The USDA sharply cut its forecast for global corn production and stocks, which will support prices

For the sixth month in a row, USDA experts have lowered their forecast for world corn production and ending stocks, but in the January report they significantly adjusted their estimates for the US, which the market did not expect, and therefore reacted with a rise in quotations. In addition, data on quarterly corn stocks in the US was 3.4% lower than analysts' estimates, which also supported prices.

Compared to the December estimates, the new corn balance for the 2022/23 FY has undergone the following changes:

• The estimate of initial reserves was reduced by 1.14 mln t to 305.95 mln t (292.54 mln t in FY 2021/22 and 306.37 mln t in FY 2020/21) following a review of the 2021/22 balance sheet.
• The global production forecast was reduced by 5.93 million tons to 1.15593 billion tons (1.217 billion tons in 2021/22 FY and 1.129 billion tons in 2020/21 FY), in particular for the USA – by 5.09 to 348.75 (382 .89) million tons due to the adjustment of yield and area before harvesting, for Argentina - by 3 to 52 (49.5) million tons and Brazil - by 1 to 125 (116) million tons due to drought, while for China the estimate increased by 3.2 to 277.2 (272.55) million tons based on data on the area sown and yield from the National Bureau of Statistics.
• The estimate of world consumption was reduced by 5.08 million tons to 1165.47 million tons (1202.3 million tons in 2021/22 MR and 1143.29 million tons in 2020/21 MR), in particular for Ukraine - by 1.5 to 6 ,2 (10.9) million tons, Brazil – by 1 to 76 (72) million tons, the USA – by 0.89 to 304.56 (317.12) million tons due to a decrease in feed and ethanol consumption, however, for China, the estimate was increased by 2 to 297 (291) million tons.
• The global export forecast was reduced by 3.46 million tons to 178.17 million tons (which will be 14.5% less than the 204 million tons of the 2021/22 season), in particular for the USA – by 3.81 to 48.9 (62.78) million tons against the background of a decrease in the pace of shipments, for Argentina - by 3 to 38 (35.5) million tons due to a decrease in production. For Ukraine, the export estimate was increased by 3 to 20.5 (27) million tons, and for South Africa and Brazil it was left unchanged.
• The global import forecast was reduced by 0.97 million tons to 175.45 million tons (183.9 million tons in FY 2021/22), in particular for Peru and the countries of Southeast Asia. For China and the EU, estimates have not changed against the background of increased feed wheat consumption.
• The estimate of world ending reserves was reduced by 2 million tons to 296.4 million tons (297.86 million tons according to analysts' estimates, 305.95 million tons in FY 2021/22 and 293.29 million tons in FY 2020/21), in particular for Ukraine – by 1.5 to 5.39 (5.09 and 0.83) million tons thanks to increased exports, for Brazil – by 1 to 7.25 (3.95 and 4.15) million tons, the USA – by 0.4 to 31.54 (34.98 and 31.306) million tons. Estimates were slightly reduced for Pakistan and Paraguay, while for China it was increased by 1.2 to 207.32 (209.14 and 205.7) million i.e.

The market had expected a lower production forecast for Argentina and a slight adjustment for the US, but it was surprised by a sharp reduction in the US crop forecast, where pre-harvest corn area was reduced by 1.6 million acres to 79.2 million acres (80.7 million acres for analysts' average estimate of 85.3 million acres in 2022 and 82.3 million acres in 2021), and the yield forecast was raised to 173.3 bushels/acre (172.5 bushels/acre according to analysts' average estimate and 176.7 and 171.4 bushels/acre respectively in 2022 and 2021).

Based on the data of the report, corn quotations increased:

• March futures in Chicago – by 2.2% to $264.2/t (+4.2% for the month),
• March futures on Paris Euronext - by 0.1% to €284/t or $307.8/t (+1%).

At the same time, February futures in Chicago fell by 0.2% to $257.75/t (+3%).

Deteriorating weather in Ukraine delays corn harvesting, and export rates remain at a high level. Since the beginning of the season, as of January 11, 13.5 million tons were exported, which is 14% higher than 11.8 million tons on this date last year. In January and February, Brazil will continue to increase supplies, which will reduce exports from the US, and only the final data on the harvest in Argentina in March will give the market new price guidance.