Corn prices in Chicago surge after USDA experts significantly downgrade US crop estimate

In the January report on corn supply and demand for the 2024/25 MY, USDA experts unexpectedly for the market sharply lowered the production forecast for the US, and, accordingly, the estimate of world stocks, which led to a significant increase in the price of futures in Chicago.

March corn futures on the Chicago Board of Trade (CBOT) rose 3.2% to $185.2/t (+6.8% compared to data after the December report), which is 42.6% lower than last year's level of $264.2/t.

And March corn futures on the Paris exchange rose by 1.2% to €213.75/t or $219/t (-33% year-on-year).

The most significant changes in the new balance were in the forecasts for the US and China. Thus, the forecast for the US corn harvest in the 2024/25 MY was reduced by 7 million tons from 384.64 to 377.6 million tons (although analysts estimated it at 383.41 million tons on average), the forecast for exports - by 0.6 million tons to 62.2 million tons, and the forecast for ending stocks - by 5 million tons to 39.1 million tons, which will be 5.67 million tons lower than the previous season.

This adjustment of the production forecast is due to a decrease in the estimate of the average corn yield to 11.24 t/ha (11.48 t/ha last year), which is significantly lower than analysts' estimate of 11.46 t/ha, and even an increase in the harvested area by 76.4 thousand hectares did not save the situation.

For China, the corn production forecast has been increased by 2.9 million tons to a record 294.9 million tons (288.8 million tons in 2023/24 MY), according to official data from the Chinese authorities, which somewhat compensates for the decline in global production.

US corn stocks as of December 1 were 306.6 million tons (compared to 309.12 million tons as of December 1, 2023), which is 1.8 million tons below traders' expectations.

Compared to December estimates, the new world corn balance for the 2024/25 MY has undergone the following changes:

• The estimate of opening stocks was increased by 1.24 to 317.46 million tons (304.66 million tons in 2023/24 MY) after an increase in the production estimate and a decrease in consumption in the balance for 2023/24 MY.
• The global production forecast was reduced by 3.54 to 1214.35 million tons (1230 million tons in 2023/24 MY and 1160 million tons in 2022/23 MY), in particular for the USA - by 7 to 377.63 (389.67) million tons, but increased for China by 2.94 to 294.9 (288.8) million tons. For Argentina and Brazil, the harvest forecasts remained unchanged, as well as for the EU, where the official estimate was increased to 59.6 million tons.
• The estimate of global consumption has been increased by 0.81 to a record 1,238.47 (1,217.22) million tons, in particular for Brazil - by 2 to 87.5 (85) million tons due to increased use for bioethanol, while for the USA the forecast has been reduced by 1.27 to 321.7 (321.9) million tons, although the rate of ethanol production is higher this season.
• The forecast for world exports has been reduced by 1.63 to 191.41 (192) million tons, in particular for the USA - by 0.64 to 62.23 (58.23) million tons, and for Brazil - by 1 to 47 (39.5) million tons.
• The forecast for world imports has been reduced by 0.77 to 183.15 (197.13) million tons, in particular for China - by 1 to 13 (23.5) million tons.
• The estimate of world ending stocks was reduced by 3.1 to 293.34 (317.46) million tons, while analysts estimated them at 294.8 million tons. For the USA, the forecast was reduced by 5 to 39.12 (44.7) million tons, and for China, it was increased by 1.91 to 206.18 (211.29) million tons.

A reduced harvest in the US will increase demand for Ukrainian corn in the second half of the season, but a further reduction in imports by China and an increase in the supply of cheap corn from South America will limit export prices in Ukraine to $210-215/t delivered to the port.