Little has changed in the fundamentals. It is still quite dry over a large portion of Brazil’s Safrinha corn belt, with no major signs of relief in the forecast. It is dry in portions of the U.S. Plains and Midwest. But it’s also early. The market is going through gyrations now as it corrects an over-bought situation and assesses whether the tight future fundamentals it priced in are actually going to play out. We won’t know that for some weeks, or even several months. That could lead to significantly more volatility with expanded position limits and daily trading limits in the week ahead.
The key to export demand is shipments. The pace of shipments says something about the urgency of the demand as well as scope. Shipments can get rolled into the following year, or even cancelled in some cases. The below graphic shows weekly corn shipments versus the previous year, versus the five-year average and versus the 10-year seasonal pace calculated to determine the weekly pace needed to hit this year’s pace, since shipments tend to have a seasonal pattern to them. You will note that corn shipments were very slow relative to that seasonal pace into December, with China seeing little urgency for taking shipment of corn while it focused on offloading the soybeans it needed to keep up with its hog herd rebuilding program. The urgency for shipping corn began to pick up this year as concerns rose about global supplies, especially as questions arose about the future of Brazil’s Safrinha crop, along with some forecasters raising alarm bells for the U.S. Midwest growing season. Taking all data into account, marketing year corn shipments to date exceed the seasonal pace needed to hit the USDA’s target by 99 million bushels, and the gap continues to grow. The red line on the graph below shows that weekly shipments need to average just 53.3 million bushels through August to reach the USDA’s target. That line keeps getting adjusted lower because shipments keep exceeding it. This puts pressure on USDA to raise its export target and bring down its projected ending stocks estimate for this year and next.