Fundamentally Speaking

After weeks of fits and starts, the corn market is finally getting the news it wanted with word from USDA that export sales of 1,156,000 metric tons of corn was purchased by China for the 2020/2021 marketing year.

The corn market at $5.50 seems to be trading a lower carryout and stocks-to-use ratio than current USDA figures of 1.502 billion bushels (bb) and 10.3% respectively.

Trade feels exports could prove to be 200 million bushels (mb) larger than current projection of 2.60 bb based on aggressive sales pace so far this season and good possibility that China will still come in for at least another 1-2 million metric tons.

With regard to the first item, this graphic shows U.S corn export sales and shipments in million bushels as of the first week in March and as percent of the USDA March WASDE export projection.

The figures in the yellow boxes are the change in the USDA corn export projection from that March WASDE to the final estimate.

The current cumulative sales total at 2.342 bb is the highest ever and at 90.1% of the March 2021 WASDE estimate of 2.60 bb it appears the second highest ever next to the 92.6% pace seen in the 2013/14 season which resulted in the USDA final export projection that year being 295 mb higher than the March 2014 WASDE projection.

This why some feel USDA is well behind the eight ball but note that current shipment pace as of first week of March is 1.093 bb and while that is highest bushel amount for this date since the 2007/08 season it is just 42% of the March WASDE, down from the 20-year average of 45.5% which is why some say possibility of Chinese cancellations justifies USDA decision to remain cautious about higher exports.

Still this week's export inspections of 86.6 mb shipped as of March 11 is the largest weekly shipment of corn since November 1989.

Though internal Chinese corn prices have dropped somewhat, they remain near historic highs linked to the drawdown of state supplies and a rebound in their pig inventories suggesting a real legitimate need of the U.S. corn already bought.

Perhaps this purchase after a prolonged absence from the U.S. market could perhaps presage additional sales to the PRC.

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