Turbulence in the Corn Market: Stockpiles Decline, Price War Imminent, USDA Predicts Corn Prices to Plummet by 10%!

In the week ending October 11, 2024, the global corn market prices showed a divergence trend, which was reflected in the decline of Chicago corn futures prices and the increase of European and Black Sea corn prices. The decline in Chicago corn futures is mainly due to the smooth progress of the U.S. corn harvest, and the production is expected to be larger. However, lower yields in Europe and the Black Sea region may limit further downside for global corn prices.

Specifically, on October 11, the Chicago Board of Trade's (CBOT) December corn contract closed at $4.1575 per bushel, down 2.1% from a week earlier. At the same time, the spot price of yellow corn No. 2 for October shipping in the U.S. Bay Area was $4.7825 per box, also down 1.9 percent. In Europe, Euronext November corn closed at 215.00 euros/ton, up 0.7%. In addition, the FOB price of Argentine corn on the river is 210 US dollars/ton, up 1.4%; The price of corn futures on Brazil's B3 exchange was 67.75 reais per bag, up 2.3%.

In the international oil market, crude oil futures prices rose for a second straight week this week as the market assessed the possibility of a possible Israeli strike on Iran's oil infrastructure. Brent crude futures, the global benchmark, closed at $79.04 a barrel, up 1.3 percent from a week ago. On Friday, the ICE Dollar Index closed at 102.677, up 0.4% from a week ago.

In its monthly supply and demand report for October, the U.S. Department of Agriculture revised upward the 2024/25 U.S. corn yield and yield. According to the report, the US corn yield estimate for the year was raised by 0.2 pu/acre to a record 183.8 Pu/acre, an increase of 3.7% year-on-year. The acreage harvested was unchanged at 82.7 million acres, resulting in a corresponding increase of 17 million cattles to 15.203 billion cattles, the second-highest yield on record, behind the 15.341 billion cattles in 2023/24.

To keep corn stocks from overballooning to record highs, the USDA this month further increased its demand forecast for old and new season corn. Among them, Chenji corn exports increased by 20 million pu to 2.292 billion pu; Ethanol industry consumption increased by 0.06 billion pu to 5.471 billion pu; Feed and other usage was also raised by 39 million cu to 5.814 billion Cu. These adjustments resulted in a downward revision of ending inventories by 52 million Cu to 1.760 billion Cu. For the new season, stocks were also revised down by 58 million cu to 1.999 billion Cu, but were still up 13.6 per cent year on year and the highest since 2018/19.

In terms of stock-to-use ratio, the 2024/25 U.S. corn forecast is 13.33%, which is lower than last month's 13.75% forecast, but higher than last year's 11.76% (last month's 12.14% forecast), higher than the 10-year average of 12.48% and the highest value since 2019/20. This suggests that the U.S. corn supply situation will be unusually loose next year, so prices must remain competitive to stimulate demand growth and avoid further inventory expansion. Usda forecasts the annual farm price of U.S. corn to average $4.10 / bushel in 2024/25, down from $4.55 / bushel last year ($4.65 / bushel last month).

The global ratio of ending corn stocks to use fell to its lowest level in 11 years. In terms of global corn supply and demand, the US Department of Agriculture this month revised down its 2024/25 corn production forecast for Russia and Ukraine to accurately reflect the adverse impact of the current hot and dry weather on the corn crop. Specifically, Russian corn production is expected to be reduced by 500,000 tons to 13 million tons, while exports are also lowered to 3.8 million tons. Ukraine's corn production forecast was reduced by 1 million tons to 26.2 million tons, and its exports were also reduced to 23 million tons.

In addition, Egypt's corn production forecast has also been reduced by 600,000 tons to 7 million tons, while corn imports are forecast to increase by 400,000 tons to 8.2 million tons.

For the Chinese market, the U.S. Department of Agriculture this month forecast that China's corn imports in 2024/25 will be 19 million tons, down 2 million tons from last month's forecast, but also significantly lower than last year's 23.5 million tons, showing the adjustment trend of China's corn import demand.

At the global level, USDA lowered its 2024/25 global maize ending stock forecast by 1.8 million tonnes to 306.52 million tonnes, a decrease of 6.13 million tonnes, or 2 per cent, compared with the previous year. This change resulted in the global maize stock utilization ratio falling to 21.78%, which is not only lower than the 21.94% forecast last month, but also lower than last year's 22.17% and the past decade average of 24.52%, reaching the lowest level since 2013/14. This data highlights the tightness of the global corn supply and demand situation, especially given the potential reduction of corn acreage in leading exporter Argentina, as well as the weather-related tightening of corn export supplies in Ukraine and Russia, while production in major Eastern European corn exporters such as Romania and Bulgaria has also been affected by bad weather.

In addition, maize seeding progress in Argentina and Brazil is also noteworthy. Argentina has been affected by dry weather, the progress of corn planting has been delayed, and several exchanges have different forecasts for Argentina's 2024/25 corn production. In Brazil, the first maize planting schedule is slightly below the same period last year.

At the same time, the monthly report issued by Strategic Grains has fine-tuned EU maize production, which is expected to reach 58.1 million tonnes in 2024/25, but still below the historical average and the average of the past five years. Eu maize imports are expected to exceed 20 million tonnes due to lower production, but maize production in traditional suppliers such as Ukraine has also been affected by drought, which could put some pressure on EU imports.

According to the U.S. Department of Agriculture's Weekly Crop Progress report, as of Oct. 6, the U.S. corn harvest schedule had reached 30%, slightly above the five-year average of 27% and a slight slowdown from the same time last year (31%). At the same time, the good and good percentage of corn remained stable at 64%, significantly higher than the level of the same period last year (53%). Weather agencies are predicting that warm, dry weather in the Midwest over the next few days will help farmers speed up the corn harvest.

In addition, the US corn market showed signs of slowing last week, but the year-to-date sales remain ahead. According to the U.S. Department of Agriculture's Weekly Export Sales report, net 2024/25 corn sales for the week ended Oct. 3 were 1.22 million tons, down 460,000 tons from the previous week. Nevertheless, total sales for the year to date have reached 17.65 million tonnes, up 15.4 per cent from last week (14.2 per cent). The USDA expects 2024/25 corn exports to target 59.06 million tons, up 1.4 percent from a year earlier.

From the point of view of export quotation, the FOB price of US Gulf corn on October 10 was 210 US dollars per ton, down 2 US dollars from the previous week. At the same time, the price of Brazilian corn at the port of Paranagua also decreased slightly to $212 / ton, down $3. However, the price of Argentine corn in the Upper River rose to $210 / ton, an increase of $4. In addition, on October 11, the FOB price of Ukrainian corn rose to $225 per ton, an increase of $5.

J.p. Morgan analysts are optimistic about the outlook for corn prices, based on weaker production prospects in major producing countries. The report cited lower yields in Ukraine and Russia following dry weather, reduced corn acreage in Argentina due to concerns about leaf hopper infestations, and lower rainfall in parts of the Americas as factors that adversely affected corn yields.