USDA corrects production of corn but cuts U.S. demand

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The number for the planted area in the United States released by USDA caused a certain change in the environment of prices on the Chicago Board of Trade (CBOT). An area well below expectations created an environment of price adjustment within a new level for the CBOT. However, to generate a consolidated upward movement, the U.S. crop would need either new negative information involving productivity or higher than expected domestic and export demand. At this point, USDA offset cuts in production with cuts in demand projection, precisely in the sector where demand is stronger, that is, in the feedstuff segment. The climate is the point to be monitored from now on.

The area indicated by USDA for 2020 stood at 92 million acres on June 30, below the 97 million acres of the planting intentions report. Effects of the pandemic on the ethanol and meat industry affected planting decisions in the United States. These data were responsible for adjusting the market view to a potential price below USD 3.20/bushel at the U.S. harvest to a new outlook at USD 3.40/3.80 a bushel, depending on routine factors such as the end of harvest, domestic demand, and exports.

As a result, the market made its correction to the price trajectory in light of the new production outlook and waited for USDA to update supply and demand last Friday. USDA maintained productivity projections at 178.5 bushels per acre, and for an area to be reaped of 84 million acres it generated a new production projection at 381 million tons. Good production, without a doubt, although inferior to what was projected earlier. The major adjustment made by USDA in this report was not only in the production environment. In May and June, with the projection of a super crop, the USDA compensated the excess supply with a strong optimistic demand bias for the 2020/21 season. Now, with a certain cut in the projected production, the Department tried to cut some of the optimism with the recovery of future demand. Demand cuts occurred in both the current and next business years.