Corn Prices Surge - Forecast Cuts Drive Market Reaction

The USDA's January report on corn supply and demand for the 2024/25 marketing year (MY) delivered unexpected cuts to US production estimates, sparking a sharp rise in corn prices. The report also adjusted global stock projections downward, further intensifying the market response.

• March corn futures on the Chicago Board of Trade (CBOT) jumped 3.2% to USD 0,185 per kg, marking a 6.8% rise from December figures but still 42.6% lower than last year’s USD 0,264 per kg.
• On the Paris exchange, March futures rose 1.2% to USD 0,219 per kg, reflecting a 33% year-on-year decline.

Key Changes to US Corn Projections

The USDA significantly lowered its forecast for US corn production:

• Harvest Output: Reduced by 7 million tonnes to 377,6 million tonnes, lower than analysts' expectations of 383,41 million tonnes.
• Ending Stocks: Cut by 5 million tonnes to 39,1 million tonnes, which is 5,67 million tonnes below the previous season.
• Exports: Adjusted downward by 0,6 million tonnes to 62,2 million tonnes.

The revisions stem from a decline in the average corn yield, now estimated at 11,24 tonnes per hectare (compared to 11,48 tonnes per hectare last year). Even a slight increase in harvested area—76,400 hectares more—was not enough to offset the lower yield.

China’s Production Growth Compensates Globally

China’s corn production forecast increased by 2,9 million tonnes, reaching a record 294,9 million tonnes, compared to 288,8 million tonnes in the previous marketing year. This rise helps balance the global supply shortfall caused by reduced US production.

Global Corn Market Adjustments

Compared to December projections, the updated world corn balance for the 2024/25 MY includes:

1. Opening Stocks: Increased by 1,24 million tonnes to 317,46 million tonnes, reflecting higher production and lower consumption in the 2023/24 MY.
2. Global Production: Reduced by 3,54 million tonnes to 1,214,35 million tonnes (down from 1,230 million tonnes in 2023/24 MY).
   • US production decreased by 7 million tonnes to 377,63 million tonnes.
   • China’s production increased to 294,9 million tonnes.
3. Global Consumption: Increased by 0,81 million tonnes to a record 1,238,47 million tonnes, driven by higher bioethanol use in Brazil, which is projected to consume 87,5 million tonnes.
4. Exports: Reduced by 1,63 million tonnes to 191,41 million tonnes, with cuts for:
   • The US: Down by 0,64 million tonnes to 62,23 million tonnes.
   • Brazil: Down by 1 million tonnes to 47 million tonnes.
5. Imports: Reduced by 0,77 million tonnes to 183,15 million tonnes, including a 1 million tonne decrease in China’s imports.

The forecast for global ending stocks dropped by 3,1 million tonnes to 293,34 million tonnes, driven primarily by reduced US stocks.

Impact on Global Trade

The lower US harvest is expected to boost demand for Ukrainian corn in the latter half of the season. However, increased exports of cheaper South American corn and reduced Chinese imports will likely cap Ukraine’s export prices at USD 0,210–0,215 per kg delivered to ports.

Conclusion

The USDA’s sharp revisions to US corn production have sent ripples through global markets. While the US struggles with lower yields, record production in China and steady output in South America are balancing the global supply. Traders will continue to monitor changes in demand and export dynamics as the season progresses.





Click here to reach our trading platfrom CMBroker