WASDE: Corn fired to fresh highs as US exports, ethanol increase
The March release of the USDA’s WASDE provided enough surprises to drive the complex higher on the Chicago Board of Trade, with the front month contract up five cents in the immediate aftermath of the report’s release.
Key to the move was the revision of South American stocks – much anticipated, but still packing enough of a punch to fire investor buying, and revisions to feed demand, reflecting the relatively low price that corn occupies versus other animal feed.
Brazil’s production was shaved 500,000 mt to 94.5 million mt, well short of the average trade guess which had on average called for a 2.3 million mt cut, but perhaps more in keeping with the prevailing conflict around where Brazil’s corn crop currently sits.
For many, the 94.5 million mt still looks too high, but the reports of conducive weather conditions driving Brazil’s first crop yields and high corn prices at least arresting any further declines in the area of the safrinha crop, overall corn crop size estimates have started to creep back up again.
Either way, exports were left untouched at 35 million mt, while Brazil’s current corn stocks were also pushed substantially higher, with the addition of over 2 million mt to 14.02 million.
An increase in domestic feed demand of one million mt to 53 million mt complemented the production cut, but still left Brazil’s ending stocks revised upwards by 800,000 mt to 11.42 million mt.
The swingeing cut came to Brazil’s neighbour Argentina, where the persistent drought conditions saw 3 million mt cut from the crop, taking it to 36 million – some 600,000 mt below trade averages – while export estimates were also cut 2.5 million mt to 25 million.
That makes the USDA’s Argentine crop estimate among the most aggressive, surpassed only by the Rosario Board of Trade, which currently estimates 35 million mt.
EU corn production was also forecast higher by one million mt to 61.14 million with concerns over the impact of drought on South Africa’s corn crop also laid to rest as the USDA nudged production up to 13 million mt.
Exports remained at 1.7 million mt, still short of the estimates some of South Africa’s industry has put forward based on current crop and yield data.
China’s data was left untouched aside from a one million mt addition to the import total, to 4 million mt, and a one million mt addition to the feed estimate to 167 million mt.
Finally, world beginning and ending stocks were revised upwards and downwards respectively, capturing the legacy of substantial crops in earlier marketing years which have driven beginning stocks higher by 2 million mt to 231.86 million mt.
World ending stocks came in at 199.17 million mt though, with total domestic demand pushed higher by 6 million mt on the back of good feed, food and energy demand and 4 million mt shaved off February’s estimate.
That represents a 14% reduction stocks between beginning and ending stocks.
US export and ethanol up
The trends of late January and much of February also left their mark in the March revisions, as US export expectations were pushed higher to 2.225 million bushels, a rise of 175 million bushels and a level that may prove hard to sustain.
With domestic ethanol production continuing to hold comfortably above the 1 million b/d level, the estimate for the amount of corn going into ethanol production was also moved higher by 50 million bushels to 5.575 billion bushels.
Overall corn use overpowered the estimated nation’s corn production estimate by around 200 million bushels, 14.82 billion bushels used versus 14.6 billion grown, to leave US ending stocks also lower at 2.1 billion bushels.