Analysts Predict Increased US Corn Production
In anticipation of the USDA’s July report, analysts are forecasting a significant increase in US corn production. They estimate the US corn crop will grow by 6.5 million tons, reaching 383.9 million tons due to expanded planting areas. This increase is also expected to boost the ending stocks estimate for FY 2023/24, which could further depress corn prices.
Declining Corn Futures in Chicago
Amid favorable weather conditions for crops, December corn futures in Chicago fell by 14.4% over the month, reaching the lowest level since the end of 2020 at $160.8/t. This is a sharp decline from April 2022 when prices were double this amount. According to USDA’s National Agricultural Statistics Service (NASS), the percentage of US corn crops rated as good or excellent rose by 1% over the week to 68%, compared to 55% last year. Additionally, 24% of corn areas are in the flowering stage, which is 10% above the 5-year average. Forecasted rainfall in corn-growing regions is expected to benefit crops during this critical development phase.
Historic Decline in Corn Prices
Corn prices have fallen for six consecutive quarters, marking the longest decline since 1959, according to Bloomberg. This prolonged drop has resulted in US farmers holding the largest corn stocks since 1988. The US Market Services Group (MSG) predicts that farmers’ income will fall to the lowest level since 2006 in 2024, 1.7% below the 20-year average and 40.9% below the record level of 2022 when adjusted for inflation. Additionally, the US is rapidly losing its status as the world leader in corn exports due to increasing competition from Brazil and Argentina. Notably, Argentina recently sent its first corn shipment to China in 15 years.
Brazil’s Harvest Progress
According to the agency Conab, as of July 7, Brazil had harvested corn from 95% of the area for the first harvest (compared to 96% last year) and 61% of the area for the second harvest (up from 29.3% last year). This progress underscores Brazil’s growing influence in the global corn market.
Weather Concerns in Ukraine
This week, Ukraine is expected to experience high temperatures of 30-35°C, which could negatively impact corn crops, despite their generally good condition thanks to June rains. The lack of precipitation and high temperatures during the flowering period over the next two weeks could reduce the potential yield of the future harvest.
Market Dynamics and Farmer Sentiment
Demand prices for corn from both the old and new harvests with delivery to Black Sea ports, remain at $160-170/t. However, farmers are hesitant to enter forward contracts, hoping for price increases in the new season.
The current dynamics in the corn market reflect a complex interplay of weather conditions, production forecasts, and international competition. As global market leaders adjust to these changes, strategic decision-making will be crucial for stakeholders aiming to navigate the fluctuating landscape effectively.