Major exporters’ corn supply & demand looks to substantially change in 2017/18, which should begin to be reconciled by the USDA’s WASDE reports from August through November. We also mention that old crop stocks are likely to be raised (yet again) as global trade data continues to fail to meet USDA forecast implications.
The graphic at left charts the pace of global corn trade needed to meet USDA’s forecast (blue line) and the actual trade (red line). It’s pretty clear that WASDE will again lower its world corn trade estimate August release. Along with a likely slight (1-2 MMTs) upward revision to Brazilian production, major exporter corn stocks are estimated at 80-81 MMTs, vs. the USDA’s July estimate of 77.5, compared to 53.6 MMTs in 2015/16. Record large old crop global corn supplies continue to weigh on rally efforts.
However, in 2017/18 the US alone will trigger a fairly sizeable decline in major exporter production and stocks. Of it’s far too early to adjust new crop Southern Hemisphere production – though the USDA’s numbers do imply another year of steady spring rainfall in Brazil – but ARC has chosen to lower Ukrainian corn production 1.5 MMTs amid recent and upcoming dryness in the far western and far eastern Corn Belt. Assuming a US yield of 162-164 BPA, US production will be down some 15 MMTs. Major exporter corn production in 17/18 is then pegged at 521 MMTs, down 17 MMTs from the USDA’s forecast and a down a hefty 46 MMTs from last year’s record. Like wheat, major exporter corn supplies very likely scored an intermediate peak last year.
Old crop major exporter corn stocks/use should reach 14.4% in the USDA’s August release, which no doubt reflects excessive supply, but notice how changes in US yield affect new crop major exporter stocks/use. The USDA currently pegs 17/18 major exporter stocks/use at 13.9%, which for all intents and purposes is unchanged on the year. Lowering US yield to 165 puts major exporter stocks/use at 11.8%, which is on par with 2014-2015. South American cash fob prices still rest at a multi-year low $145-158/MT. However, ARC notes that a bottom is being formed in South American cash markets, and as corn replaces feed wheat consumption, the US should maintain an export profile of 1.7-1.8 Bil Bu in 17/18.
The point is that, unlike a year ago, successive record crops in S America are needed to turn bearish below $3.60, basis spot.
