By: Miguel I. Moneta Porto, international markets advisor at CAADES:
As usual, the report of the month of May is expected with much interest because in it the first approximations of production, consumption, international tradefinal inventory and projections of prices average to producer of the agricultural cycle 2024 – 2025as well as adjustments to the year agricultural in progress.
Therefore, this report must be analyzed from two perspectives, the current situation and the possible future development of the market. Taking into account the current situation, this month’s report can be considered neutral to slightly bullish for cornneutral for wheat and from neutral to slightly bearish for soy according to the projections offered. As the months go by, the next agricultural year will take precedence in the evolution of the market.
He WASDE report should be considered as a compass that shows the possible direction of the market, but they are the specific events that are happening, such as precipitation I frostfor example, those that ultimately affect prices.
In the specific case of corn the adjustments made by the USDA to the final inventory of the 2023/24 agricultural year, together with a lower area to be planted in the United States in the 2024/25 agricultural year and a reduction in production projections in South America in 2023/24 due to adverse weather and pests, result in inventories lower than those anticipated in previous reports and those expected by market operators and analysts.
Other factors that were taken into account by the USDA were ethanol production in the United States, which remained unchanged, forage consumption in that country, which increased, as well as exports due to their evolution in recent months. .
At the international level, the USDA predicts for next year a recovery in production in South America, which will only be seen in the spring of 2025, and in Ukraine, which will enter the market this year along with that of the United States. The USDA estimates that the world’s final inventory at the end of the agricultural year, that is, August 2025, will increase 3 percent compared to the current year. For all of the above, the USDA estimates that the average producer price in the United States will fall from $183.06 per ton in 2023/24 to $173.22 per ton in 2024/25, given that the final inventory/consumption ratio in the United States after all Those movements would rise from 13.8 percent to 14.2 percent.
Prices may vary in the coming weeks and months according to the evolution of sowing progress in the United States, which is showing a certain delay due to excess rain in some regions and which, if it persists, may end in a greater surface migration of corn to soybeans. Likewise, the behavior of the safriña in Brazil, which produces 70 percent of that country’s total production and which faces a situation of water scarcity, may affect prices. On the other hand, in terms of demand, China may import less due to lower consumption due to a reduction in the pig herd, but the greater demand from Mexico due to lower production due to drought would compensate for that deficit.
All of the above refers to yellow corn, which represents the vast majority of world consumption, which is fundamentally fodder, industrial and for ethanol production.
White corn for human consumption represents a very small percentage of world consumption, it is not listed on the Chicago Stock Exchange and its main producer and consumer is Mexico. Other players in the white corn market are South Africa and the United States, which have a very limited supply for export and which are mostly transgenic white corn that are prohibited for human consumption in our country.
This year in Mexico, due to the drought in both the PV 2023 and the OI 2023 – 2024, production is greatly reduced, so it is estimated that it will only be enough for human consumption this year and there will be no surpluses for livestock as This normally happened in previous cycles, which added to the limited international supply of this product will make the dynamics of the white corn market in this period different from that of yellow corn.
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