WASDE: Corn export, stock revision anticipated, but downside limited

While best guesses for the fate of the corn market lean heavily towards the bearish end of the spectrum ahead of the upcoming January WASDE report, market sources see little downside for prices.

That's because values remain holed in the $3.50/bu range – with many arguing that corn cannot fall much below that price.

With the USDA set to release the latest version, the final part of its 2017 review, on January 12, much of the market’s expectations for revision focus on the fierce competition for export markets and the disappointing export sales that have been a consequence.

While US production has excelled, reaching 14.57 billion bushels according to the December report, 1.925 billion bushels was earmarked for export.

However, export sales currently account for some 55% of that total, when it it should be closer to 58%, according to market analysts at Allendale Advisory Center, potentially leaving the US to miss that target by 58 million bushels, or 1.5 million mt.

Allendale’s chief strategist, Rich Nelson, expects the USDA to adjust the export volume by some 25 million bushels, with others echoing that expectation.

“The USDA lowered its US export estimate 25 million bushels in the December monthly WASDE report,” Benson Quinn Commodities also noted in a research note, with the trade looking for adjustment lower in the January edition.

US ethanol production has also surprised many, with the sector seeing record production levels in excess of a million barrels a day for much of the tail end of the year, and relatively high oil prices encouraging demand.

That encouraged the USDA to revisit production levels in the December edition when it added 50 million bushels to take corn consumed for ethanol production to 5.525 billion bushels.

However, with stocks above 22 million barrels, it is unlikely to see a revision in that corn outlet – particularly ahead of the first quarter of the year, which is typically a weak point for any road fuel demand.

South America woes more than weather

Further afield, the ongoing La Nina effect continues to ring alarm bells, but the December WASDE report changed production estimates for neither Argentina or Brazil, both of which remained at 42 million mt and 95 million mt respectively.

Argentina’s planting has rattled on and narrowed the delays seen versus the previous year, but key portions of the country are already experiencing drought conditions and may yet tip the balance towards a revision of production.

Brazil is also in the spotlight, with the slow pace of soybean harvests delaying the planting of the safrinha crop in some states – the second corn crop that powers much of Brazil’s corn exports.