July 25, 2023

 

Brazilian supplies and high prices cast doubt on US corn and soybean

 

 

As the new marketing year approaches on September 1, US corn and soybean export potential is facing doubt due to abundant Brazilian supplies, high prices, and uncertainties about US crops, Reuters' analyst Karen Braun reported.

 

Typically, new-crop US corn and soybean export sales pick up in July, especially into August. While there has been some progress in the past month, total bookings for both commodities remain at four-year lows.

 

Data from the US Department of Agriculture (USDA) on July 13 indicated that US exporters had sold 4.5 million tonnes of corn and 4.9 million tonnes of soybeans for delivery in 2023/24. These figures are the lowest for this date since 2019, just ahead of the 2019/20 season.

 

The current sales cover only 8% of the USDA's 2023/24 US corn export forecast of 53.3 million tonnes (2.1 billion bushels), falling below the five-year average of 13%. Notably, the average is influenced by the past three years, including China's significant purchases, accounting for 25% of coverage by this date in 2021.

 

Regarding new-crop soybean sales, they represent 10% of USDA's 2023/24 export target of 50.35 million tonnes (1.85 billion bushels). The five-year average is 16%, driven by last year's 24% as buyers rushed to secure U.S. supply amid Brazil's drought-related losses.

 

Some analysts consider both export outlooks, particularly for corn, to be overly optimistic, given that cheaper Brazilian supplies are increasingly taking a share of the US export market. But the focus should be on the US crop, as it will determine price direction and overall demand.

 

USDA's projections indicate a record US corn crop for this year, leading to an 11% increase in overall U.S. corn supplies, the largest annual growth in a decade. This allows for healthy but not excessive growth in corn exports on the balance sheet.

 

On the other hand, US soybean supply is expected to remain steady into 2023-24, but USDA predicts a nearly 7% decline in U.S. exports for the year. Notably, the agency maintains China's soy imports for 2023-24 at 99 million tonnes, consistent with the previous year.

 

Last week, new-crop corn and soybean commitments were significantly influenced by sales to Mexico. The U.S. corn bookings to Mexico, totalling 2.8 million tonnes, set a record for this date. Similarly, new soy sales to Mexico reached 884,000 tonnes, the second-highest total for this date after 2018.

 

While Mexico remains a top buyer of US corn and soybeans, China, the primary soy customer, has been slow in its purchases, as Brazil continues to deliver a record soy harvest to Chinese ports.

 

China's reduced participation in US corn trade is not surprising, considering its late entry into Brazil's corn market last year. Presently, China has booked 272,000 tonnes of new-crop U.S. corn for 2023-24, significantly lower than the same dates in previous years.

 

Apart from Mexico and Japan, whose corn purchases remain near the recent average for this date, standard customers Colombia and South Korea have not made any new-crop corn purchases. Interestingly, Canada has already bought nearly 300,000 tonnes of new-crop US corn, setting a record for mid-July.

 

- Reuters