Midwest and Plains are in silking and pod-filling stage. Pollination is going on under the conditions registered in the second half of July, which will have an effect on final productivity. A sharp loss in the wheat spring crop in the US Plains triggered a sharp rally on the Chicago Board of Trade, sending corn into the upward curve.
The US crop is taking shape in terms of productivity. This year’s features did not change in July. From Iowa towards the east to Indiana/Ohio and towards the south, the crop scenario is very favorable with excellent rainfall in July. On the west side, the good presence of irrigation pivots is satisfying a better condition of crops and with a lower risk of severe losses despite the not that favorable climate scenario.
The discussion point, therefore, is in the north-central Corn Belt and the Plains. In the case of wheat, the market took a long time to assess the decline in production in this region, USDA corrected its number in July, and wheat prices jumped from USD 6 to 7/bushel. Could the same design happen to corn and soybeans?
The region surrounding the area most affected by this summer’s drought has nearly 22 million acres, not counting northern Iowa and Nebraska. If we consider a normal average yield in the region of 180 bushels/acre, we are talking about a volume of around 95 million tons of corn. Evidence that there are corn losses in this region seems to push the US crop towards a reduction compared to initial estimates.
In a simple exercise, yield losses of 20 bushels per acre in this bloc, which is fully possible, from an average of 170 to 150 bushels/acre, would account for around 12 million tons of production losses. However, it does not seem that the region will be able to reap such an average this year and, therefore, surprises may arise in the US pre-harvest.
On the other hand, the US production nucleus is in a much better situation and suggesting high or even record yields. Illinois, Indiana, Ohio, Missouri, the Mississippi Delta and much of Iowa show very good potential this year. Could this region produce additional volumes to offset losses in the north? This is the equation the market will try to unravel in the next USDA reports and field assessments.
On August 12, USDA will update its supply and demand picture. As usually, it makes its first adjustment in the expected yield for corn, while that of soybeans may only occur in September. Should it project the evidence of these losses of the north, a reduction in yield to 176/178 bushels per acre would bring potential production losses of 3 to 8 million tons for the national crop, currently estimated at 385 million tons. Along with this report, there may also be a reassessment of China’s imports from 26 to 28 million tons this business year. However, the projection of a larger crop for China, perhaps above 270 million tons this year, could reduce the imports forecast for 2022.
Agência SAFRAS Latam
Copyright 2021 – Grupo CMA