Wasde: Inauspicious start heralds 2% cut to corn end stocks, lifting futures

The USDA proved this year's Wasde odyssey still had the capacity to surprise, with an inauspicious unveiling finally revealing a slight fall in the US corn yield and a trim to production.

The report's downward revision was enough to counter the impact of broad reductions in feed, ethanol and export demand forecasts to leave ending stocks down both for the US and globally.

Corn futures rose by up to $0.06/bu in the aftermath, reversing modest losses seen for much of the day.

At 167 bu/acre, the yield was a shade above the 166.8 bu/acre that analysts had expected, but the USDA once again stood its ground on harvested acreage, leaving it unchanged at 81.8 million acres.

That delivered a corn production outlook of 13.66 billion bu (347 million mt) - not quite as sharp as the 13.586 billion bu (345 million mt) that analysts had looked for, but still down by 118 million bushels (3 million mt).

Despite robust production levels, US ending stocks were trimmed - although not by the deltas that some had expected, with analysts polled by Agricensus looking for 1.79 billion bu (45.5 million mt) from the 1.929 billion bu (49 million mt).

What the USDA delivered was a mild trim of 19 million bu (482,000 mt) as the production fall was cushioned by wholesale changes to US domestic demand - ethanol, feed, industrial and residual losing 75 million bu (1.9 million mt) of demand.

Along with that, the outlook for US exports was also trimmed.

This reflected sterner competition from South America through the early portion of the marketing year, with Ukraine now picking up the baton.

US exports lost 50 million bushels to 1.85 billion bu (47 million mt), with the US loss compensated for in greater export outlooks for Brazil - up 2 million mt to 36 million. And also Russia, which has seen a roaring trade into Iran recently, where the prospects were raised to 5.7 million mt, up 500,000 mt on a larger crop.

Futures took comfort from the overall reduction in world ending stocks however, with 2018/19 ending stocks trimmed by 4 million mt to 320 million mt, and 2019/20 ending stocks dipping below the 300 million mt level.

Analysts had looked for a fall of around a million mt, to 301 million, but got instead a sizeable cut of 6.5 million mt to 295.96 million mt.

That reflected lower opening stocks, as global production trimmed by 2 million mt to 1.102 billion mt, and an increase in demand across domestic feed of around a million mt.

Production was held stable across South America, Brazil projected at 101 million and Argentina at 50 million mt, although Ukraine's lower harvest yields cooled talk of a new record production.

The USDA cut 500,000 mt from October's 36 million mt outlook to bring it in just behind last year's 35.81 million mt record, although the country's export outlook was held stable at 30 million mt.

Collectively, despite lean times for the US exporter and the prevalence of African swine fever, Asia's end users have seen robust demand for corn, soaking up a huge part of South America's record production.

Meanwhile, the USDA increased its import expectations for Japan, South Korea and Vietnam.

Mexico, however, saw its production revised down by 2 million mt, but with no expectations of a boost to imports - with production forecasted falling to 25 million mt, with the import forecast held at 17.5 million mt.

Source: AgriCensus