Porto Alegre, December 12, 2023 – The United States Department of Agriculture did not bring any major surprise in its December report. Small adjustments in supply and demand along with caution before cutting the Brazilian crop before its planting seem to have been the highlights of the report. The focus remains on South America, with its problematic crop on the north side and awaiting new measures from the Argentine government on exchange rates and export taxes, at least.
With the US crop reaped, attention continues on the final production data in the January report, when the Department closes the 2023 crop data. Small demand corrections in this December report and a small adjustment in the final corn stocks from 54.8 to 54.1 mln tons. No effective change to the market.
From now on, the CBOT prices will focus on some crucial points, such as:
– The financial sector crisis in China, which could really shake markets and demand for commodities;
– The greatest difficulty in shipping wheat through Russia due to the arrival of harsher weather in the port regions. Besides this environment, Russia is expected to reduce the pace of shipments from February/March on a seasonal basis, to resume sales from September onward. Wheat has risen more than USD 1/bushel in the last three weeks and avoided further pressure on corn prices, after the low of USD 4.50/bushel;
– The pace of US exports;
– Argentina’s production and competitiveness with the arrival of a significant 2024 crop;
– The planting of Brazil’s 2024 crop, currently significant for global supply;
– The profile of the area to be planted in the United States in 2024, with the planting intention report on March 31.
Corn on the CBOT seems to have reached its lows for this 2023 crop. Strong demand and, now, improving exports help to sustain corn prices above the historical average. Brazil begins to lose strength in the export environment, from next January, and offers space for the United States to boost sales until Argentina begins its crop only in March. It is natural that global demand is divided between purchases from the USA and Argentina in the first half of 2024. It is at this point that prices on the CBOT can volatilize between USD 4.50 and 5.00 a bushel and surpass these levels again depending on the planting of the 2024 US crop. If soybeans maintain current prices firm at USD 13/14 a bushel, it seems clear that corn will lose area in the next local crop.
In other data from this month’s report, Europe also registered small corrections, and the import projection was maintained at 24.5 mln tons. This picture indicates that Europe will keep seeking supplies from Ukraine and Argentina in the first half of the year. The small surprise about the region was the new increase in Ukraine’s crop projection and its export potential to 21 mln tons.
The big divergence of the USDA report continues to be Chinese production. The December report was unchanged for China, with production at 277 mln tons. Projected imports in this cycle remained at 23 mln tons. However, the Chinese government maintains its projection at 288 mln tons, which makes a significant difference from Chinese import needs.
Meanwhile, Argentina shows a very favorable climate environment, with routine rains in producing regions and corn and soybean planting exceeding 50%. Local planting lasts until the end of January and, given the weather conditions, we do not think there will be any problems during this crop period. Attention is now focused on the measures to be adopted about exchange rates and export taxes by the new local government.
Follow the Safras Agency on our website. Also follow us on our Instagram and Twitter and stay on top of the main agribusiness news!
Copyright 2023 – Grupo CMA
