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See corn analysis below. Strongest fundamentals in the grain complex, excluding the possibility of trade retaliation. Margins are cheap, prices are long term cheap and volatility is manageable.
CORN: Bullish Report Subject To Bullish Revisions
The March WASDE pegged ending U.S. corn stocks at 2,127 M Bu, down 225 from the 2,352 February estimate, down from last year’s 2,293 and well below the average trade estimate of 2,312. World stocks also declined.
The 225 M Bu decrease in U.S. stocks included a 175 increase in exports and a 50 increase in ethanol usage. Exports were raised due to competitive pricing, robust sales and a decline Argentine exports.
World ending stocks of 199.2 mmt were down from the February estimate of 203.1, down from last year’s 231.9 and in line with trade estimates.
Global corn stocks declined for the first time in five years. The global stocks to use ratio was 18.5% in 17/18, 21.9% in 16/17 and 22.2% in 15/16.
At 14.4% of usage, the 17/18 global corn stocks “without” China were the same as the U.S.
In an era of burdensome stocks, corn is the shining light. Global corn stocks are now in line with the 20 year average and below the longer term averages.
Global production was unchanged as gains in the EU, India and South Africa offset the reductions for Argentina and Brazil. The Argentine crop was pegged at 36.0 mmt, down 3.0 from February and below the average trade estimate of 36.6.
The Brazilian crop was pegged at 94.5 mmt, down from the 95.0 February estimate and above the 92.2 trade estimate. Given the CONAB estimate of 87.3 mmt, 8.2 below the USDA, the Brazilian crop downgrade was seen as conservative and subject to further reduction.
The U.S. by far is the world’s largest producer, consumer and exporter of corn. China is the second largest producer and user. As the world’s largest domestic feed user, China does not export corn.
As the world’s largest agricultural market, interesting to see the major decline in Chinese corn stocks and their stocks to use ratio over the last three years. The deficit between use and production also increased. This was no doubt partially responsible for the 1.0 mmt ton increase in Chinese imports
Unlike corn stocks, Chinese wheat stocks continued to increase over the same period while the much lower bean stocks remained flat. While China is a major producer and has major stockpiles of wheat and corn, they are not a big producer of soybeans nor do they maintain large stocks of beans when compared to wheat and corn.
The decline in stocks sets the stage for 2018/19. Attention will now turn U.S. corn export shipments, further Latin American production downgrades, the end of month quarterly USDA stocks & acreage report and the upcoming N. American growing season. On a negative note, U. S. corn would no doubt experience Chinese trade retaliation before soybeans.
This information has been taken from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. The author is an analytic observer with decades of experience. He is not an advisor or a broker, does not manage money, provide investment advice or make recommendations.