Will Corn Exports Increase now that China Approves?
Dec 17, 2014
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Corn exports so far this marketing year have been disappointing given the relatively low price and record crop. Export sales have been better in recent weeks, but are still well below levels needed to hit the USDA projections. There is some hope that corn exports will pick up later in the marketing year. Now that China has finally approved Syngenta's MRI 162 (or is in the process of doing so) will this mean an increase in US export sales for corn?
So far this marketing year, which began in September, export sales for corn have been a bit disappointing. Marketing year to date we have sold 933.5 million bushels of corn compared to 1.011 billion at this time last year. For low prices and a record crop this is a bit disappointing. However, the argument has been made that with a record pace of soybean sales and shipments the ports are clogged with soybeans and the corn shipments will come later. There is a big hole in this argument though, marketing year to date we have shipped 391 million bushels compared to 317 million bushels at this time last year. So, we have sold less corn then last year but shipped more. This means that there is no problem shipping corn, but we are not selling it as quickly.
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Part of this may be due to the oddly timed rally in corn prices. the current low in corn came on October first as we were in the beginning stages of harvesting a record corn crop. Generally speaking we would expect to be making new lows at least until we were almost done with harvest. Global buyers may have been surprised by this as well and may now be looking for prices to come down again before becoming more aggressive buyers again.
In the last few days there has been new reason to hope for more robust corn exports despite prices over 75 cents off lows. For one, Ukraine confirmed that there have been disruptions in corn intended for China. This could mean that Ukraine may not be able to fill a portion of it's export commitments and may mean the US gets more export interest from China. What we do not know is how much corn or for how long these disruptions in the Ukraine will effect their commitments to China.
With China now moving to approve MRI 162 (the strain that caused so many cargo rejections in the last 12 months) it seems that China is concerned that then may need to be looking to the US to fill some of their corn needs. At the very least it seems they are looking to be buyers of our DDGs.
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It will be interesting to see how corn exports look over the next couple of weeks. It may be the case that China will come in as a big buyer and push prices higher. This could also motivate other global buyers to get in before the price goes too high. Strong China corn purchases could have a snowball effect on the global corn market. However, if these big china purchases never materialize and export sales continue to fall flat, corn could need to use lower prices to go hunt for more export business.
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March Corn Daily chart:
January Soybeans Daily chart:
March Wheat Daily chart:
All this means that speculators should be looking for opportunities and producers need to look to lock up some prices. Give me a call for some ideas. In particular, producers looking to hedge all or a portion of their production may be rather interested in some of the options / options-futures strategies that I am currently using.
In my mind there has to be a balance. Neither technical nor fundamental analysis alone is enough to be consistent. Please give me a call for a trade recommendation, and we can put together a trade strategy tailored to your needs. Be safe!
Ted Seifried (312) 277-0113 or firstname.lastname@example.org
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