The corn market’s short-lived bullish reaction to last Thursday’s tighter U.S. and world supply estimates from USDA signals that demand concerns will continue to dog market this fall and winter, capping prices.
The import/export situation is of particular concern to the market as U.S. corn export sales remain extremely slow, while hog and poultry operations in southeastern states have turned to imports to meet their needs in the face of high U.S. prices.
Friday’s corn futures retreat was driven partly by poor weekly export sales and partly by talk that livestock feeders had booked large amounts of Argentine corn.
Trade sources in Argentina told Reuters News Service later in the day that U.S. buyers had booked around 600,000 metric tons of corn (23.6 million bushels) from Argentina for delivery from November through May. The first shipment of Argentine corn, a 43,000-metric-ton cargo, is scheduled to arrive in Wilmington, N.C. on Nov. 12.
The news of the Argentine purchases follows the late September revelation that a group of three large North Carolina livestock producers had booked 750,000 metric tons (29.5 million bushels) of Brazilian corn for delivery over a six-month period.
The reports suggest that U.S. buyers have already booked imports of at least 53 million bushels, or 70% of USDA’s 2012-2013 import forecast of 75 million bushels. Brock Associates continues to forecast U.S. corn imports at 100 million bushels. Imports will also come from Canada and possibly from Europe.
Either way, there’s not a huge amount of corn involved and the impact on the market may be mostly psychological. The main fundamental impact of the imports will be to ease the upward pressure on corn prices in the eastern Corn Belt, which normally supplies Southeastern feed needs. A large southern corn crop will also fill some of the supply gap left by the drought shortened crops in Illinois and Indiana.
Meanwhile, net U.S. corn export sales for the week ended Oct. 4 totaled just 600,000 bushels and 400,000 of those were for delivery in the 2013-2014 marketing year, USDA reported on Friday.
The absence of sales sent a clear message to the corn market that the spike in futures prices following the release of USDA’s quarterly Grain Stocks Report on Sept. 28 was enough to shut down export demand, which has been very weak since early summer.
Five weeks into the 2012-2013 marketing year, total U.S. corn export commitments are running 47% behind a year earlier with USDA forecasting about a 25% drop in marketing year exports.
From a seasonal standpoint, exports are still close to the pace needed to meet USDA’s export forecast, with total 2012-2013 export commitments at about 36% of that total. Over the past five years, export commitments have averaged 39% of final exports at this point in the marketing year.
However that is no reason for optimism since USDA projects the lowest U.S. corn exports in 39 years. USDA cut its 2012-2013 corn export projection by 100 million bushels on Thursday to just 1.150 billion bushels. By comparison, U.S. soybean exports are now forecast at 1.265 billion bushels.
U.S. corn export sales should start to pick up in coming weeks as South America runs out of old-crop corn to export, but 2012-crop corn from Ukraine and eastern Europe will continue to provide competition, even though production there was also limited by drought.
Editor’s note: Richard Brock, Corn & Soybean Digest's marketing editor, is president of Brock Associates, a farm market advisory firm, and publisher of The Brock Report.