Demand for U.S. corn continues to garner attention. USDA dropped 2020-21 U.S. ending corn stocks in the April WASDE report by 150 million bushels to 1.352 billion bushels due to an uptick in demand. This increase was split between the export, ethanol and feed/residual categories. The end result tightened the stocks-to-use ratio to 9.2%, the lowest level since 2013-14.
Traders are closely monitoring the current U.S. corn export figure, with some suggesting it remains too low as existing sales are already more than 98% of USDA’s annual forecast (as of this writing). That said, interest in old-crop bushels has been waning in recent weeks and likely remains so until more is known about the Brazilian corn crop size.
Ongoing dry conditions in Brazil have resulted in lower production estimates. In April, USDA predicted a 109 million metric ton (mmt) corn crop for Brazil, while other analysts have estimates as low as 103 mmt. Similar to soybeans the last few months, production will be debated well into the safhrina harvest, which is still months away.
U.S. corn shipments for the week ending April 15 marked the slowest weekly total since mid-February, leaving inspections needing to average roughly 59 million bushels per week the balance of the marketing year. Domestic corn prices in Brazil have continued to move higher, partly due to the aggressive export shipping pace they had last year. As a result, Brazilian corn values have rallied to record levels, leading Brazil to book a few old-crop corn cargoes from Argentina until supplies become more readily available.
U.S. ethanol margins are running at slight positives, with strong corn oil prices helping to keep margins in the black. Corn used for ethanol production for the week ending April 9, totaled roughly 97 million bushels, exceeding the pace needed to meet USDA’s annual projected total. As driving is expected to improve through the summer, some market participants believe USDA’s estimate is likely 25 to 50 million bushels too low.
The U.S. feed and residual number appears to be more of a wild card. While USDA increased its April estimate, some believe feed usage may be slightly overstated. Despite strong cattle on feed numbers, hog inventories have been declining. In addition, more wheat is reportedly being worked into feed rations.
Currently, producers are estimated to be 80%-plus sold on old-crop corn and 10% to 15% on new crop. Some selling continues to be noted as futures mark new highs, but it appears most are waiting to see how the planting season progresses before locking in sizeable sales. Given the current demand/stocks picture, prices will likely remain supported this spring. Stay in contact with your local elevator merchandiser for updates on changing market dynamics and pricing opportunities moving forward.