Are Exports the Problem?
The USDA Quarterly Stocks and Acreage Reports contained surprises for corn traders to digest. The big surprise was an increase in acres to 94 million, up 2 million from the last acreage report in March. The range of estimates prior to the report was 91 to 93 million. The added acres, using the current yield estimate from the USDA of 181.5 bushels per acre, should grow supplies by about 334 million bushels when using a common conversion that 92% of planted acres are harvested for commercial corn. Quarterly Stocks came in 155 million bushels (mb) less than expected. Between the two, the net supply increase is about 180 mb. However, current crop conditions, as released each Monday by the USDA in the Crop Progress and Ratings report, indicate this year’s corn crop to be rated at its lowest level since the drought year of 2012. Most private yield estimates are from 171 to 178 bushels per acre. If using 176, a 5.5 bu decline, total crop size could be reduced by approximately 475 mb. When adding the net report gain of 334 mb and projected loss in yield, there could be a reduction of approximately 141 mb compared to a month ago. Still, corn prices have traded below where they bottomed out in May.
The potential reason traders are defensive on corn prices is likely exports. An extremely slow pace this spring coupled with expectations that Brazil’s very large second corn crop (Safrinha) – which is more competitively priced that the U.S. – is keeping exports slow. The implication is we will likely see cuts to projected exports for this year and next year, perhaps as soon as the July World Agriculture Supply and Demand report, due for release July 12. Export sales year-to-date are 1.527 billion bushels (bb). The current USDA forecast is 1.725 bb, however, the pace for the last eight weeks suggests it may be difficult to achieve this figure with more competition from Brazil and China absent from the U.S. market. The 2021/2022 marketing year saw exports at 2.471 bb. The slowdown for the 2022/2023 season underscores just how much business has been lost. For the 2023/2024 marketing year (September 1, 2023 – August 31, 2024), the U.S. is expected to export 2.1 bb. There is skepticism this can be reached, suggesting further cuts from the USDA. More competition from South America and world recession concerns are two reasons suggesting exports will remain slow.
Much can change in a year and, while the current outlook for exports remains tarnished, time will provide more information. However, with December 2023 corn futures trading under $5.00 both in May and again now in July, end users have not responded. This is concerning. For corn producers, a slow export pace tends to limit price rallies. When they do come, they can quickly disappear. This suggests using sell targets above the market as a strategy to capture price rallies. Have conversations with your advisor about where to put orders that can work for your operation.
Editor’s Note: If you have any questions on this Perspective, feel free to contact Bryan Doherty at Total Farm Marketing: 800-334-9779.
About the Author: With the wisdom of 30 years at Total Farm Marketing and a following across the Grain Belt, Bryan Doherty is deeply passionate about his clients, their success, and long-term, fruitful relationships. As a senior market advisor and vice president of brokerage solutions, Doherty lives and breathes farm marketing. He has an in-depth understanding of the tools and markets, listens, and communicates with intent and clarity to ensure clients are comfortable with the decisions.
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Bryan Doherty