The USDA reduced the forecast of world corn production, in particular for Ukraine, by 4.5 million tons

For the fifth month in a row, USDA experts have lowered their forecast for world production and ending stocks of corn, but for the second month contrary to their estimates, quotations have fallen against the background of reduced global demand. In the December report, the forecasts for Ukraine, the Russian Federation and the EU have been reduced the most, but the estimate for Argentina, where drought is delaying sowing, has not yet been adjusted.

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

• The estimate of initial reserves was reduced by 0.6 million t to 307.09 million t (292.54 million t in FY 2021/22 and 306.37 million t in FY 2020/21).
• The global production forecast was reduced by 6.5 million tons to 1.1639 billion tons (1.217 billion tons in 2021/22 FY and 1.129 billion tons in 2020/21 FY), in particular for Ukraine – by 4.5 to 27 (42.1 ) million tons (although the Grain Association estimates it at 24 million tons due to the delay in harvesting), for the EU - by 0.6 to 54.2 (70.95) million tons and the Russian Federation - by 1 to 14 (15.2) million tons .
• The estimate of world consumption was reduced by 4.75 million tons to 1170.55 million tons (1202.3 million tons in 2021/22 MR and 1143.29 million tons in 2020/21 MR), in particular for Ukraine - by 3 to 7.7 (10.9) million tons as a result of interruptions in energy supply at enterprises, for the CIS countries - by 0.95 to 46.95 (48.5) million tons, for South Korea - by 0.5 to 11.05 (11.55) million tons, while the estimate was increased by 1.4 to 76.1 (82.7) million tons for the EU, where the use of fodder wheat for feed will also increase.
• The global export forecast has been reduced by 1.11 million tons to 181.63 million tons, which will be 11.5% less than the 202.51 million tons exported in 2021/22 FY. For the USA, the estimate was reduced by 1.9 to 52.71 (62.28) million tons due to low rates of shipments at the beginning of the season, for the EU - by 0.5 to 2.2 (6) million tons due to a decrease in the harvest, for the Russian Federation - by 0.7 to 3.3 (4) million tons. At the same time, for Ukraine, the export estimate was increased by 2 million tons to 17.5 (27) million tons due to a reduction in domestic demand, and forecasts for South Africa, Argentina, and Brazil were left unchanged.
• The estimate of world imports was reduced by 0.8 million tons to 176.4 million tons (183.9 million tons in 2021/22 FY), in particular for South Korea - by 0.5 to 11 (11.5) million tons, Canada - by 0.5 to 1 (6.14) million tons, while for the EU it increased by 1.5 million tons to 21.5 (19.8) million tons due to a decrease in domestic production. For China, the assessment of imports was left unchanged.
• The forecast of world ending stocks was reduced by 2.4 million tons to 298.4 million tons (307.09 million tons in FY 2021/22 and 293.29 million tons in FY 2020/21), although analysts estimated them at 300.8 million t. For the USA, against the background of slow exports, the estimate of reserves was increased by 1.9 to 31.93 (38 and 31.36) million tons, while for Ukraine it was reduced by 3 to 6.89 (5.09 and 0.83) million tons due to active export.

Markets had expected a more substantial decline in production forecasts for South America and the US, so despite the "bullish" nature of the report, corn quotes fell:

• March futures in Chicago - by 0.2% to $253.5/t (-3.2% for one month and -7.2% for two months);
• March futures on Paris Euronext - up 1.5% to €286.75/t or $318.8/t (-12.8% for the month, but only -3.5% in dollar terms, and -18 % in euros for two months);
• January futures in Chicago - by 0.1% to $250/t (-12.84% for one month and -16.8% for two months).

A decrease in the supply of Black Sea corn against the background of increasing imports to the EU will support corn prices in Ukraine in the near future, especially given the significant delay in harvesting. As of December 7, 17.2 million tons of corn were threshed from 2.8 million hectares or 66% of the area in Ukraine with a yield of 6.19 tons/ha, while last year at this time 97.8% of the area was threshed and the yield was 7 ,47 t/ha. From July 1 to December 7, 10 million tons were exported, which is 39% more than last year's 7.2 million tons.

On Dec. 6, the number of net long and short positions in corn fell to the lowest level since September 2020 in the U.S. market, confirming traders' doubts about the recovery of price growth in the near future.