US exports of corn need to grow in the coming few weeks

The international corn market has great influence from the high price of wheat and the almost absence of Brazil in new exports. However, the effects of this combination of indicators have not yet impacted US weekly exports. With a crop of 380 million tons, it is very important that weekly shipments confirm the USDA projections. For this, besides global demand, there are clear signs that China needs to return to US corn purchases. Without that, prices could still lose the level of USD 5.00/bushel among the US harvest.

The US harvest is advancing in line with the weather progress and as demand allows a quick flow of the crop. Problems with Hurricane Ida in the Gulf of Mexico may have contained the initial harvest pace in the Midwest, with trading companies urging growers to wait for the resumption of shipments at ports. On the one hand, this scenario affected the weekly US export figures. The US business year begins with 24.2 million tons sold in exports, which may be fulfilled or not in the coming few weeks. Weekly exports have been very weak and reaching only around 500 thousand tons. For a crop arrival period, this pace is too slow.

With the correction of damage at the Gulf of Mexico terminals, shipments may return to normal in the coming few days, and the numbers even surprise further ahead. This also helps logistics in the interior and speeds up the harvest. China has not made any new purchase of the new US corn crop, already for 120 days without making any new purchases from this source. This is the picture that most worries the price environment on the Chicago Board of Trade (CBOT). At first, the harvest is coming and with good production numbers. Besides, the resumption of exports through the Gulf must facilitate the flow of this crop arrival. However, this pace should remain firm and contradict the USDA forecast of a good pace for this 21/22 cycle.

Prices in China have not yielded even with the upcoming local crop. Chinese companies have not resumed the purchases of US corn yet, despite the favorable differential for imports between the prices of the two markets. The new Chinese crop does not drop local prices, the US market is waiting for China to resume purchases at any time and holding prices above USD 5.00/bushel on the CBOT. If China does not resume purchases, the rest of the world buyers will need to exert a large import movement with US corn to support the current price levels on the CBOT.

Prices are great for US growers, and it would not be surprising if some selling pressure would arise with the harvest. Exports still have some competition from Brazil, despite the low availability, but the large volumes are coming from Argentina. The country reaches 30.7 million tons in shipping procedures and may surpass this accumulated volume over the year until the end of the month. The pace is very similar to that registered in 2020. However, there is an additional demand for Argentine corn between October and February, either by Brazil or other world importers. Argentine corn is still the cheapest among exporters, but this month it increased from USD 230 to 245/ton FOB.

The Argentine export target this year is between 35 and 37 million tons. At the current pace, it seems clear that the country will easily reach this target, and the symptoms of rising premiums and FOB prices reflect the start of a declining supply in the Argentine market. Local sales reach 37 million tons, the best sales pace in history. As the Argentine crop only arrives in the local market from April, prices will likely start rising from now on due to the shrinkage of the local market.

Safras & Mercado

Tags: exports, corn, USA