The USDA's supply and demand report for November brought an important and structural surprise with the cut in the American harvest. No estimate from the US private sector pointed to a new loss of production in the announced proportion. The USDA confirmed the new loss number and cemented a corn price for CBOT above US $ 4.00/bushel through the September 2021 harvest. This is because the cut in inventories has also increased to the lowest since 2014, which puts pressure on the results of the 2021 South American harvest and the next planting in the United States. The USDA also predicts an increase in Chinese imports this business year.
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The 2020 American crop was planted in a perfect window, that is, until May 30th for corn and until June 15th for soybeans. There were no obstacles like in 2019 for planting, nor for development in July in the critical phase of corn pollination. In August, a storm hit Iowa and part of Illinois with strong winds, damaging most corn crops and some soybeans. The sequence was drier weather for both states. However, the corn was ready, and the drier climate hit soybean crops, basically due to the decisive moment for the level of production.
The USDA cut production in its September and October reports, and there was still no market expectation that the cuts could be deeper. This November, the market was still expecting some downward adjustment, and the department brought a bigger cut than expected. Yield fell to 175.8 bushels/acre, the lowest since 2018, bringing production to 368.5 million tons, still a good historical number but well below initial projections of 384/400 million tons.
Per: Arno Baasch | Source: SAFRAS Latam Agency
