ANALYSIS: Can the US hit the USDA’s 67m mt corn export target?

This month’s update to the USDA’s influential Wasde report unveiled an ambitious hike to US corn export targets, as inflated Chinese and Mexican buying stoked hopes of a record-breaking year at the country’s main hubs.

Buoyed by net sales data already showing 10.7 million mt in the roster for China, with another 6.8 million for Mexico and 4.5 million mt for Japan – along with another 5.2 million mt for unknown destinations – there are reasons to be optimistic about the country’s prospects.

However, the near 14% increase raised eyebrows, as the USDA banks on a 2.65 billion bu (67.3 million mt) record export bonanza dissipating the impact of what is likely to be the third biggest crop in history and staving off a build in ending stocks.

The question now is, with a heavy soybean programme running in tandem, is it even feasible?

Agricensus looks at some of the factors that could make or break a critical export year.

For

From a logistical perspective, the primary hubs of the US Gulf and the Pacific Northwest can certainly cope with the volumes with both capable of handling up to 2 million mt each per week of combined corn, soybean and wheat exports, along with a slew of Atlantic Coast, Lakes and interior rail options.

The US is likely to have the corn to sell as well, despite heavy cuts to production outlooks since the start of planting, when some voices initially called for a US corn crop in excess of 400 million mt.

At 368.5 million mt, the current projection is still the third biggest in history, falling only just behind the 2016/17 and 2017/18 harvest, which averaged 378 million mt and comes in just as Ukraine’s production outlook is pared sharply back and amid South American export exhaustion.

The final supportive factor is the customer base – on the face of things the staple buyers have returned to the US, Japan’s buying streaking ahead of last year’s pace, and Mexico marginally ahead by around 700,000 mt.

But China is increasingly seen as the game-changer, and that is cause for both optimism and concern.

“I still believe China has more to buy from the US,” one trade source told Agricensus.

“I have seen more corn in line-ups during a big bean program than ever before. I think the bean number might be too high,” the source said.

Against

And that is part of the challenge.

The heavy soybean export slate has driven up cash premiums for corn as it tries to compete for berth space, making US corn only competitive in bursts and rendering a relatively slow start to the export season.

Currently, US corn inspected for export this marketing year stands at 7.5 million mt, according to USDA data, making an average export rate of 767,767 mt through the first 10 weeks of the new marketing year.

At that pace, exports can only aspire to reach 40 million mt, so the pace has to pick up somewhere.

The expectation is that, as Brazil’s new crop locks up more of the Chinese market, the pace of US corn exports will pick up as it fills the vacated soybean slots from late February.

The USDA has its soybean export outlook at 2.2 billion bushels (60 million mt), but if the current corn export pace is maintained through to mid-February, US corn exports are likely to stand around 18-20 million mt.

That’s a respectable figure, but would still leave around 48 million mt of corn to be exported, equating to a weekly rate of 1.7 million mt for the balance of the marketing year – a scintillating pace, and one that would be utterly dependent on flawless logistics and cooperative weather.

December, January and February will be the key quarter, according to estimates, with the period likely needing to handle close to 1.5 billion bushels of corn and soybeans combined – roughly a third of the full year’s corn and bean export estimate.

“Even with a bigger sorghum program, we should be able to digest that movement,” Kelly Herrick of Advance Trading told Agricensus but warned “we’re one logistic hiccup away from having issues though. It’s inevitable there will be a derailment or storm system disrupt something along the way.”

And the challenge past February is maintaining US competitiveness as first Argentina and then Brazil return to the export fray from late March onwards, with the Pacific Northwest likely to shoulder the brunt of the competition into the key Asia markets.

“PNW values are far too high to compete past March at present value compared to the Gulf. We are going to have a tough time and I think logistics just get worse once we see winter,” the first source said.