Ahead of the Feb. 9 Supply and Demand report, traders predicted 2020/21 corn exports would hit at least 2.75 billion bushels (a 200-million-bushel increase from January). Record corn export sales in late January escalated expectations that 100 million bushels pulled from the estimate in January would be added back, plus another 100 million bushels.
Traders got neither. Instead, USDA added just 50 million bushels to estimated exports. With no other changes to the balance sheet, estimated 2020/21 corn carryover was lowered 50 million bushels, but the estimate was still about 100 million above the average trade guess ahead of the report.
Even though many market watchers immediately discounted the estimate, corn futures retreated from highs established earlier that day.
As dust settled, many asked, “What was USDA thinking?” Some possibilities:
- Port capacity. Some speculate the reason USDA was conservative with corn exports was because it increased soybean exports by 20 million bushels, further stressing the capacity of the U.S. grain export industry.
- South American new-crop supplies. Even with about 70% of the Brazilian corn crop to still be planted, harvest of the first 30% is underway. The flow of supplies to the market could siphon some demand away from the U.S.
- China’s “fidgety” history. China has a history of export cancellations. There’s speculation China could use a “cancellation scheme” to drive prices lower to make replacement purchases later.
And while USDA employed the go-slow approach to the U.S. export estimate, it did get aggressive with Chinese corn imports, pushing the tally up 6.5 million metric tons (MMT) to 24 MMT. USDA also says 4.5 MMT of those exports are headed to storage as they were added to estimated 2020/21 corn carryover.
Here’s my biggest concern about what USDA didn’t deliver. What if the trade is right that U.S. corn exports will be at least 2.75 billion bushels with an outside chance of reaching 3 billion?
Signals Arrive Too Late
Those additional exports would intensify the need for demand rationing and higher corn acres in 2021. If the bulging export sales are loaded and delivered, the signal to add to 2021 production will be sent too late to farmers.
Actual shipments would support prices for any remaining old-crop bushels in the summer of 2021 and would offer improved pricing opportunities for new-crop bookings. If USDA’s February outlook is accurate, that Feb. 9 contract high might turn out to be the high.
