- The USDA reduced corn’s global closing stocks to 289.4m tonnes in Thursday’s WASDE.
- This is down 2.9m tonnes from the May WASDE.
- With no changes to production or consumption, it seems dry weather in Brazil is the reason behind the reduction.
Nixal’s Forecast
We’ve increased our 2020/21 (Sep/Oct) average price forecast for Chicago corn to 5.1 to 5.5 USD/bu, up from 4.7 to 5 USD/bu previously.
The average price since the start of the old crop (Sep/Aug) is running at 5.1 USD/bu.
We think Chicago corn will average 4.5 USD/bu in 2021/22 (Sep/Oct), as corn-based ethanol production looks set to strengthen.
Nixal’s Market Commentary
The June WASDE lowered corn’s global ending stocks for 2021/22 to 289.4m tonnes, down 2.9m tonnes from before. With no changes in consumption or production, the reduction came from Brazil’s old crop production, which was lowered by 3.5m tonnes to now sit at 98.5m tonnes.
Conab lowered its Brazilian production forecast by 10m tonnes to 96.4m tonnes.
We think Brazilian production will be closer to 90m tonnes, meaning there should be a downside bias to both the USDA’s and Conab’s numbers.
The WASDE raised US old crop corn exports to 2.85b bu, up from 2.77 before. It lowered closing stocks to 1,107b bu (down 150m bu) and the new crop number remained unchanged.
We think the US’ corn area will total 93m acres; the USDA puts this at 91 acres. Ethanol usage should total 5.3b bu, up 100m bu from the USDA’s number. With this, our stock-to-use estimate sits as 10.6% vs. the USDA’s 9.2%.
US corn is now planted and ranks 72% good-to-excellent, down 3% year-on-year. Around the globe, Russian and Ukrainian corn are also fully planted. French corn ranks at 91% good-to-excellent, up 8% year-on-year.
On the wheat front, the WASDE increased US new crop production, thanks to a small improvement in yields (50.7 bushels per acre vs. 50 before). This was partly offset by 10m bu of higher feed consumption, leaving ending stocks 5m bu lower.
Global wheat ending stocks were increased on the back of higher EU production (137.5m tonnes) and higher Russian production (86m tonnes).
US wheat is 2% harvested, down 4% year-on-year and 5% from the five-year average. It’s now ranked at 50% good-to-excellent, however, up 1% year-on-year. France’s wheat condition improved a bit last week and now sits at 81% good-to-excellent (a five year high).
All in all, the WASDE was supportive with confirmation of tight old crop stocks for corn, soybeans and wheat. We’re still anticipating lower corn production in Brazil and higher exports from the US.
The key things to watch over the next couple of months are weather in the Northern Hemisphere, especially in the US, and the USDA’s next WASDE report.
Other Opinions You Might Be Interested In…
- Corn: Brazil Needs Rain, and Fast
- Brazil’s Corn Woes Start to Show
