WASDE: Corn Use Up, Stocks Down, Global Production Trimmed

July 13th, 2018


Category: Grains

(AgriCENSUS) – A lack of change on the US corn yield was perhaps the biggest surprise of the July WASDE update, with stellar conditions and rapid growth failing to persuade the USDA.

Market voices had expected yields to move up as high as 177 bu/acre, but instead the USDA left them unchanged at 174 bu/acre, waiting on “the critical pollination period of middle and late July,” before making any revisions.

That accounted for one of the bears that the market had anticipated, but there was more — or perhaps less — in store.

For the US domestic market, the anticipated increase in corn used in the ethanol grind resulted in a 25 million bushel increase to take total 2017/18 corn consumed in ethanol to 5.6 billion bushels (142.25 million mt).

Corn production was pushed up to 14.23 billion bushels, well within analysts’ expectations, and just shy of the average expected of 14.26 billion bushels on the back of increased planted area which rose to 89.1 million acres.

Pushing up ethanol use helped affect a cut in 2018/19 beginning stocks which was greater than had been anticipated — 2.02 billion bushels versus an average guess of 2.107 billion — and set the US on its way to lower ending stocks of 1.55 billion bushels, versus estimates of 1.7 billion.

Key in propagating that stock reduction was the expected increase in US corn exports, which moved up to 2.22 billion bushels (56.5 million mt) amidst lower expectations for the rest of the world’s production and export firepower.

Finally, while 25 million bushels was added to the 2017/18 marketing year, the USDA cut out 60 million bushels from the 2018/19 feed and industrial use taking it to 7.105 billion bushels, including a 50 million bushel cut to corn for ethanol production.

Globally, an overall cut in corn stocks was reversed through an increase in global production, the former moving down to 191.7 million mt and the latter moving up to 1.054 billion mt. But increased feed use and exports saw global stock levels fall to just under 152 million mt – at the bottom end of expectations.

No further, potentially final, revision of Argentina’s 2017/18 crop was made, despite expectations, but Brazil saw a further 1.5 million mt taken out of its total production as the safrinha continues to feel drought stress.

That took Brazil’s crop to 83.5 million mt, while South Africa was also pushed slightly higher to 13.8 million mt.

For the EU, corn production was pushed modestly higher in the 2017/18 year, up 100,000 mt to 62.2 million, with the 2018/19 outlook also tweaked slightly higher by 500,000 mt to 61.5 million mt versus the June report.

South Korea’s recent buying trend has fostered expectations of a higher import need, with the USDA raising the 2018/19 forecast to 10.2 million mt, from 9.7 million.

Russia’s corn production and export capacity was also slashed and, while Ukraine was left unchanged, a parallel GAIN report called for the 30 million mt that the country is currently forecast to produce to be cut almost 20% to 24.5 million mt.

With many of the fears around this month’s WASDE update already priced in, the tighter outlook for stocks and increased demand saw CBOT corn futures ping back from early losses to see September 2018 through to July 2019 contracts add at least $0.05/bu along the curve.

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