Slowdown in U.S. corn, soy sales could pressure export outlooks -Braun
NAPERVILLE — U.S. exporters are enjoying a third consecutive year of strong corn and soybean exports as global demand has stood firm against higher prices, but the costs may have recently reached prohibitive levels as buyers have backed off their purchases.
This was not reason enough for the U.S. government to reduce its current-year corn and soybean export predictions earlier this week, a move that could have been warranted given the slow crawl toward the finish line that awaits at the end of August.
The week ended July 7 marked the third consecutive one featuring net soybean cancellations in the old crop. Despite cancellations and rollover sales being common this time of year, the three-week reduction of more than 600,000 tonnes is significantly larger than in any other year.
Total 2021-22 sales of 59.5 million tonnes (2.185 billion bushels) exceeds the government’s full-year target by just over 400,000 tonnes (15 million bushels), leaving very little room for the recent cancellation trend to continue without reducing expectations.
U.S. exporters were selling soybeans at a record pace early this year as Brazil’s crop came up short. Near-record prices did not correct until mid-June, substantially slowing business. Old-crop sales totaled less than 800,000 tonnes over the last two months, more than last year but otherwise a nine-year low.
The U.S. Department of Agriculture earlier this week reduced the U.S. soy export outlook for 2022-23 by 65 million bushels to 2.135 billion bushels, a three-year low. That degree of reduction would be expected given the smaller crop outlook, which was based on fewer acres.
However, USDA also cut China’s new-crop imports by 1 million tonnes to 98 million, up from 90 million this year, citing less aggressive demand recovery than previously expected.
New-crop U.S. commitments through July 7 totaled 13.9 million tonnes, a 10-year high for the date, representing 24% of full-year forecast. That share is an eight-year high, boosted by a record run of sales back in February, though the pace has been very average in the last couple of months.
China and unknown destinations account for 84% of 2022-23 U.S. soybean sales, a bit more than the same date last year.
USDA in March bumped 2021-22 U.S. corn exports to 2.5 billion bushels from 2.425 billion in February after Russia’s invasion of Ukraine, a key corn supplier. However, USDA cut that to 2.45 billion bushels last month and left it unchanged in this month’s update.
U.S. corn sales were extremely strong in the two weeks after the invasion, though they became more modest after that with prices climbing further throughout April. Corn sales have been lousy lately, as old-crop commitments over the last two months were the lowest for the period in nine years.
Based on progress as of July 7, U.S. exporters still must sell 1.8 million tonnes (71.5 million bushels) of corn for shipment by Aug. 31, a volume not seen in other high-price years. Last year, less than 100,000 tonnes were sold in the same time frame.
U.S. corn prices have come down in recent weeks but are less attractive than Brazil’s supplies, which will be plentiful in the next several months as the record harvest progresses.
One potential outlet for U.S. exporters is China, usually Ukraine’s top customer. Ukraine shipped only 23.5 million tonnes of corn in the 2021-22 marketing year ended June 30, well below the 33.8 million predicted just before the invasion.
China bought about 2.5 million tonnes of old-crop U.S. corn in April and has 2.9 million on the books so far for 2022-23, so there could be some room here, especially since China’s new corn supplier Brazil will likely need to wait until mid-2023 to begin that trade.
On the flip side, more barriers to the China-Brazil arrangement are not suggestive of urgency on China’s part.
A deal may be signed next week for Ukrainian grain to start safely moving from Black Sea ports with cooperation from Turkey, but market-watchers are skeptical on progress between Kyiv and Moscow given the fighting that continued on Thursday.
Even in the event of a deal, logistics will likely be challenging, which could limit the export volumes at least in the near- or medium-term.
Looking ahead to 2022-23, USDA pegs U.S. corn exports at 2.4 billion bushels, a three-year low. Some 11% of that was sold as of July 7, below the anomalous year-ago 25%, but above some of the years prior to that. Stronger early corn sales have been common in other years where prices were elevated. Karen Braun is a market analyst for Reuters. Views expressed above are her own.
(Editing by Matthew Lewis)