WASDE preview: Familiar corn concerns focus on South America

Ahead of this week’s release of the March World Agricultural Supply and Demand Estimates from the USDA, the market’s expectations again focus on South America and the potential downgrade of Argentina and Brazil corn crops.

Argentina’s crop in particular has borne the brunt of La Nina dryness in recent months, with the South American country already the subject of one USDA revision in the February update.

Since then, persistent dry weather has seen tangible consequences for the Argentinian crop, with many local analysts slashing their expectations and pressure mounting for the USDA to further trim corn production from 42 million in January, to 39 million in February with most estimates targeting a further cut to 36.5 million mt by March.

Some analysts put the anticipated reduction as low as 33 million mt.

Brazil remains something of an enigma, however, with the February report holding production at 95 million mt, despite weather worries, cotton competition and decreased acreage reigning most others’ expectations in.

With no change in February, expectations are focused on a cut to 91.6 million mt, according to analysts polled ahead of the Thursday release, leaving the USDA in the slightly awkward position of potentially cutting their estimates while others are now looking to increase.

Relatively improved corn prices, lingering rains and rapid improvement in corn plantings following a delayed start for the safrinha crop have laid some of the concerns around farmers planting decisions to rest, bolstering yield expectations and arresting any further decline in the planted area earmarked for corn.

After concerted efforts by China and strong US performance on exports, expectations are also focused on global end stocks being revised downwards by close to 5 million mt to 198.9 million mt.

Within the US, most expectations focused on ending stocks and exports – something that was also revisited in February – with on average the market anticipating a fall in US ending stocks to 2.313 billion bushels.

What drives the fall in US ending stocks is likely to be a further increase in exports, although again ethanol production has been robust, exports have been healthy and the industry is on track to exceed the current 5.525 billion bushels that the USDA is currently forecasting.