US crop conditions drop again. Last Monday, the USDA released its weekly crop progress report. According to the report, on July 14, 57% of corn crops were in good or excellent condition, 1 point less than a week earlier and 5 points lower than the same period last year. At the state level, it is worth noting Iowa, one of the top US producers, where good/excellent conditions dropped 7 points week-over-week to 56%. The weather models point to a wetter pattern in the west of the belt until the end of August, which can prevent further deterioration in crop conditions, however, they indicate the return of a warmer and drier weather in September, which can mainly harm the soybean crop.
Today, August 22, the USDA will release its weekly US crop follow-up, and we may have a better indication of how crop conditions evolved over the past week. On September 12, the USDA will release its monthly supply and demand report, which the market has long been waiting for, as it should bring some revision to productivity estimates for the US crop. In August, the Department had already reduced its yield estimate for the 2022/23 corn crop to 11.01 t/ha, but further cuts are not ruled out, given the continued deterioration of conditions in the country over the past month.
US corn shipments were lower than expected in the week ended August 4. According to data released in the USDA's weekly export inspection report, the US shipped 555,600 tonnes of corn in the week ended August 4, 349,700 less than in the same period of 2021. The volume was below the range expected by the market, which varied between 701,100 and 1.15 million tonnes. Cumulative exports totaled 52.5 million tonnes, 11.4 million less than at the same time of the previous season. The accumulated volume is 9.7 million tonnes below the USDA estimate for the current crop.
Chinese demand is a matter of concern among agents. Much of corn's devaluation recorded at the beginning of last week can be explained by concerns related to Chinese demand, caused by fears linked to a possible conflict between China and the US over Taiwan, which could damage trade between the two countries. There is a rumor in the market that China would be interested in starting imports of Brazilian corn this year instead of just buying the product from the 2022/23 summer crop. This expectation is motivated by the high domestic corn prices in China and a short supply of Ukrainian corn in the international market. It is unknown if this story will be confirmed, but it is a point of attention in the market. In addition to the US-China tension, another factor related to the Asian giant that has been moving the market is the difficulty presented by the Chinese economy to recover from the effects caused by the Covid-zero policy.
US corn shipments for the week ended August 11 are within expectations but below what is needed to meet the USDA forecast. According to data released in the USDA's weekly export inspection report, the US shipped 538,400 tonnes of corn in the week ended August 11, 17,200 less than in the same period of 2021. The volume seen was below the range expected by the market, which varied between 475,000 and 800,000 tonnes. Cumulative exports totaled 53.1 million tonnes, 11.6 million tonnes less than recorded at the same time of the previous season. The accumulated volume is 9.2 million tonnes below the USDA estimate for the current season.
Weekly ethanol production in the US drops again, but stocks increase. The Energy Information Administration (EIA) reported that US ethanol production dropped to 983,000 barrels per day for the week ended August 12, which is 39,000 lower than a week earlier. In addition to a seasonality issue (production starts to decline before the corn harvest, as mills usually plan to increase the downtime before harvesting due to the scarcer supply), the drop in ethanol production can also be justified by demand for gasoline being below pre-pandemic levels and problems in some plants of the Midwest. Ethanol stocks, on the other hand, rose to 23.45 million barrels, against 23.26 million in the previous week.
Weekly US export sales - 2021/22
US export sales advance but remain lower than last season. The USDA reported that net sales for the 2021/22 crop totaled 99,300 tonnes in the week ended August 11, against 191,800 tonnes the week before. In the equivalent week of 2021, US net sales stood at 216,500 tonnes. The volume was within the range expected by the market, which varied between 0,000 and 400,000 tonnes. Commitments to all destinations rose to 60.9 million tonnes, against 70.9 million in the same period last year.
Positive expectations for the evolution of Ukrainian shipments. After the agreement recently signed for the creation of a Ukrainian export corridor through the Black Sea, the grain flow through seaports was recovered. The volume seen so far is still much lower than that recorded before the conflict, but as new vessels leave Ukraine's ports and there are no records of non-compliance with the agreement, optimism grows around a growth in the corn supply on the international market. Last week, Ukraine's Ministry of Infrastructure reported that there were 30 vessels in the two-week lineup at the port of Odessa. According to the Ukrainian government, the country should be able to export 3 million tonnes in September, and that volume could reach 4 million per month if the agreement with Russia lasts.
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