US planting of corn starts at a fast pace

Source:  SAFRAS & Mercado
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The international market scenario continues its downward bias for corn. Last week was marked by adjustments and prices within the range that corn has operated throughout the semester, with no news. The movements going forward will be very much in line with the US weekly export and planting pace, focusing on the May supply and demand report.

There is some concern over the negotiation involving the Ukrainian export corridor. The main discussion is that Ukraine continues to sell wheat and corn very cheaply for the entire Eastern Europe and harming neighboring countries, including Russia. This Ukrainian selling pressure is generating the expectation that Russia may still limit flows through the corridor in the renewal of the agreement until the closing of this month. This is the point that may still bring some speculation movement with wheat and corn on CBOT in the short term.

The next point would be the weekly US exports. However, it seems that the lack of good exports by Argentina has not been enough to keep US sales leveraged. Last week saw very poor US sales, which was one of the factors that pressured prices on Friday. The absence of China, which made no new purchase, also made corn lose some room to sustain support.

In any case, we must understand that current CBOT prices are still high for a stock recovery situation. USD 6.60/bushel for May and USD 6.30 for July are prices that still represent this business year that will end in August, with stocks still tight and depending on good conditions of the 2023 US crop.

The US new crop started with a strong planting pace, with 8% planted against 5% of the five-year average. Weather conditions have been favorable this early spring. The five-year average for the week is 15%, and we believe it will be possible to maintain this pace this week with the 2023 crop or even above this percentage. Now, it is a matter of planting pace until the week of the 10th, when the goal is to reach 50/60% of the projected area.

However, the information that really started to weigh on international price formation is the premium curve. Argentina’s crop failure should and still can generate additional demand for US and Brazilian corn. However, world importers are evaluating that the risks are discreet this year for a shortage of supply compared to 2022, for example. In 2022, there was uncertainty over Ukraine, a historic failure in Europe, low stocks in the US, production losses in China and there was a large shift in demand to Brazil, which reaped a new record crop. In 2023, everyone is seeing a reverse picture. USA and Europe with a crop that must recover stocks, Ukraine unimpeded, and China enabled to get a new production record. So everyone slows down purchases and does not extend business into the second half of the year, that is, if supply is normal and prices go down, purchases will take place later on.

Premiums in the Gulf of Mexico showed a sharp decline last week and, incredible as it may seem, FOB prices in Argentina collapsed even with the historic loss of production. This situation may become more evident with the progress at a good pace in US planting and with the 23/24 supply and demand report, to be released by USDA on May 12. This report will project the US new crop certainly above 370 mln tons and, even with optimism about future demand, stocks should rise from the current 34 mln tons to something close to 47/48 mln tons. This information will be fully bearish for new crop contracts, September and December, especially if it is linked to the good pace of planting.

Europe is likely to have a rainy summer in the main countries of the bloc. Therefore, the suggestion is for full recovery of corn production in this 2023 crop that is being planted. Moreover, in China, which starts planting in May/June, there is a prospect of favorable weather conditions between July and September, a critical period for crops in the northeast of the country, where the highest corn production is concentrated.

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